Tax Incentives Boost Biofuels/Local Plants

Tulare County - While the prices of fossil fuel hit record levels just about every day - a new tax bill passed by congress last week and likely to be signed by President Bush - will boost renewable based biofuels like ethanol made from corn or green waste and biodiesel made from soybeans or waste food oil.

The measure - called the American Jobs bill (HR 4520) includes tax breaks for farmers, manufacturers and small business and includes key provisions likely to ramp up the volume and availability of E85 ethanol and biodiesel blended with petroleum diesel. Significantly it allows farm co-ops for the first time to pass credits through to cooperative members spurring more interest in biofuels. It extends ethanol tax credits through 2010 and changes the way tax incentives for renewable fuel are paid for - removing penalties on current highway funding (see accompanying article).

For biodiesel the measure creates a $1 per gallon tax credit for agri-biodiesel (farm based oils including from animal fat) and 50 cents tax credit for biodiesel recycled oil through 2006.

Surprised that the biodiesel component of the tax bill was even in the package hammered out by congress last week, was Joe La Stella director of Green Star Products who opened the state’s first major biodiesel plant in Bakersfield in the past year.

La Stella explains that the measure needed the blessing of Congressman Bill Thomas of Bakersfield who heads up the Ways and Means committee who, despite the fact the plant is in his home district, had not looked favorably on biodiesel in the past.

After all, “Bakersfield is the third largest oil producing region in the US, behind only Texas and Oklahoma.” Oil interests don’t take so kindly to competition.

But instead, the measure passed without objection from Mr. Thomas who had been criticized in several Bakersfield media reports about his lack of support for the clean burning fuel made in his own hometown.

The biodiesel provision “is just huge” says La Stella, since it incentivizes refiners to blend biodiesel with petroleum diesel.

Biodiesel is typically sold as B20 (20% biodiesel mixed with 80% diesel) or even B2 - 2% biodiesel. La Stella says it will be cheaper to blend one gallon of biodiesel with 4 gallons of diesel to make 5 gallons of B20 than pay the excise tax on 5 gallons of standard diesel. Biodiesel is currently a few cents higher than traditional diesel.

“This is just what the industry needed,” he says.

The Bakersfield plant that has the capacity to put out 5 million gallons a year has done only a few hundred thousand gallons in 2004 in part whipsawed by the rising cost - now the declining cost of soybeans on the market. “We’ve decided to make biodiesel in Bakersfield with food oil,” says La Stella. He predicts there is enough around to supply the needs of the plant.

La Stella says the company is supplying biodiesel to the blenders in Salt Lake City who sell it as B2 at 3 cents below average diesel prices. Biodiesel helps lubricate car engines while it reduces toxic emissions associated with diesel.

In California Green Star Products has just announced an Automobile Club of California test confirmed that biodiesel mixed with the compound AFT made by the company actually increases fuel efficiency of cars by 5.7%. “We can clean the air, reduce our need for foreign oil and get better milage too,” says La Stella.

La Stella says he plans to test the air inside and outside a school bus using biodiesel pointing to recent reports that showed children are being harmed by petroleum diesel fumes that get inside school buses.

Biodiesel puts out far fewer harmful substances - 50% less hydrocarbons and 18% less CO2 - a factor in global warming. Particulate matter - one of the worst problems in the valley associated with both farm tractors and diesel big rigs - can do their work using biodiesel that emits 47% less particulate matter, according to the National Biodiesel Board.

A booming market for biodiesel could do more than reduce dependence on foreign sources of oil, but could add $1 billion to the bottom line of US farm income, says the National Biodiesel Board.

The Bakersfield plant sits on 36 acres of an organic fertilizer facility. Little of the biodiesel produced so far at the Bakersfield plant goes to Bakersfield - the smog capital of the valley. But that will change soon, vows La Stella. Instead the firm has sold to suppliers on the coast who report strong demand for the environmentally friendly fuel.

