Even as New England states ready for a pipeline carrying fracked natural gas to Boston for export from the three offshore LNG terminals outside Boston Harbor, a locally sourced alternative fuel has been quietly gaining momentum in the region.

Cape Cod BioFuels, a Sandwich, Mass.-based biodiesel manufacturer and retailer, and Newport Biodiesel, a Newport, R.I.-based biodiesel manufacturer and wholesale supplier, provide southern New England with nearly 3 million gallons of biodiesel heating fuel annually.

Biodiesel is a cleaner burning fuel that substantially reduces carbon emissions of heating systems and diesel-run vehicles. B99, biodiesel fuel composed of 99 percent waste cooking oils blended with 1 percent petroleum product, emits 86 percent less greenhouse gases than diesel. B20, or 20 percent waste food oils, emits fewer greenhouse gases than natural gas.

Both companies were born out of Yankee thrift and ingenuity by start-up entrepreneurs who wanted to save on fuel costs after diesel hit $3 a gallon in 2006. And although diesel costs continue to rise and fall, biodiesel using recycled restaurant cooking oil has steadily increased in value — so much so that it has spawned a cottage industry of blending plants and distributors in the past decade.

Zero waste
“We want to get to the point where everything that we produce goes into home heating oil or into generating electricity,” said Andrew Davison, co-founder of Cape Cod BioFuels.

Currently, his business sells fresh cooking oil from the Catania-Spagna Corp. to about half of its 800 restaurant customers, then collects the waste cooking oil to process at its Falmouth, Mass., plant. It blends the used restaurant oil to B20, which it sells to its 1,000 home-heating-oil customers at about 10 cents a gallon less than No. 2 home-heating oil. The B20 product also is used to fuel the company’s trucks.

Transesterification, the process of converting used food oil into biodiesel, has two byproducts: brown grease/wastewater from the impurities in the used oil, and glycerin created by adding methanol to the oil. The plant’s glycerin goes to anaerobic digesters in Hadley, Mass., for conversion to biogas-generating electricity. The brown grease goes to a composter.

Davison said the next step for Cape Cod BioFuels is to buy a 4-megawatt generator to run B99 product. “We’re hoping to get into electricity generation and sell to the grid.”

Newport Biodiesel had a similar start-up motivator: looking for a less expensive way to fuel tractor-trailers. The business grew from the basement of one of the founders to the Norman Bird Sanctuary in Middletown, R.I., where the blend was perfected.

“In those days, people were doing it on a small scale,” said Bob Morton, chairman of the Newport Biodiesel board of directors. As the business developed the product, it was used to heat buildings, run farm equipment, and even tried as a marine motor fuel. In 2007, the company moved the business to its full-scale production plant in Newport.

The company collects restaurant waste oils from as far away as New Hampshire and New York, according to Morton. The company now has a list of 2,200 restaurants that it buys waste food oil for processing, including several chain restaurants.

Newport Biodiesel blends to B99 at the plant, then sells it wholesale to distributors of heating oil in Rhode Island and Massachusetts. The glycerin created by the process goes to an anaerobic digester to become biogas. The plant was tripled in size three years ago to handle increasing demand, and now handles about 2 million gallons of biofuel annually.

Incentives have slowed
Gasoline shortages after hurricanes Katrina and Rita in 2005 helped spur the federal Energy Independence and Security Act of 2007 that pushed the development of biofuels. As a result, both Massachusetts and Rhode Island passed laws supporting increasing amounts of biodiesel as an alternative fuel.

Massachusetts initiated the Clean Energy Biofuels Act in 2008, which would have taken effect in 2010. But, bowing to pressure from home-heating-oil distributors, the Department of Energy Resources deferred the mandatory program and initiated a voluntary opt-in program for a 2 percent biodiesel blend. It suspended entirely a provision that would have required blended diesel for diesel-run motor vehicles.

Rhode Island’s Biodiesel Heating Oil Act of 2013 mandated that all No. 2 distillate heating oil contain at least 2 percent biodiesel by July 2014, with stepped annual increases to 5 percent biodiesel by 2017.

For now, federal regulations and tax incentives are on hold, causing some of the larger biodiesel plants to slow down. Congress allowed the biodiesel blenders tax credits (BTC) to lapse in 2013. BTCs were as high as $1 a gallon of blended fuel.

The Environmental Protection Agency (EPA) sets renewable fuel standards (RFS) that allocate types of biofuels and the target amounts known as renewable volume obligations (RVOs). In 2014, the EPA proposed an RFS of 1.23 billion gallons of biodiesel nationwide, although production levels in 2013 were closer to 2 billion gallons.

By December 2014, the EPA had filed notice that it wouldn’t establish new ROVs until soemtime this year, attributing the delay to the decrease in gasoline consumption and controversy over assigning standards.

In a rather complicated system, renewable incentive numbers (RINs) are traded by biodiesel distributors under EPA’s moderated transaction system and waivers are granted each year based on compliance with federal agency’s reporting system. Since the percentage and volume of renewables hasn’t been established since 2013, EPA is still reviewing the retirement of 2012 RINs.

“The EPA still hasn’t adopted a rule setting volumes for 2014, much less 2015 and 2016. All three volumes were supposed to be established by now under law,” said Ben Evans, director of public affairs at the National Biodiesel Board, a Washington, D.C.-based trade organization.

Evans said the delay has taken a significant toll on the biodiesel industry.