A local company that produces green-friendly biodiesel from used fryer grease and vegetable oil could become the latest casualty in the healthcare battle.

New Leaf needs help from the U.S. Senate.

^{Courtesy photo}

The U.S. Senate, having finally passed its version of healthcare reform on Christmas Eve, adjourned for the year, leaving myriad tax issues still on the table – including a critical tax credit extension for biodiesel producers. Without it, producers can't make a profit and the industry staggers.

“We can’t afford to compete with diesel without the tax incentive,” says Jennifer Case, CEO of New Leaf Biofuel, a 14-person company in Barrio Logan.

Biodiesel, extracted from recycled grease, burns much cleaner than both petroleum diesel and gasoline. Large-scale adoption would reduce greenhouse gas emissions.

To encourage the industry, Congress in 2005 passed a $1 per gallon tax credit that provided producers with a $1 per gallon profit margin, says Case. In December 2008, Congress extended the credit for the year, which expired Dec. 31.

“It stimulated biodiesel production throughout the whole country,” Case says.

The only biodiesel producer in San Diego County, New Leaf was launched with private equity, a $600,000 grant from the California Air Resources Board and a $590,000, five-year loan from the city’s revolving loan fund. It began commercial sales in November 2008 and now produces an average of a million gallons a year. Its fuel can be used by most diesel engines and is commonly blended with petroleum diesel for large truck fleets.

The company hopes to increase production to 1.5 million gallons a year this quarter and 3 million gallons by the end of the year.

It collects half its grease from about 1,000 restaurants through a free service. The company also buys from other grease collectors as well as wholesalers stuck with contaminated oil unsuitable for cooking, says Case.

Individuals can drop off used grease at an Allied Waste site in Chula Vista or the New Leaf headquarters at 2285 Newton Avenue.

The company uses a process called "transesterification," which replaces glycerin from the grease with methanol. The grease is boiled and separated from water and other foreign materials. Methanol is added along with a catalyst, sodium methylate, which removes the viscous glycerin.

New Leaf does not refine the more stubborn “brown grease,” which fills grease traps. Case says refining brown grease, which is 80 to 90 percent water, requires a more intensive boiling process that emits a heavy odor. They instead transport it to another company off-site.

“Someday, we hope to be able to do that, but this facility is not right for it,” she says. “When you start cooking brown grease – it gets really, really stinky.”

New Leaf sells wholesale to about 10 to 15 customers, but its recent growth will come to a halt if the tax credit isn’t extended.

“If this tax credit doesn’t go through, the industry of biodiesel is done. It’s over,” Case says. “There’s plenty of hope that it will pass, but it’s scary not to know when.”