Ethanol Too

In Tulare County where at least three ethanol plants are in the works, the news from the tax bill is good as well. Tom Koehler, helping to build two proposed new ethanol plants planned in both Madera and Visalia, says the provisions will help this renewable fuel as well. The change in the law now allow any operator, refiner or marketer, distributor or jobber can get 52 cents per gallon incentive to blend ethanol up to the E85 level (85% ethanol - 15% unleaded gas).

The Volumetric Ethanol Excise Tax Credit (VEETC) provision in the tax bill extends tax credits until 2010 and introduces more flexibility in how a tax credit is taken. Many currently made flexible fuel vehicles can run on E85 fuel.

Most states blend gasoline at 10% with ethanol, although California blends at just 5.7%. Ethanol boosters want the state to up that ratio to 10% helping to decrease the volume of gasoline needed for California which at least appears to be always short on supply.

While the price and supply of imported oil remains dependent on political stability overseas or natural disasters that can suddenly reduce supply, these home grown fuels can decrease the dependence on these global fossil fuels that may be helping to warm our planet.

On October 22 the California Energy Commission and Air Resource Board will discuss just how the state can reduce gasoline and diesel fuel demand by 15% below 2003 levels by 2020, and increases use on non petroleum fuels to 20% of on road fuel consumption by 2020 and 30% by 2030.

While the focus has been on car makers to cut emissions here through engine improvement, fuel related changes using these biofuels could make a difference not a decade from now when the fleet of cars in California turns over but in the next year as more biodiesel becomes available for example.

The E85 provision in the tax code has an incentive for example for gas stations to convert one of their pumps from mid or high grade fuel used by only a few drivers, to E85 suddenly making the fuel available everywhere you shop for fuel.

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Supervisor’s Race Turns Testy

Visalia - At a candidates forum in Visalia this week Supervisor candidate Phil Cox took the chance to lash back at his opponent - incumbent Lali Moheno over an organized effort by Moheno allies - the public employees union - to paint Cox as a businessman who doesn’t pay his taxes.

In his opening statement Cox said “it only goes to prove the level some people will stoop to win an election.” The audience didn’t know what he was talking about because what has become a bubbling issue behind the scenes never came up.

Fred Fuchs of the Central California Association of Public Employees has been handing out packets of Tulare County tax records to the media that show Cox failed to pay more than $54,000 in employee withholding taxes in 2002 and 2003. Cox has responded that while the tax liens are real, they were paid off last year. “I take responsibility for them,” says Cox who notes the penalties were paid off as well.

Fuchs plans a mass mailing campaign and newspaper ads asking voters “Do you pay your taxes - Phil Cox doesn’t” The campaign piece says tax liens sat unpaid for nearly a year before they were paid.

Cox says the publicity amounts to “dirty politics” by the Moheno campaign. “I will not get down to that level,” says the current council member.

But the opponents say the matter has come up lately because Cox portrays himself as a successful businessman and touts his experience managing a business to run the county.

While campaigns often turn bitter in Fresno, LA and many parts of the nation, Visalia and Tulare County see fewer bare knuckles battles. But politics is a matter of timing and this shouldn’t be a surprise that a campaign waits until 2 weeks before an election to spring this kind of revelation.

The actual debate this week was a largely civil affair although Cox sought to distinguish himself from Moheno on a number of issues.

Moheno said she supports the reopening of the pre-trial facility in part because of the public safety aspect - it helps unclog the current jail that would otherwise be forcing the county to release prisoners. Cox said the county had not secured firm contracts with dollar amounts attached and that clearly more money is needed.

Moheno said she supported a plan that will allow a Reedley area school in Tulare County to expand on ag land citing “private property rights” but Cox said the county should make no exception to the current Rural Valley Lands Plan that has a point system to see if projects should be allowed or not. Moheno said the plan “needs flexibility.”

The most spirited exchange when Cox and others suggested the county needs to adopt impact fees to help get the county out of dire financial straights noting the city of Visalia has just raised theirs. He said he wouldn’t vote to close fire stations in the county - “they are part of public safety.”

Moheno noted that taxpayers in Tulare County already say that “they pay and pay and pay” and that added fees would hurt small business. She says the county is working on a “Fire Summit” to come up with a plan to ensure fire safety in Tulare County.

