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Grease bandits take off with 'liquid gold'

Vern McArthur was driving his unmarked van through Toronto's back alleys last month, vacuuming out 55-gallon drums of used fryer grease.

But when Mr. McArthur, the owner of VMC Disposal Services of Halton, stopped for a regular pickup at a downtown diner, the containers were mysteriously missing, with only a trail of grease covering the nearby pavement.

The grease bandits had struck again. Days later, the containers were found in a back alley two blocks away, where thieves had evidently stashed them before siphoning out more than 400 litres.

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"I see it all the time now," said Mr. McArthur, the latest entrepreneur to smell eco-profit in the dirty business of grease collection. "Thieves are beating us to a lot of our grease. We're showing up and they're empty."

On the surface, it might seem absurd: Grease is waste, not liquid gold. But, increasingly, grease is the word: Processed fryer oil, commonly known as yellow grease or waste vegetable oil, has grown valuable in a world desperately searching for fuel alternatives. Its value has doubled in the past year, driven by the ever-escalating price of oil, making it a popular form of biodiesel to fuel vehicles.

In Toronto, the grease industry is thriving like nowhere else in Canada, Mr. McArthur said, because of the competition from biodiesel startups and the high number of restaurants in the city.

There are at least 10 companies fighting with each other to get contracts with restaurants for their waste oil, and more grease-collecting biodiesel startups coming on board each month, he said. In Western Canada, by contrast, one company owns virtually the entire market.

The demand for grease is also driving collection companies to new ends to win over businesses and smother competition.

"It's cutthroat out there," Mr. McArthur said. "I'm afraid I'm going to show up at one of my restaurants and there's going to be cement in my barrels."

Restaurant grease is another trash-turned-treasure in Canada's thriving underworld economy.

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Recently, manhole covers have been pried off the holes with picks or crowbars, then allegedly resold for scrap metal. Toronto's enterprising metal thieves have been reselling copper wire to scrap-metal yards for decades.

The grease industry, an offshoot of the rendering and biodiesel industries, has become so competitive that all the major local grease-collection companies complain of a spate of used-cooking-oil heists from their waste-oil containers. Mr. McArthur suspects that the thefts may be coming from black-marketeers or a minority of drivers who use filtered grease to fuel their converted biodiesel vehicles.

There are a growing number of such do-it-yourself environmentalists getting into the grease game: Anyone with a diesel vehicle can buy kits on the Internet, starting at around $1,000, to convert their engines to run on filtered fryer oil.

Jim Long is vice-president of rendering for Rothsay Biodiesel, a subsidiary of Maple Leaf Foods, one of Toronto's main grease collectors, with contracts for major fast-food chains and restaurants. He said the company has "several" investigations under way and has retained the services of a private surveillance team to find the thieves in some of the grease dumpsters hit most often.

"There has been a noticeable impact [on]volume," Mr. Long said. "Theft of any kind will not be tolerated, and we continue to investigate incidents and work with the authorities. … Thieves are not only stealing from the approved service provider but also from the restaurant owner."

Yellow grease comes from soy oil, canola oil and other oils used for cooking. In the past, its value has been as an additive to help manufacture soap, makeup, clothing, rubber and detergents. But its main use, historically, has been as a livestock-feed additive because it makes the food less dusty and more appetizing for farm animals.

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In 2000, yellow grease was trading for around seven cents a pound. Last week, its price was more than 39 cents a pound, or around $3.60 (U.S.) a gallon. In Canada, that amounts to around $1 a litre. That would make the 5,000-gallon haul from a fast-food court, for instance, worth around $18,000 if the grease were pure. Even one of Mr. McArthur's 55-gallon drums would likely net $200 or more.

In this lucrative market, grease-collection companies are doing their best to stifle competition.

Last year, just after Mr. McArthur made his move into the grease market, his phone rang. The call was from another grease-collection company and the message was clear: Watch your back.

