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Canola Contract Could Fuel Portland's Pumps by Dean Brickey East Oregonian, November 12, 2006

PENDLETON - A farmer and a businessman are headed to Portland Monday to help forge a new deal for area canola growers.

Echo's Kent Madison and Pendleton's Al Gosiak are working with the city of Portland to produce canola for an Oregon-branded biodiesel to be sold next year in Portland.

Portland City Commissioner Randy Leonard came to Umatilla County last month to meet with farmers and local officials to banter about biofuels. They discussed how Portland can partner with Eastern Oregon farmers to help spur economic development opportunities and reduce dependence on foreign oil.

Among those involved in the Pendleton meeting were Pendleton Mayor Phil Houk and Councilwoman Marjorie Iburg; Kim Puzey, Port of Umatilla general manager; Bill Hansell, Umatilla County commissioner; Hulette Johnson, the county's economic development director; Don Wysocki, an Oregon State University soil scientist, and Don Horneck, an OSU agronomist.

After meeting with the group and touring Pendleton Grain Growers' canola crushing operation and Madison's biodiesel plant, Leonard said he left pumped about what could be pumped in Portland.

"It was one of the most productive, best meetings I've had in public life," he said this week.

He particularly remembered the precarious ride on the "man lift" at PGG's McKennon Station, a single-person elevator that took him up a few stories to the co-op's canola crusher.

"The crushers there and the ones that Kent have are just the beginning of where we're heading with this," Leonard said. "We're working on a deal."

Leonard has two goals: providing enough Oregon-produced biodiesel to fuel the city's of Portland's truck fleet, and providing additional biodiesel for Portland consumers who want it.

Portland's fleet consumes 400,000-500,000 gallons of biodiesel annually, he said. Water Bureau vehicles burn B99, a mixture of 99 percent biodiesel and the rest petroleum diesel. The remainder of the city's truck fleet uses B20.

Leonard said Monday's meeting would involve work on a contract to assure farmers a price floor so they could dedicate fields to canola each year. The price under discussion is 14 cents per pound, or two cents more than PGG and Madison offered this past year.

"I am hoping that we can get Portland to agree to pay us the fair market price for our biodiesel and return at least 14 cents to the farmer for his canola," Madison said. "I should know more by TuesdayÉ."

Horneck said getting a 14-cent contract would be exciting.

"We're trying to give it a stable price and what's an economic price for everybody," he said.

Gosiak, PGG's president and chief executive officer, said the contract is the key to the deal.

"If we can lock in the farmer price, we can lock in the biodiesel price," he said. "This is all about contracting for a season at a time, so the farmer knows what's going to happen for a full year."

The Portland City Council has adopted an ordinance requiring all diesel sold in Portland must be B5, or five percent biodiesel, effective July 1.

Leonard said the city will require about five million gallons of biodiesel per year to meet that need.

But he's hoping to amend that ordinance by mid-December to require that all biodiesel fuel sold in Portland must be derived from canola.

"Canola is the best crop that you can get to produce biodiesel from," Leonard said. "We want canola first, and we want it to be Oregon-grown canola."

Gosiak is excited about that.

"They're giving us an opening," he said.

Leonard said he's trying to change America's dependence on all foreign oil, not just petroleum.

"Farmers in Eastern Oregon grow a crop that produces the best biodiesel derived from any crop," he said. It's superior to a soy base or palm base."

Leonard also said Portlanders want to use biodiesel in their diesel vehicles.

"They are enthused to think that they can actually use a product in their vehicles that was produced by Oregon farmers," he said.

Horneck, who works at the Hermiston Agricultural Research and Extension Center, said he suggested branding the Eastern Oregon biodiesel and calling it Oregon Fair Trade. Madison drafted logo, which will be one of the things discussed Monday in Portland. His idea is an Oregon-shaped photograph of an bright-yellow blooming canola field beneath a blue sky with Oregon Fair Trade BioDiesel emblazoned on it.

Horneck said canola is not just a dryland crop. It can be used as a rotation crop with wheat on dry or irrigated ground.

"It fits in the wheat niche," he said, "so if you're growing winter wheat, you could grow winter canola."

He estimated there's 1,000 acres of canola being grown in the region, about half on dry land and half irrigated.

Wysocki, who works at the Columbia Basin Agricultural Research Center near Adams, said a good canola crop yields 80 percent of a farmer's wheat crop in bushels. That means a 50-bushel-per-acre wheat field would produce 40 bushels of canola per acre. Canola is sold by the pound, however, so some conversion is needed.

Canola seed is lighter than wheat, Wysocki said. At 50 pounds per bushel, a 40-bushel-per-acre canola crop would yield a ton per acre, he said, "If you get it planted in a timely manner in the fall, which is before Sept. 15 essentially."

Gosiak said a ton of canola per acre at 14 cents per pound compares favorably with 70-bushel-per-acre wheat at $4 per bushel less transportation costs.

He realizes biodiesel consumers want a fair price, too.

"You have to really love it to buy it if its significantly more expensive," he said.

Gosiak predicted consumers of B5 won't see any change in price.

"Once it's blended at that level, it's invisible," he said.

He thinks B100 will be selling for about $3 per gallon next summer in Portland.

"That's a fair price because that's what they're paying now," he said, adding that the futures market indicates diesel prices are climbing.

While variables, such as production and transportation costs, exist between the farm and the pump, he believes those can be held down with a stable canola price.

"The market on both ends today can make it work," he said.