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Visalia May Want To Get Into The Water Business

Visalia - The Visalia city council voted 4 to 1 to move forward on a feasibility study that could put the city back in the municipal water business. The city sold a small water company to Cal Water some five years ago. The city system provided service to the industrial park.

California Water - a private water company - has been the community’s water utility since 1926 and wants to keep doing it even as the city expands, says Phil Mirwald, local general manager.

But an impasse with home developers in Visalia pushed the developers through their trade group, the BIA, to suggest the city could do a better job as a water utility for the new lands on the outskirts of the city just now being developed.

A February 25 letter signed by builders Gary Smee, David Hatch (Centex), Andy Mangano, Jim Robinson for McMillin Homes and Brian Ennis, suggest Cal Water was “an unresponsive monopoly” not interested in working with local home builders.

The issue revolves around the cost of putting in main water lines to serve new development and whether Cal Water would share in the cost of oversizing those lines meant to provide water to other home subdivisions, but paid for by the first subdivision going into an area.”

Mirwald says just how the large pipes are paid for “is kind of a gray area.” If the pipes are not oversized and have to be dug up later, all water users must pay for that “and that’s not fair,” notes Mirwald.

A staff report to city council this week suggested the city fund a full feasibility study to look into the idea of forming a water utility on the new lands being brought into the city while Cal Water continues to provide service to the remainder of Visalia. The cost for the study could run $100,000.

But mayor Bob Link contended that staff should negotiate with the home builders to share in the cost of a feasibility study since it was they who brought the issue forward. The majority on the council agreed with that.

It was Cal Water’s turn to speak and Mirwald suggested that he hoped to meet with home builders to try to work something out.

Another reason cited by staff for being back in the water business is the priority the council has put on water retention and conservation. The city has teamed up with Kaweah Delta Water Conservation District and TID to build sinking basins and emphasize water recharge around the city for the past few years. But where was Cal Water in all this?

Mirwald responded that the city never contacted them about conservation efforts but that perhaps it was Cal Water who dropped the ball.

Unlike any other entity, Cal Water could carry out recharge and conservation programs seeking reimbursement through the CPUC from rate payers to carry them out.

That may be the area the city wants to get into as well - it provides a payback mechanism for conservation programs.

But now Cal Water now vows to join with the city in this effort. The company has 78 wells in the area serving over 27,000 connections.

“It’s a shame it had to come to this to begin working together,” says council member Jesus Gamboa. Council member Kirkpatrick suggested the feasibility study not go forward until Cal Water and developers see if they can work something out and the city and Cal Water get together on a larger conservation plan. But the majority sided with staff’s request to move forward on the first step toward formation of a new city owned utility.

Mirwald told the Voice after the meeting that they are working on a draft water supply and management plan that the city is aware of and that draft should be ready in the next few weeks. He says the plan calls for conservation plans for the long term. In addition he says Cal Water recently joined with KDWCD and the city on their own water management plan.

As for the builders, Mirwald says “we want to be their partner not their adversary.”

Not that the negotiations are over - some believe they have just begun.

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Wet Winter Outlook?
Wet Winter Coming? Hope Springs Eternal

San Joaquin Valley - A winter forecast is not proven in a few days of course, but predictions of a mild El Nino year and NOAA’s forecast of a wetter winter for the central and southern part of the state looks pretty good if we look out the window - at least as we go to press.

A storm pattern has emerged in recent days and over the next week weather forecasters are suggesting several rainy days in a row through October 26 as it appears that high pressure that guards California has been blown away early this year.

The new pattern blew in on a wind change that kicked up dust until sprinkles started to fall at first only enough to cause power problems and get your car dirty.

By mid week the storm turned heavier with Visalia recording over a half inch of rain as this paper goes to press - Wednesday 10 a.m. October 20. Fresno got 0.7 of an inch. The storms blanketed the West Coast and closed Sierra highways including those in our own Sequoia Park with snow.

