Between now and next summer, biodiesel use in Illinois should increase noticeably. Illinois Gov. Rod Blagojevich signed House Bill 112 (HB0112), which requires all state, county and local governments, universities, community colleges and public school districts, and mass transit agencies operating diesel vehicles throughout the state to use a minimum of 2 percent biodiesel when bulk refueling centers are used. The directive goes into effect July 1, 2006. 
 

 "We are pleased with what's happened so far," said Hans Detweiler, deputy director for the Bureau of Energy and Recycling in the Illinois Department of Commerce and Economic Development (IDCED). "Last year, Gov. Blagojevich signed an Executive Order requiring all state-owned vehicles to use B2, and we found that there really were no higher costs associated with extending that to include what [HB0112] covers." However, the lack of additional costs wasn't the determining factor in Blagojevich signing the bill. 
 
 Three strong reasons backed the governor's solid acceptance of HB0112-keeping the kids healthy, supporting Illinois agriculture and contravening dire dependence on foreign oil. 
 
 Blagojevich's main focus in signing HB0112 was curbing public school bus emissions, Detweiler said. Biodiesel's capacity, even with low blends, to reduce carcinogenic particulate matter emissions from school bus tailpipes clinched his support. "The governor will do anything he can to create a healthier environment for the kids," Detweiler said. 
 
 The second driver in signing the bill was to show support for Illinois agricultural products. 
 Thirdly, the governor wanted to make headway in moving Illinois away from dependence on foreign oil. "The governor believes this legislation will help prime the pump on renewable fuels," Detweiler said. 
 
 Most recent data suggest approximately 4.5 billion gallons of diesel fuel are consumed in Illinois annually, according to the IDCED. The state's transit authorities alone would use approximately 500,000 gallons of biodiesel per year under HB0112's B2 mandate. 
 Looking at Illinois' fuel infrastructure, Detweiler doesn't foresee any impediments to implementing the B2 directive. "The agency did a survey on [Illinois fuel] blending systems, and a number of them already produce biodiesel and are looking at expanding that," he said. 
 
 Forecasting ahead, Detweiler had some encouraging words on future Illinois biodiesel initiatives. "Right now, we're in dialogue with the investment community," he said. "The market is there, and a number of entities want to develop. But, to the lending community, this is a relatively new bird."
 -Staff Report

Gov. Blagojevich signs key biodiesel bill for Illinois

Everyone likes free stuff. 
 

 That's why I know you'll appreciate the complimentary wall map packaged with this month's issue of Biodiesel Magazine. The 2005 U.S. & Canada Biodiesel Plant Map, both attractive and functional, represents one of the most comprehensive biodiesel plant lists ever published. The map accurately represents all existing, expanding and under construction biodiesel plants throughout the United States and Canada. 
 Associate Editor Dave Nilles spearheaded the project, and with the help of others, contacted every known biodiesel producer and future biodiesel producer across two nations-coast to coast, from Texas to Quebec.
 
 The fruit of their labor is eye-opening. 
 
 According to the data Biodiesel Magazine collected, existing producers (the United States and Canada combined) have a collective production capacity of 316.6 mmgy-that's about a dozen times greater than what was actually produced in 2004. Guess what? There's another 282 mmgy under construction, and an additional 35.5 mmgy coming on line as a result of current plant expansions. All told, that's nearly 635 mmgy of total production capacity. 
 
 Don't overreact. In the biodiesel business, one must quickly learn to distinguish capacity with actual production, or even intended production. Capacity represents just that: a facility's full potential to produce biodiesel. But to use a homespun sports metaphor, not every player dressed for the big game actually plays. Some can't. Others don't want to. The biodiesel industry is no different. 
 
 I should also tell you that our map doesn't represent proposed biodiesel plants-only those that already exist or those that were scheduled for construction by Oct. 15. Also, in order to make the map manageable-for editors and readers alike-we included only facilities and projects with production capacities of 1 mmgy or greater. In fact, in the course of compiling data for the map, our writers called hundreds of people, each with an equally interesting, but almost always unique, plan to produce biodiesel. Their reasons for wanting to produce biodiesel are as varied as the feedstocks they plan to make it with. And at the end of the day, we understand that it's quality, not quantity, that really counts. 
 
