There are lots of people doing this now. A couple of years ago caterers were paying a small fortune to get used oil disposed of, now it has become a small revenue stream for them. The price for used fat will equal diesel soon enough
I imagine it will be properly cleaned and most of the engine damaging substances removed before it is used in the buses. To say that used chip oil is to be used is not really correct. The used chip oil will be used as the base substance but the actual fuel used will be considerably different. Quote "BUSES that run on fuel made from recycled chip oil are being bought for Cambridgeshire's guided bus system".
I just could not allow myself to use an untested substance in my expensive engine - one that may well shorten its life considerably.