It’s a hopeful sign to see automated rain reports from a high Sierra gauge at Hockett Meadow above the South Fork of the Kaweah measuring near 4 inches of precipitation from October 16 through October 19. Up a Quaking Aspen on the Tule they got 3.25 inches on their automated gauge.

Some people are talking about an early ski season. Too optimistic?

On October 6 the National Oceanic and Atmospheric Administration (NOAA) issued their weather forecast showing a hotter than normal west coast winter and a better than 50% chance of a wetter season in the southern part of the state from about Merced County south (see map).

NOAA said that they did not expect this to be a strong El Nino - the kind we suffered through in 1997-98 - nevertheless NOAA has suggested the weak El Nino could strengthen during the coming months.

But a JPL scientist this week disagreed saying “the El Nino that NOAA was talking about has definitely dissipated or pooped out.”

That’s not what folks in the central valley who have suffered through 6 dry years want to see.

Still locals hope that an El Nino year will mean a wet pattern from central California depending on how the storms coming into the state - from the Pacific or from the north.

One thing about predictions - they are always changing. NOAA promises an update on October 21.

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Farm-to-Market Poster Boys Defy Conventional Wisdom

By Aaron Collins

Lindsay - Migrant farm workers-turned-farmers are rare in these parts. So granted, there wouldn’t be a lot of competition for the Mendozas of Lindsay if rags-to-riches poster boys were needed.

And if a “Best Farm-to-Market Ingenuity Award” were given, their company, Mendoza Family Farms, might bag that, too -- although competition would be stiffer since many farmers are discovering the profitability of selling direct to retailers and consumers.

Although the above “awards” may be imaginary, the U.S. Patent Agency’s patent award for the Mendozas’ ingenious pomegranate seed extractor is very real. And so are their profits.

Jerry Mendoza’s passion for farming is evident. One of the three brothers in business (along with their father), Mendoza took some classes at Porterville College, but his marketing instincts seem to be both innate and keen. He often researches products by taste-testing them with his four children, ages 3-11. He even covertly listens in to customers conversations and watches their behaviors in the markets where their products are sold.

Lindsay farmer Keith Trembley formerly employed the Mendozas, including Jerry as ranch foreman. He describes the Mendozas as “very efficient farmers.” Currently Trembley is selling the property to his former workers in a lease/option structure that will enable them to take full ownership in about 10 years.

Jerry, 42, recalls his days working Trembley’s fields, picking fruit with his parents after the family arrived from Mexico in 1969. This experience gives him a perspective most area farmers don’t have.

Mendoza says that “farm worker conditions have improved, but the money’s still bad.” He should know, having been on both sides of the paycheck. And whereas farm workers’ heroes in the 60s and 70s had names like Kennedy and Chavez, “Bush-Cheney Farm Team” bumper stickers are more likely to be found on Mendoza Family Farms vehicles. Times have changed for these hard-working financially successful Latinos.

Unlike many farmers, English is the family’s second language. Jerry learned it by age 9. He still uses Spanish to command respect from his Mexican workers, while he has worked hard to reduce his Latin accent when speaking English, which he does expertly.

Perhaps due to their atypical background, the Mendozas are rewriting the old-school farming rules. They didn’t exactly invent the approach. Companies like Armstrong Olives in Porterville learned quite some time ago that merely growing olives didn’t compare to creating their own gourmet product and selling to retail grocers.

But the Mendozas have reinvigorated once nearly abandoned products like pomegranates, which were being yanked from the ground en masse.

When other farmers told them that they were crazy to end-run the produce brokers, the Mendozas followed their own instincts. Instead of the whining about prices and natural forces that are part of the business, the Mendozas exhibit a positive can-do attitude about their business, encouraging fellow farmers to stop the whining and find new ways that work.

“No one seems to be saying we’re crazy so much anymore,” says Jerry. Perhaps that is because the Mendozas sold well over $.5 million worth of the ruby-red pomegranate seeds this last season alone.

Moreover, the poms comprise only 150 of the family’s 450 acres which also include olives, apples, chili peppers, and persimmons. So their operation is diversified.