 To everyone who offered us information about their facility or project over the last few months, thank you.
 
 
 Tom Bryan
 Editorial Director

 tbryan@bbibiofuels.com

Editor's Note

California-based Rural Enterprise Management Company LLC and Georgia-based Desmet Ballestra have partnered to conduct a feasibility study and preliminary business plan for a possible biodiesel plant in Michigan. The project is funded by a USDA Rural Development grant and guided by the Michigan Department of Agriculture (MDA), according to Bob Craig, director of the MDA Agriculture Development division. The study should be completed by the end of this year when it will become a public record. "Whoever wants to then take the ball and run with it, and in fact build a plant, can do that," Craig told Biodiesel Magazine.

Michigan biodiesel plant feasibility study underway

Ag Processing Inc. (AGP) is planning another expansion to its Sergeant Bluff, Iowa, biodiesel facility. The plant, which  more than doubled in capacity recently, would be expanded to more than 20 mmgy. The construction project will involve the addition of new infrastructure, process equipment and additional storage tanks intended to improve plant efficiencies, enhance market flexibility and increase production. AGP Vice President John Campbell said the permit application process has begun, and completion of the expansion is expected in 12 to 18 months.

AGP plans to expand plant

The Texas Commission on Environmental Quality approved Biofriendly Corp.'s Green Plus diesel additive under the Texas Low Emissions Diesel (TxLED) ruling, which started Oct. 1. At press time, the approval makes it only the second additive, along with Lubrizol's PuriNOx, certified for use with No. 2 diesel to reduce NOx emissions in Texas' most populated region. Biofriendly also received more than $300,000 in two new state grants to test Green Plus with ultra-low sulfur diesel and biodiesel.

Green Plus approved TxLED fuel

As a fuel, biodiesel cannot meet its full potential without recognition from the companies manufacturing the diesel engines in which it operates. Accordingly, in addition to the biodiesel tax credit expiration date being extended from 2006 to 2008, several other diesel-related provisions were passed as part of the Energy Policy Act of 2005. 
 
 Tax credits totaling $875 million were authorized for vehicles meeting certain efficiency requirements. Beginning January 2006, if a vehicle with "advanced lean-burn technology" is bought, the purchaser may be eligible for up to $3,400 in tax credits. "'Advanced lean-burn technology' is essentially code for diesel," said Allen Schaeffer, executive director of the Diesel Technology Forum, an organization representing diesel engine, fuel and emission control system manufacturers. 
 
 Diesel engines are fuel efficient by design. The high air-to-fuel ratio and basic thermal efficiency of the diesel engine allow compression ignition engines to conserve fuel at a higher rate than gasoline engines. "With continually rising oil prices, more people are becoming aware of the fuel economy of their vehicles," Schaeffer said. 
 
 There are no diesel vehicles on the U.S. market that currently meet the stringent "Tier 2, Bin 5" emission standards required for these new credits, but Schaeffer hopes this monetary incentive might encourage manufacturers to introduce eligible diesels to the domestic vehicle market soon. Sales in the last couple of years show promise, however. "From 2000 to 2004, sales of diesel vehicles increased 56 percent in the U.S.," Schaeffer said.
 
 Another provision, the Diesel Emissions Reduction Act (DERA), authorizes $1 billion over five years to retrofit older on-road trucks, buses and off-road equipment with diesel particulate filters, NOx traps and selective catalytic reduction systems. Schaeffer said 70 percent of the funding would go to the U.S. EPA for distribution to vehicles operating in the nation's highest-ranking non-attainment zones where ambient air quality suffers the most. Thirty percent will be doled out to the states for localized programs. "[The non-attainment and near non-attainment zones] will get the first bite of the apple," he said. The size of that "apple" isn't determined yet, but Schaeffer hopes appropriation funding will approach or match what has been authorized. 
 
