Central Wheatbelt-based Kalannie Distillers has found a way to overcome high fuel prices in processing mallee trees into eucalyptus oil.
The group received a $75,000 Royalties for Regions grant last year, which enabled them to convert the operation into a biomass-fuelled system.
Kalannie Distillers director Ian Stanley used the funds to install a new boiler on his farm 2km north of Kalannie, which he fired up for the first time last week.
Mr Stanley used biomass from oil mallees harvested on his property to fuel the boiler to aid the conversion of eucalyptus leaves into oil.
"Because the cost of diesel is so high we are using waste biomass to make it economically viable," he said.
"Steam is generated in the boiler, which volatilises the oil in the leaf and that stays as a gas.
"The volatilised eucalyptus oil is taken through a condenser which cools the steam that reverts to a liquid which we then separate out into oil and water.
"The water goes back around to the boiler and we take the oil out which is our product.
"The waste product is the resultant biomass which we then use for fuel."
Kalannie Distillers has been in operation since 2002 but Mr Stanley said the business would only become profitable once this new system was developed.
"With the old system, we were using two to three litres of diesel for every litre of oil we were producing," he said.
"We looked at our numbers and on some days we weren't breaking even.
"We were looking for alternative fuel sources and that is why we developed the solid fuel boiler."
Based on a eucalyptus oil price of $14 a kilogram, Mr Stanley said Kalannie Distillers would have to process at least 15 tonnes of harvested mallee a day to break even with the diesel-fuelled boiler.
"Because we were still developing a harvester and a boiler system we were only getting three tonnes a day," he said.
"By taking diesel out of the equation we aim to prove we will have a viable business based on oil."
After years of modifying Australian equipment, Mr Stanley and a fellow director travelled to Bavaria in Germany in 2006 where the group commissioned engineers to build an oil mallee harvester.
Based on a poplar tree harvester, Mr Stanley said the machine enabled them to source a regular supply of biomass to fuel the new boiler.
The mallees are being sourced from Mr Stanley's farm but in the future Kalannie Distillers will use mallees from other growers in the district.
"Since the late 1990s we have planted 1.25 million mallees on our farm," he said.
"In time, we will purchase biomass from local farmers."
He aims for 1.5 per cent efficiency in converting the trees into oil, or 150kg of oil for every 10 tonnes of mallees.
Kalannie Distillers is made up of six central Wheatbelt farmers, also members of the Oil Mallee Association.
The company exports oil in bulk to the eastern states and sells small amounts in Kalannie.
Mr Stanley said he hoped the new system would enable Kalannie Distiller to market its oil more as a niche product in the local market.
"We will be supplying oil to New South Wales and WA but our intention is to pursue the local market more aggressively," he said.
He believes the production aim of 50 tonnes of oil a year will be achievable using the new system."That is our initial goal but once we've achieved that we will be able to scale it up from there."
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