Imperium Renewables Inc. has delayed a $345 million initial public offering, put on hold its plans for four additional plants and trimmed its corporate staff. Its chief executive officer resigned without explanation.

The $78 million plant is still operating, though the price of soybean oil and other vegetable oils has jumped 100 percent to 200 percent in the past year. Hopes to buy much of the feedstock from Eastern Washington farmers haven’t blossomed and, instead, the plant is using mostly canola oil from Canada.

And while biodiesel is supposed to help reduce American’s dependence on foreign oil and cut greenhouse gas emissions, the domestic market has not materialized as expected. Virtually all of Imperium’s product is being shipped to Europe.

“We are experiencing challenging times,” said John Plaza, Imperium’s founder and current CEO. “The entire industry is facing this.”

SOME SUCCESSES

But ever the entrepreneur, Plaza isn’t about to give up. His latest venture, with the help of Boeing, is to develop and manufacture “green” aviation fuel.

A Virgin Atlantic 747 that flew from London to Amsterdam in February was partially powered by a biofuel produced by Imperium. It was the first such flight by a commercial airline.

One of the plane’s engines was powered by a mixture of kerosene, babassu oil and coconut oil. Babassu oil comes from the seeds of the babassu palm, which grows in the Amazon region of South America. It and coconut oil are often used in cosmetics.

“It’s a hot topic out of necessity,” Plaza said about biofuels.

He said the new aviation fuel could be cheaper than the Jet A fuel now used and could reduce carbon dioxide emissions from jet engines by 80 percent. Airplanes could start flying regularly on biofuel within three to five years, and the Grays Harbor plant could be modified to produce it, Plaza said.

Pilots on the Virgin Atlantic flight said they noticed no drop in performance in the engine running on biofuels. Mechanics later found the engine had not been affected, said Terrance Scott, a Boeing spokesman.

“This is not about rhetoric, this is about finding a biofuel,” said Scott. “We are looking for something that will offset fuel costs and burn cleaner.”

THE ENVIRONMENTAL IMPACT

Burning 1 pound of jet fuel now releases 3.1 pounds of carbon dioxide, Scott said. According to an Environmental Protection Agency report, aircraft account for about 3 percent of U.S. carbon dioxide emissions. Some scientists estimate that unless changes are made, carbon emissions from aircraft will triple globally by 2050.

Both Airbus, Boeing’s main competitor, and the U.S. Air Force are working on developing biofuels. Possible sources include switch grass, algae and jatropha, a scrub bush that grows on marginal farmlands.

“It won’t be a simple, cheap process,” Plaza said of developing aviation biofuel.

Imperium’s financial problems are not unique in the biodiesel industry. Because its plant is located on the coast, it has one advantage – it’s easier to ship its products to Europe than if it were located in a landlocked state.

Several biodiesel companies have recently filed for bankruptcy, some plants have suspended operations, and construction on other plants has been halted.

“Some of the industry’s players are facing rougher times than others,” said Amber Thurlo Pearson, a spokeswoman for the National Biodiesel Board.

Theories abound as to why the cost of vegetable oils have soared. Some say farmers aren’t planting as many acres of soybeans, switching to corn as demand for ethanol grows. Of the 450 million to 500 million gallons of biodiesel manufactured in the United States, about 80 percent is made from soybean oil.

RECORD HIGH PRICES

But demand for all vegetable oils is also growing globally, pushing up food prices around the world. Others believe speculators are driving up prices for vegetable oils; some think droughts in some parts of the world are responsible. Plaza and others believe the increased cost of crude oil has driven up farmers’ costs for everything from fertilizer to running a tractor.

“All grain and vegetable oils are at record high prices,” Plaza said. “If one goes up, they all go up.”

Currently, there is a $1-per-gallon federal tax break on biodiesel. That has made the American product competitive in Europe, where demand for biodiesel is high. In 2007, U.S. producers shipped almost 300 million gallons of biodiesel to Europe, a tenfold increase over 2006. Some say U.S. taxpayers are subsidizing cheap diesel prices in Europe.

“It is a thoroughly legal practice,” said Thurlo Pearson of the Biodiesel Board.

But European producers are upset and have filed an unfair trade complaint with the European Commission, alleging U.S. biodiesel producers are receiving an illegal subsidy.

Both Plaza and Thurlo Pearson expect U.S. demand to grow with the passage of an energy bill last year that requires 1 billion gallons of biodiesel be produced and used in the United States by 2012.

Until then, the industry will continue to evolve.

“We need to stabilize the company, Plaza said. “But in one form or another, we will be around.”

Les Blumenthal: 202-383-0008

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