 Nearly $200 million was authorized for two more programs: an idle emission reduction program to help the EPA's SmartWay Transport Partnership get auxiliary power units in play, and a 50 percent cost share program to retrofit and modernize truck fleets in ports and large-haul operations. 
 
 The inclusion of these diesel incentives is good news for diesel and biodiesel. "It offers a ray of hope and opportunity for both manufacturers and consumers," Schaeffer said. The growth of both the diesel vehicle and biodiesel fuel markets will likely coincide, which Schaeffer said raises questions like, "What happens if I put biodiesel in a diesel vehicle with a particulate filter?" 
 
 Working together, both industries can successfully address these concerns. "The diesel industry recognizes the biodiesel industry's success," Schaeffer told Biodiesel Magazine. "And together we're taking steps down the right road."
 -Staff Report

U.S. energy bill packs powerful diesel provisions

New England-based New Energy Capital, along with other investors, has provided equity capital for Mid-Atlantic Biodiesel Company LLC, a 5 mmgy, $10 million biodiesel plant that broke ground in July in Clayton, Del. The facility will use virgin soybean oil, waste vegetable oils and animal fats as feedstocks. Fagen Inc. of Granite Falls, Minn., is constructing the facility. Mid Atlantic Biodiesel also received financial help from Greater Atlantic Bank of Reston, Va., the USDA and the state of Delaware. It is the first large-scale biodiesel plant in the Northeast.

New Energy Capital provides equity for biodiesel plant

Natural Nutrients, a subsidiary of Natural Chemical Group LLC, is preparing to break ground this November on a $19 million glycerin refinery in Corning, Iowa, and the state recently delivered good news to the project. Iowa's Department of Economic Development approved Enterprise Zone tax benefits for Natural Nutrients, providing tax breaks and credits. The plant will refine glycerin, preferably that which came from refined vegetable oils, into kosher vegetable glycerin. For contract information, please call CEO Robert Salazar at (713) 524-0500.

Iowa glycerin refinery planned

The United States isn't the only nation in the world where biodiesel production and use is growing. In addition to the European Union (EU), many other countries are developing their own industries.
 
 The Philippines' first biodiesel production facility is under construction and slated to start producing in the third quarter of 2006. The 60 million-liter (16 mmgy) facility will use coconut oil and palm oil as feedstocks. Chemrez Inc. is developing the project. The company is a member of the Biodiesel Manufacturers of the Philippines. According to Chemrez, Lurgi is providing continuous process technology. The facility will also include glycerin refining capabilities, according to Chemrez Operations Manager Jun Ang Lao.
 

 The plant, located in Quezon City and touted as Asia's first continuous biodiesel facility, could be capable of meeting most of the country's biodiesel demand. The Department of Energy instituted a National B1 Program where all diesel fuel sold will incorporate 1 percent coco-biodiesel.
 
 The Philippines produces approximately 1.4 million tons of coconut oil annually. Seventy percent of that production is exported.
 In other international news, Bangalore, India-based Labland Biotech has announced its plans to produce 10 million jatropha plants specifically for biodiesel production. Labland is producing approximately 100 million tissue cultures derived from jatropha plants to distribute globally to biodiesel production countries situated in India, Africa, Central Asia and South America. Labland has developed an integrated center to research jatropha cultivation methods, contract farming and crude oil extraction.
 
 The Indian government announced in 2004 that the country would introduce biodiesel into the nation's fuel supply by 2012.
 Neste Oil, a northern European oil refining and marketing company, is implementing its proprietary technology for biodiesel production. The technology, dubbed NExBTL, was developed in the mid-1990s. A €100 million ($124 million) plant under construction in Finland, due for completion in summer 2007, will showcase the technology. The EU has set a goal of having nearly 6 percent of vehicles in the EU running on biofuels by the end of 2010.