By today’s mega-corporate standards, their farm is not large, but their farm-to-market practices net them a great deal more than other similarly-scaled operations. Mendoza’s success has enabled them to plan for growth. Under consideration are other profitable crops similar to those in which they’ve already proven successful, including a new seedless pomegranate variety, and others with cache in the upscale grocery stores.

Their achievement reflects their energy, savvy, and willingness to try new methods. You get the feeling that they are inspired, even born to farm.

When they tired of the back-breaking labor of picking fruit, the family pooled their money in the 70s and started a trucking company. Weary of dishonest produce brokers controlling the price he receives for the family’s fruit, Jerry decided to take their product straight from farm to market.

But not just any supermarket would do: Jerry, a very shrewd and knowledgeable man, called directly on upscale grocers like Trader Joe’s, Whole Foods, Melissa’s, and others. These were places where he could get top dollar for premium fruit without any middleman forcing his price downward.

The Mendozas’ success is also due in part to their deft response to both upscale produce buyers and their consumers’ preferences. Jerry responds quickly to market concerns.

Consumers think pomegranates are too messy? The Mendozas built a machine to process the seeds and package them, which minimizes consumer handling.

Brokers mistake farmers for rubes? The Mendozas established a professional looking corporate identity with design standards that readily tell the world they know what they are doing.

The product’s package looks a little weak next to more attractive products on the shelf? Jerry had the packaging redesigned, using more attractive, colorful labels that stand out and show off the colors of their produce.

Does produce -- like persimmons -- have shelving issues in the market according to produce managers? Jerry asked designers to come up with a sturdy recyclable plastic “clam shell” tray, with the fruit arranged in an attractive pattern. Their sales increased, bruising was minimized, and spoilage was reduced.

Concerned about the environment, Jerry is eager to utilize biodegradable packaging and reduce insecticide use. He also knows that upscale customers prefer organic. But his concern for his environment and workers seems genuine. He uses high-tech pheromone emitters which deter male insects from breeding, reducing both the cost and pollution from insecticides.

No wonder produce guys love him.

However, brokers might not be the Mendozas’ biggest fans. The family has culled the old-school ways of doing business with middlemen.

The decision came after Jerry was quoted a low-ball price by an L.A. produce buyer who was accustomed to lesser-informed farmers. Jerry went into action. The broker’s offered price was only half of then-current prices. Jerry was aware, because daily he stays up on the market using internet reporting sources. So he found a reputable broker, bought a box, and took it back to the unscrupulous buyer and showed him the receipt. That was the end of their business relationship.

Once the Mendozas decided to skip brokers altogether in favor of more profitable farm-to-market sales approach, “Fellow farmers to me I was crazy,” Jerry says. “They told me I would fail, and that I’d need the brokers someday and I’d come crawling back to them, but that they wouldn’t deal with me.” But that hasn’t happened. “They’re not saying that anymore,” he adds.

Their approach means that they are no longer passive, allowing brokers to control prices. Typically, brokers offer growers contracts that lock-in prices days before crops are picked, leaving the farmer disconnected from market and conditions. Some prices to farmers are low even while retail is high, because sometimes several brokers are involved before produce reaches the retail market.

However, avoiding middlemen requires the Mendozas to do everything themselves. They market their premium apples to juicers. Smaller ones go straight to candy apple makers, while others go to juicers. But considering the increased profitability, the increased effort is worth it, even with added insurance requirements imposed on growers by the retailers.

Jerry is the marketing expert of the family, but still uses hi welding and mechanic skills learned when he was a laborer. Joe processes orders and handles other administrative tasks at the main office in Lindsay, and Mendoza brother Alfonso is the engineer, using his abilities to invent their top-secret pomegranate de-seeder (Mendoza did not offer this reporter even a peak).

Development costs of Alfonso’s device were upwards of $80,000. But Mendoza had it patented and it has quickly paid for itself. The Mendozas might eventually sell their technology to other farmers, but, for now, their machine is the only one in the US, and the only seeds on the market are theirs.

