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As Price of Crude Rises, Thieves Target Fryer Grease

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Last May, we took a look at an uptick in grease theft --yes, grease theft -- as the price of oil climbed.

Now, with a barrel of crude going for roughly $112, grease rustling is back in the news.

"Rises in fuel prices have led to an increase in the number of used fryer grease rustlers roaming restaurant alleys in the United States," Reuters reports today.

Tom Cook, president of the National Renderers Association, tells the news service that "Recyclers and collectors pay restaurants about 18 cents a pound for grease," which is, believe it or not, a tradable commodity, selling for more than double that at yesterday's close.

This, put simply, is something those in the grease trade would never have expected in a million -- no, make that two million -- years.

In 1996, an article in the Wall Street Journal quoted one Tres Dausey, who, with his father George, ran a struggling grease outfit in St. George, South Carolina, called Dausey By-Products.

“To tell you the truth I don't see why anyone would want to get in the business," he said. "My dad's been in the business I can't tell you how many years long. Right now the market for our finished product is the lowest it's been in 30 to 35 years.”

How times have changed. Biofuels still have a ways to go before keeping ExxonMobil (XOM) executives awake at night. But used frying oil, or yellow grease, which can be rendered by companies like Darling International (DAR) into a substitute for diesel fuel, is a traded commodity that has tripled in price over the past two years, leading to what Render Magazine called the “ever-increasing theft of grease.”

“Grease is no different from diamonds,” Christopher Griffin, director of legal affairs for Cold Spring, Kentucky-based Griffin Industries Inc., which collects raw grease, told a reporter. “They both have value, they’re both a commodity.”

As diesel costs rise, grease thefts do too, with grease being illegally carted away from storage areas behind fast-food restaurants like McDonald’s (MCD), Burger King (BKC), and Wendy’s (WEN) by everyone from biodiesel “homebrewers” to organized grease-theft rings with their own tanker trucks.

“Obviously, I think there’s some linkage there,” Michael Frohlich, director of federal communications for the National Biodiesel Board, told me when asked about the correlation between diesel prices and grease theft. “While 70% of biodiesel used to come from virgin vegetable oils, it’s now down to 50%, with a corresponding rise in the use of waste grease. At one time, used grease required restaurants to implement costly disposal programs. Now, it’s something they can profit from.”

If there’s a positive takeaway to be found in the rise in grease theft, Frohlich said, it’s that it illustrates “the growing size and acceptance of the biodiesel industry.”

Tim Norman, VP of sales & marketing at Mahoney Environmental in Joliet, Illinois, said of grease theft, “Oh yeah. We see quite a bit of it actually.”

“It’s one of those things you can never really stop,” he told me, “but we try to make it a little more cumbersome for the grease thieves to get at. Particularly on the outside containers, we’re putting on locks and clips, though anyone with a boring saw can cut a hole in the side and suck the grease right out.”

Norman says Mahoney has stepped up security measures as a result.

“More and more, you’re seeing the containers being kept inside, with a port the drivers can open up and collect the grease,” he explained. “We’ve got security cameras up, really anything that can act as a deterrent. It helps, but it’s certainly not going to stop the problem.”

Yellow grease may be in vogue right now, but there’s plenty to be said for biodiesel made from brown grease, as well. Plus, brown grease isn't particularly attractive to thieves either, as it's “harvested” from underground sewer lines.

“Sewer grease is so rancid, and so decomposed, a cost-effective technology to turn it into fuel never existed until now. Anything that smells really, really bad that nobody else wants -- that's our sweet spot,” Emily Landsburg, CEO of BlackGold Biofuels, explained in a telephone interview.

Brown grease not being a tradable commodity makes it less subject to the volatility and speculation associated with yellow grease.

“Brown grease not only can be made into biodiesel, removing it actually provides a wastewater solution by aiding in the cleanliness of municipal sewers,” she says. “Sewer grease is the leading cause of sewer overflows, which puts utilities in violation of the clean water act,” and can cost them large amounts of money.

Houston attorney Jon Jaworski, known in legal circles as “The Grease Lawyer,” defends people accused of grease theft. (He started making clients promise to clean up before coming to his office after the nauseating odors got to be too overwhelming.)

“I had a guy who was paid with a bottle of vodka and a couple cartons of cigarettes to steal grease,” Jaworski told me. “I also get a lot of calls from biodiesel companies wanting to know how to protect themselves from people stealing their grease.”

Being a defense lawyer, Jaworski isn’t sure he agrees that, under the law, grease theft is actually theft.

“If it’s rancid oil, a pollutant, sitting in a garbage container, is it really theft?” he asked. “Under supreme court law, if it’s in a trash can, it’s trash.”

That’s something to be argued in a court of law, not here. However, one thing not up for debate is Jaworski’s passion for grease.

“I love a good grease case -- they’re always very interesting.”
POSITION:  No positions in stocks mentioned.