International projects move ahead

An agreement between FirmGreen Energy Inc. (FGE) and Mitsubishi Gas Chemical America Inc. (MGCA), under which FGE will provide MGCA with as much as 6 million gallons of methanol per year, was ratified by the Solid Waste Authority of Central Ohio in mid-July. The approved deal-something FGE officials called a "partnership of technology and marketing"-effectively allows FGE to build a methanol plant and provide MGCA with the offtake. MGCA, in turn, intends to market at least some of the methanol into the U.S. biodiesel industry. 
 
 According to FGE spokeswoman Rhonda Howard, FGE will produce "green methanol"-methanol made from renewable stocks of landfill gas rather than from conventional non-renewable sources such as a natural gas or coal. The product will be supplied from FGE's future methanol plant in Grove City, Ohio. Howard said the plant is currently under construction. The facility is being touted as the largest landfill gas-to-renewable methanol project in the world, and it's receiving strong praise from the Methanol Institute for its innovative use of technology. "Using renewable feedstocks such as landfill methane to produce a high-value chemical and fuel like methanol makes a world of sense," said Methanol Institute President and CEO John Lynn.
 
 The plant's central location in Iowa positions the companies to reach numerous methanol customers in the region, biodiesel producers among them, as well as supplement the traditional methanol market, according to Mark Vassar, MGCA's vice president of marketing and sales. MGCA is one of the largest methanol producers in the world. The company owns two large-scale joint venture plants, one in Saudi Arabia and another in Venezuela. Methanol from the Venezuelan plant is marketed in the United States. In addition, MGCA has two storage terminals in the United States.
 
 Steve Wilburn, president and CEO of FGE, said both companies have received overwhelming consumer interest in the future availability of green methanol. "We're very pleased to be working with Mitsubishi to supply renewable methanol to the world marketplace," Wilburn said. "Their position as an industry leader brings a high level of credibility to the whole undertaking."

FirmGreen, Mitsubishi Gas to make 'renewable methanol' available to biodiesel industry

Agriculture and Agri-Food Canada released 2005-2006 estimates for grains and oil production, and the country's numbers mirror this season's weather--inconsistent. Grains and oilseed crops declined by 600,000 hectares from last season. Total harvested area in Canada is forecasted to be 23.4 million hectares, marginally up. Grains and oilseed crop projections are slightly lower than last season, coming in 2 percent lower at 62 million metric tons; oilseeds were up, but that was offset by low grains production.

Canadian oilseed production drops

Pennsylvania soybean farmers are closer to having another market for their soybeans. Keystone BioFuels Inc. began construction on its biodiesel production facility in Shiremanstown, Pa., in early September, according to Keystone BioFuels President and CEO Race Miner.
 The 1 mmgy plant will use soy oil as feedstock. Miner said Pacific Biodiesel Inc. is under contract to provide the facility's process technology. The project received final go-ahead when its wastewater discharge permit was granted in late August.
 
 The biodiesel plant will be housed within an existing manufacturing facility previously owned by the Quaker Oats Co. The facility was once used to produce cereal products until the late 1990s. Miner said the lease for the building was negotiated in early spring 2005. He said extensive work is required to prepare the manufacturing complex for the biodiesel facility. Much of the existing mechanical equipment has to be removed. Miner said tanks were installed in September.
 

 Miner said he has been in negotiations with several soybean crushing facilities in the area for feedstock. One soy crusher is located 75 miles north in Danville, Pa. A second crush facility is located 25 miles away in Lancaster County. Those facilities could produce approximately 3 mmgy of soy oil.
 
 Miner said he hopes to begin producing biodiesel before the end of the year. He is currently negotiating offtake agreements. He said most demand is coming from heating oil markets throughout the Northeast.

Keystone BioFuels breaks ground

Biodiesel wasn't the sole focus of the American Soybean Association's (ASA) summer trade mission to Europe, but it was certainly a bright spot in a series of meetings largely mired in differences of opinion over biotechnology. 
 
 During the ASA's week-long mission in early June, ASA grower leaders and staff, Congressional staff, industry representatives and U.S. Foreign Agriculture Service staff, immersed themselves in trade-related issues impacting the importation and use of U.S. soybeans and soybean-derived products in Europe. In addition to lively exchanges of information over biotechnology, the U.S. delegation took time to explore the inner workings of the European biodiesel industry-and the policy drivers behind it. 
 