"They asked what I thought I was doing treading on their territory," Mr. McArthur said. "They told me, plain and simple: 'We're out to get you. You won't survive.' "

The owner of another Toronto-based grease-collection start-up, who asked to remain anonymous, said he believes that he has been targeted by other companies since entering the industry. He converts the grease to biodiesel at home. His efforts to get oil have been stifled by other companies. In mid-July, he scoured downtown Toronto for restaurants willing to give him their oil. Within a day of striking deals with some family restaurants, a second company had moved in, paying as much as $45 per barrel, effectively pricing him out of the market.

But he has adapted. He said he has been stealing business away from other companies by intercepting the waste oil before it gets dumped in their containers. There's a loophole in contracts signed with restaurants, he said, so he has struck side deals with owners to get the grease in what he considers a "legal" way.

"It's not theirs until it gets into the collection bins," he said. "The gloves are off, all bets are off, they'd have no problem slitting my throat, metaphorically speaking, for the grease, so I have to do what I can."

Mr. Long, though, balked at that practice and said it's an example of another unregulated company capitalizing on the hot market. They'll soon fizzle out, he said.

"I don't think companies like that are going to last," he said. "Our expectation is that when the markets recede, which they have historically done in the past, we will see a decline in the number of smaller collectors."

Toronto's big grease players deny trying to intimidate smaller start-ups. Joel Ste-Marie, the vice-president of restaurant services for Montreal-based Sanimax, which owns a large share of the Toronto market, converting grease to biodiesel, animal feed and soap, admits that the business is becoming increasingly competitive, but he said his company has not changed its practices.

"A lot of these new companies are taking a street-fighting-type approach," he said. "The competition is putting pressure on the industry, but we're not doing anything different out there."

Mr. Ste-Marie said the company has considered several options to deal with increased theft. But it is nearly impossible to prove, barring setting up cameras in back alleys, staking out fried-chicken restaurants at 4 a.m. or hiring a private investigator.

Those on the front lines said restaurant owners are still amenable, for the most part. Chantale Doyle, a long-time waste-vegetable-oil driver from Toronto, who recently drove her Volkswagen van across North America on biofuel, said she has not experienced much resistance from restaurants, which are usually happy to get rid of their grease.

"When I have been turned down, it is usually because the person who collected the grease before me left a mess at the grease dumpster," she said.

Restaurateurs, for their part, have noticed the increased competition. Rob Erlich, co-owner of Toronto's Duff's Famous Wings, said he switched companies last month to a local start-up biodiesel firm. Grease was being spilled over the back alley because the previous company was neglecting the drums.

The new company pays him by the litre for the oil. His two Duff's Wings locations, one on Bayview Avenue and the other on College Street, create some of the most sought-after grease in the city because of the high-quality oil they use, Mr. McArthur said. Mr. Erlich estimated that they create 1,400 litres of used cooking oil each week and require frequent pickup.

Mr. McArthur is stockpiling the oil, removing excess water and gunk, turning it into biodiesel, and beginning to sell it to farmers and agricultural firms who use it to fuel their tractors. He has had inquires from companies in Pakistan, India and Africa, which are scouring the globe for bulk yellow-grease supply. The grease can also be sold on Internet trading websites, he noted.

Some companies, such as Mr. McArthur's, don't pay restaurant owners for the grease, but play up the environmental benefits of using it for biofuel. That's changing, however. Two years ago, restaurants paid to have their grease hauled away, but most companies now offer them five to 10 cents a litre for it. Earlier this year, Mr. McArthur said, a Toronto restaurant-chain owner looking to capitalize on the grease market began attempting to process the oil at his uncle's farm, then sell it to biodiesel firms in bulk. A week later, the owner called him back.

"He just couldn't handle the smell," Mr. McArthur said. "At the end of the day, you're covered in grease and you can't get rid of the smell of French fries. … It's a disgusting business, it really is."

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