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Biodiesel requirement takes effect

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Gov. Tim Pawlenty traveled the state Thursday to promote Minnesota's new law requiring diesel fuel sold here to contain 2 percent biodiesel-- which is made from soybeans. (MPR Photo/Tim Pugmire)
Starting Thursday, nearly all the diesel fuel sold in Minnesota must contain at least 2 percent biodiesel, a farm-based oil made from soybeans.

Worthington, Minn. — State officials are celebrating the start of a new requirement Thursday that all diesel fuel sold in Minnesota contain 2 percent biodiesel.

During an appearance outside a school bus garage in Mendota Heights, Gov. Tim Pawlenty said the nation has been asleep at the switch when it comes to energy policy. He said the country is addicted to foreign oil.

"We have to find a better way. We have to find other sources of energy and fuel. And biodiesel is a tremendous opportunity for our state to once again lead the nation to a brighter and better future with respect to energy policy," Pawlenty says.

State Agriculture Commissioner Gene Hugoson says critics of the mandate wrongly predicted that biodiesel would be too expensive to use.

"My understanding is that this last week the wholesale price of diesel fuel in Minneapolis, delivered to Minneapolis, was $2.39 a gallon. The same price for biodiesel was $2.00 a gallon. So, it's cheaper," Hugoson says.

The law is the biggest step forward yet for the state's biodiesel industry, and it makes soybean farmers happy because it provides another use for soybeans and helps boost grain prices.

But the change is not welcome news for truck drivers, who rely on diesel to fuel their vehicles. They're concerned the new requirement could raise the price they pay for diesel fuel, and they call it unnecessary government mandate.

When the law was passed three years ago, it spurred construction of several biodiesel plants in the state. Southwest Minnesota farmer Bruce Hill heads the board of Minnesota Soybean Processors, which makes biodiesel in the town of Brewster.

"We are currently running 100 to 105 percent capacity," says Hill.

The plant is one of three in the state. The others are in Albert Lea and near Redwood Falls. Hill says, combined, the three will produce more than 60 million gallons of biodiesel a year, four times what's needed to meet the 2 percent mandate. Hill says much of the Brewster plant's output goes out of state.

"Illinois, Iowa, California. It's getting out there a ways," says Hill.

Minnesota is the only state requiring biodiesel. Still, use of the fuel is growing nationwide, mainly through government involvement. A growing list of states, cities and counties burn biodiesel in their trucks or buses. The U.S. military is a big user.

Renewable, non-toxic, bio-degradable, American-grown fuel if you would.
- Paul Nazzaro, Advanced Fuel Solutions

Country singer Willie Nelson made a big media splash this year when he introduced a biodiesel blend called "BioWillie." He's selling the fuel to truckers.

The increased demand means more production plants are being built in states like Iowa, Colorado, Mississippi, Texas and Georgia. Like the Minnesota facilities, they're looking for new places to sell.

One possibility is the nation's diesel fuel supply. Starting next year, what's called ultra-low sulfur diesel fuel will be phased in across the U.S. The switchover will take several years and is designed to reduce air pollution.

Al Mannato of the American Petroleum Institute says removing sulfur lowers the "lubricity" of the fuel -- it makes it less effective as a lubricant in the engine.

"Sulfur is a natural lubricant in diesel. And the diesel engine needs that lubricity," says Mannato.

Mannato says biodiesel is also a lubricant, so adding a small amount to ultra-low sulfur diesel would solve the lubricity issue. However, Mannato says biodiesel is more expensive than other additives, which might limit its use.

"Companies will be looking state by state and area by area -- what is the most cost-effective solution to dealing with lubricity," says Mannato.

One plus for the biodiesel industry is the federal energy bill passed last summer, which requires increased use of renewables like biodiesel and ethanol in the nation's motor fuel supply. It's possible some refiners will use biodiesel as a lubricant to help them meet the renewable requirement.

Another major area of interest for biodiesel producers is the home heating market. Paul Nazzaro heads Advanced Fuel Solutions, a Massachusetts-based promoter of renewable energy. He says adding a small amount of biodiesel to traditional heating oil reduces pollution.

Nazzari's company surveyed consumers and fuel dealers. He says they're willing to pay a little extra to get a renewable blend.

"They were willing to swallow a 4-5 cent premium to get a blend of biodiesel in their home heating oil, to get those benefits," says Nazzaro. "Renewable, non-toxic, biodegradable, American-grown fuel, if you would."

Nazzaro says his company is having success selling a home heating oil that's 5 percent biodiesel. He says most is sold in the northeast U.S., but he says a few companies in the Midwest are offering the blend.

That's the sort of news which encourages biodiesel producers like those in Minnesota. They believe public opinion is on their side. They say consumers seem willing to pay more for a product that reduces pollution and lessens the nation's reliance on foreign energy.