 In France, the delegation toured Saipol, a large biodiesel plant in Rouen, where delegates spoke with French biodiesel industry leaders. "I was struck by how much we have in common on biodiesel," said ASA President and former National Biodiesel Board President Bob Metz. "Like us, the French are firmly committed to developing and maintaining a strong biodiesel industry. They produced about 104 million gallons of biodiesel in 2004. Wouldn't it be nice to see production in the U.S. ramp up to that figure?"
 
 In fact, French officials recently announced that four new biodiesel plants capable of collectively producing an additional 59 mmgy will be constructed by 2007. European Union (EU) member states produced approximately 576 mmgy in 2004, according to the European Biodiesel Board. Germany is the largest producer of biodiesel in the EU-it produced 308 mmgy in 2004-while France was second and Italy a close third at 95 mmgy. 
 
 In Belgium, the U.S. delegates visited with high-ranking officials, delegates of EU member states and biodiesel industry leaders. One particular meeting provided the U.S. delegates with insight into how EU policy has effectively transformed Europe's biodiesel industry. "It's clear that EU policies are driving the biodiesel market," said ASA Chairman Neal Bredehoeft. "Member states give biodiesel a tax break, and the EU aims to use renewables in no less than 5.75 percent of transportation fuel sold by 2010. These directives closely resemble the biodiesel tax incentive [extended in the Energy Policy Act of 2005]. … [The mission] illustrated the important role biodiesel can play in promoting biodiesel."

ASA explores EU biodiesel industry during trade mission

Iowa's growing biodiesel industry is beginning to significantly increase in-state demand for soybean oil. Biodiesel plants could consume more than 200 million bushels of the state's soybeans, or about 40 percent of the 2004 crop, according to Grant Kimberley of the Iowa Soybean Association. He said a sustained in-state demand for 200 million gallons of biodiesel per year would raise the price of soybeans by 17 cents per bushel. Iowa currently grows just over 10 million acres of soybeans.

Biodiesel boosts Iowa soy demand

Recently, two California professors stirred up the biodiesel industry by releasing a study in March that said biodiesel production using soybeans required 27 percent more fossil energy than the biodiesel produced.
 
 Cornell University's David Pimentel and Tad Patzek of the University of California-Berkeley delivered similar accusations to the ethanol industry, which counters the argument by saying Pimentel's research is outdated and grossly inaccurate. In an attempt to settle the issue, the National Corn Growers Association (NCGA) hosted a debate in which Patzek, a chemical engineering professor, and Pimentel, an entomologist, faced off against Bruce Dale, a chemical engineering and material science professor at Michigan State University, and John Sheehan, senior engineer at NREL. The group met Aug. 23 at the National Press Club in Washington, D.C. 
 
 According to Dale and Sheehan, Pimentel and Patzek continuously inflate the energy inputs of farming and fuel production in their studies. "Their estimates of fossil inputs for farm production are twice as high as those estimated by the U.S. Department of Agriculture, and their grain-processing input estimate is 40 percent higher," Sheehan said. 
 
 In the end, both sides of the debate agreed that the United States does need to find an alternative to importing foreign oil. "Our situation is more serious than you think," Patzek said of the country's increasing energy consumption. "We have to start by cutting down on fossil fuels."

 To view the presentations shown at the event or to hear the entire debate, visit www.ncga.com/ethanol/debunking/index.htm.

NCGA hosts renewable fuels energy debate

Iowa Gov. Tom Vilsak and other dignitaries attended the Aug. 10 groundbreaking ceremony for Cargill Inc.'s biodiesel and glycerin production facilities that will be adjacent to its soybean crushing facility in Iowa Falls, Iowa. 
 
 Construction has begun on the new additions that will produce 37.5 mmgy of biodiesel and 30 million pounds of USP-grade glycerin annually. Soy oil will be the primary feedstock, although the plant has the capacity to use animal fat or waste grease in the future. Plans include BQ-9000 certification once the plant is operational in April 2006.
 