The Paramount farming company, the Valley’s largest pomegranate grower, even tried to buy out the Mendozas, offering enough to allow the whole family to retire. But they’re holding steady. “What would I do, go lie on a beach somewhere?” Jerry asks. At least (most likely) he won’t need to go back to picking fruit in the hotter-than-blazes Central Valley harvest.

Valley Voice News & Arts Editor Aaron Collins is a third generation Californian and grandchild of Dust Bowl immigrants to the San Joaquin Valley. He serves on the board of directors of Arts Council of Tulare County. He can be reached at aeronchase@hotmail.com

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Moore Wallace Plays Crucial Printing Role

By Miles Shuper

Visalia - Moore Wallace, part of the largest printing company in North America, continues to expand its Visalia operations and could hire more workers.

The firm, part of RR Donnelley Company, produces forms, checks, and various business documents and, by the end of this year, labels.

Since mid 2003, when Moore North America and Wallace computer services combined to make the third largest printer in North American, the work force at the Visalia plant on Goshen Avenue west of Plaza Drive, has increased by 25 percent. Van Crawford, plant manager, said more than 100 workers are employed full time and more hiring is expected.

"While we will not predict what will happen over the long term in response to market conditions, we expect to be hiring additional employees in the near term as we continue to transfer work in from other facilities and work to fully utilize our manufacturing asset." Crawford said."

The plant, known for many years locally as Moore Business Forms, will not experience any building expansion but additional state-of-the-art printing equipment has and will be added, according to company officials.

In explaining the rapid changes in the printing industry Crawford said, "The form business is a challenging market right now because there is a trend toward the use of electronic forms. Our plant in Visalia has grown during this time though because we aggressively market our products and services and because we made Visalia one of our manufacturing Centers of Excellence and transferred work here from other facilities."

About two years ago there were indications that the plant might be closed and work transferred to some of those other facilities.

City officials worked with the company to attempt to keep jobs in the area, an effort good enough to convince the firm to make the Visalia plant a key in its overall corporate reconfiguration.

Crawford, who assumed the plant manger duties during that time, acknowledges the city's effort. "We would like to thank the City of Visalia for assisting us with our transition and making sure we are able to support our customers needs," he said.

In addition to printing government checks for the State of California and most all of the Western states, Moore Wallace prints billings for SBC, Southern California Edison, Pacific Gas and Electric (PG&E) and other utilities as well as credit card billings, such as VISA and Citibank.

It wasn't long after the Moore Corporation Limited merger with Wallace Computer Services Inc. was finalized in June 2003 that Moore Wallace combined forces with RR Donnelley becoming the largest printer in the North America.

RR Donnelley, with corporate headquarters in Chicago, has gross sales in 2003 of $4.78 billion, and earnings of about $270 million, according to company documents. Worldwide, Donnelley has approximately 50,000 workers with manufacturing operations in North America, Europe and China. The firm was founded in 1864.

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Tulare County - Sunkist VP Mike Wootton says he is optimistic the South Korean government will reopen the border to Tulare and Fresno citrus in coming weeks in time to begin orange shipments from Tulare County. South Korea is Tulare's biggest export market for citrus. Shipments typically begin by mid November into Korea - a $100 million market for Sunkist, says Wootton.

South Korea banned citrus from Tulare and Fresno counties last April.

"There's been a concerted effort by officials and legislative representatives and trade officials," says Wootton, to convince Korea to reopen the market including Congressman Nunes who sheppard a letter signed by 16 congressmen, says Wootton, and personal efforts by US Senator Diane Feinstein last week, he says.

"Based on what we are hearing" the effort will be successful, he predicts. Trade officials have been "pounding on the door" of the South Korean government.

Wootton says USDA provided their Korean counterpart the protocol that will be followed on shipments to assure Korea no septoria citri diseased fruit would come into their country as they have alleged. "We've never found it," says Wootton, noting the allegations aren't based on science.

Growers are being counseled to follow pre harvest fungicide treatments to ensure no fungus will be found. Those treatments schedules have been shared with the Korean ag department.

Observers believe Korea was really retaliating over the US ban of Korean citrus dating from 2002 because of citrus canker - a problem they have not addressed.

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