Smelling is believing

Neil Rich (left), Don Miksch (center), and Darin Rich switched from homemade fuel to managing a 10-million-gallon-a-year biodiesel plant near Crawfordsville, Iowa.  The tank behind them holds 150,000 gallons of biodiesel made mostly from soybean oil.

Smelling is believing.   At least it was for Don Miksch, a Washington, Iowa, farm kid trained as an accountant.   He doubted that his friends, Neil and Darin Rich, could make fuel on their farm from used French fry grease.

"Until they made their first batch and physically showed me they were running a vehicle on it, I was skeptical," Miksch admits.   "I watched them pour it in and start it up, and I stuck my head by the tail pipe."  It smelled like French fries.

From tinkerers to executives
The Rich brothers started concocting biodiesel fuel three years ago to cut costs.  They help their dad, Phil, raise 500 acres of corn and soybeans, custom farm 2,500 acres, and run a manure-hauling service that puts waste on 8,000 acres.  At times they burn 500 gallons of fuel a day.

That need soon led them to shift from scrounging restaurant grease to buying rendered animal fat for 12¢ a pound.  That's about $1 a gallon for the main ingredient.  To make biodiesel, they mixed 10% methanol and inexpensive lye into a 275-gallon plastic tote of fat.  (Methanol adds another 20¢ to the cost of a gallon of fuel.)  Methanol, which is highly flammable, and lye break fatty acids into methyl ester, or biodiesel, and a by-product called glycerin.

"That was cost-competitive when diesel was $2 a gallon," says Neil Rich.  Adds Miksch, "At $3 a gallon, it's extremely competitive."

Those compelling numbers and good results running trucks and tractors on 100% biodiesel led the Rich brothers and Miksch to ramp up to commercial production.  In April 2005, they formed Riksch BioFuels, LLC.  They sold stock to 27 investors, including family, in six southeast Iowa counties.  "Our plan was to provide biodiesel to the local area," Miksch says.  Adds Neil Rich, "We insisted on having producers and people in agriculture tied to the project."

This fall, their 10-million-gallon plant was slated to begin producing fuel.  Neil Rich says he's less concerned about selling fuel than getting sources of oil.  So the plant is located near three grease recyclers and two soybean crushers.  Since it relies on trucks and not rail, it can source and sell widely.  Most of the biodiesel will be made from soy oil.

The $7.5 million plant also got a boost from a $500,000 renewable energy grant and a $3.25 million USDA guarantee on its bank loan.

"It seems like they're attempting to cover all marketing and production bases.  They're delightful young kids," says USDA Under Secretary for Rural Development Tom Dorr.

The plant's corporate brass really is young.  Neil Rich, 26, is its CEO. Miksch, 27, is treasurer and chief financial officer. Darin Rich, 21, is chief operating officer.