Sep. 1--Though far behind schedule, the major biofuel operation planned for the Port of West Sacramento is still alive and its developer is in talks with new investors.

Long Beach startup Primafuel Inc. unveiled plans in early 2007 to build the state's largest biodiesel plant and a distribution terminal at the port. The company expected to be churning out the diesel substitute within two years. At the time, the market seemed ready to swallow all the biofuel the nation could produce.

"Those days are over," said Rahul Iyer, Primafuel's chief strategy officer.

In the last year, the biofuels industry has gone into a tailspin. Plants making ethanol from corn and biodiesel from vegetable oil or animal fat have shut down across the country. Several companies, including Sacramento-based Pacific Ethanol Inc., have sought bankruptcy protection as the sector struggles with debt, a glut of production capacity and relatively low oil prices.

Primafuel's original financing plans came apart last year amid the credit crunch, Iyer said, and construction on the West Sacramento project still hasn't started.

That may turn out to have been a blessing. Instead of having sunk millions into construction, Primafuel has a chance to rethink the $60 million to $90 million project.

In an interview, Iyer emphasized the site's potential as an importing and distribution hub for a range of biofuels, in addition to its prospects as a biodiesel factory. The site has permits for 42 million gallons of fuel storage.

Despite the industry's recent troubles, federal biofuel mandates are likely to boost future demand. Market prospects appear particularly solid in California. This spring, state regulators adopted a plan to cut the carbon content of motor fuels 10 percent by 2020.

That mandate will be phased in starting next year, and meeting it is likely to demand substantial imports of alternative fuels from other states and countries. Regulators expect the mandate will increase usage of both ethanol and biodiesel, as well as alternatives yet to be commercialized. Those new fuel flows stand to require new distribution systems, like the terminal Primafuel is planning.

"It's just necessary infrastructure," said Clayton McMartin, a New Mexico-based biofuels broker.

Daniel Sperling, a fuels expert at the University of California, Davis, said investors today are likely see a biofuel-distribution project as a safer bet than a production plant.

Iyer said his firm is in contact with fuel distribution companies, among others.

"There are a number of -- parties who understand there is a very important strategic benefit" to owning a share of a biofuels network, he said.

Iyer wouldn't comment on whether the company has financing commitments yet, and wouldn't predict when construction might begin.

Primafuel has since August 2008 paid $28,786 a month for its 49-year lease at the port, said Mike Luken, the facility's manager. The project has cleared the major permitting hurdles, Luken said.

Primafuel has also developed a system to recover vegetable oil from the byproducts of corn-ethanol production.

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Call The Bee's Jim Downing, (916) 321-1065.

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