 Memphis-based Lurgi PSI has been contracted to design and build the add-ons, providing turnkey technology, engineering, building materials and equipment. Cargill Bio Fuels will market the biodiesel, while Cargill Industrial Oil & Lubricants will market the glycerin products. Both will be marketed within the United States.
 
 "The price volatility of the soybean oil and petroleum markets can be challenging for biodiesel producers," said Wayne Teddy, president of Cargill Grain and Oilseed Crush Supply-North America. "However, we believe that we are uniquely positioned to manage this volatility and make this enterprise a success by leveraging Cargill's experience with other renewable fuels, utilizing our expertise in processing, logistics and risk management, as well as accessing our production of multiple feedstocks."
 
 Similarly, Cargill has invested in a 200,000-metric-ton biodiesel facility in Mainz, Germany, that will be built near Cargill's oilseed crushing and refining operations in the region. The plant is slated to begin production in the third quarter of 2006.
 
 The new facility will enable us to meet the increasing demand from our customers for biofuels," said Jack van den Hoek, general manager of Biodiesel and Biomass at Cargill Europe. "Mainz is ideally situated for the production and supply of biodiesel-both in terms of its geographical location and in the availability of raw materials such as rapeseed oil and other vegetable oils, which can be supplied via the Rhine [River]."
 -Staff Report

Cargill breaks ground on Iowa plant, invests overseas

If the 55 billion gallons of distillate fuels sold in the United States each year, the single largest category is on-road diesel fuel at approximately 35 billion gallons per year. This category is consumed almost entirely by over-the-road trucks. For many years, it has been suggested that NBB focus its outreach efforts on this highest-volume market. However, the trucking market is also the most cost sensitive market, as fuel is its No. 1 operating expense. 
 
 It has been the contention of NBB that until the cost differential is better addressed, an effort to promote biodiesel to truckers would be premature. Indeed, premature introduction to truckers could have had long-term negative effects. Asking truckers to use B20 at a 30-cent upcharge when it was not available at truck-accessible sites would have probably led many truckers to dismiss biodiesel. Fuel is lifeblood to truckers, so they are understandably sensitive about cost, availability, performance and fuel economy. They also have a long memory. Once you lose them, it is hard to win them back.
 
 A number of factors have conspired causing the trucking market to burst wide open this year. The first factor was the implementation of the biodiesel excise tax credit, which did much to address incremental cost. The other major force that had an enormous impact is Willie Nelson. There could not be a better spokesman to truckers than Nelson, whose biggest hit, "On the Road Again," is an anthem to truckers. Willie has inspired XM Radio and trucking talk show hosts like Bill Mack, Dave Nemo, Dale Sommers and others to talk about biodiesel. This has created such a buzz among truckers that is unbelievable.

 
 Actually, buzz may not be a strong enough term because this doesn't look like it will be a passing fad with truckers. Truckers have educated themselves on biodiesel through CB radios, interactions at truck stops, cell phones and by using the fuel. What we hear from truckers is that biodiesel operates smoothly and quietly. It manages hills better, cleans out the fuel system and gives them better mileage.
 They are also excited about supporting American farmers and increasing our independence from imported oil. 
 
 If you would like to witness this phenomenon for yourself, I encourage you to tune in to XM channel 171 on Wednesdays at 1 p.m. CDT. Bill Mack's trucking show features "Willie Wednesdays." Willie calls in most Wednesdays from wherever he is in the world to talk to truckers about anything they choose. Surprisingly, they mostly want to talk to Willie about biodiesel. Willie is always gracious and knowledgeable, and be often refers truckers to NBB for more information.
 
 The No. 1 question by truckers: "Where can I get it?" Truckers have been flooding the NBB hotline to ask this question. As a response, NBB has launched a new Web site, specifically tailored for truckers' interests: www.biotrucker.com. The site features information and a directory of more than 200 truck-accessible locations. In its first week, BioTrucker was visited by more than 2,500 truckers.
 
 In addition, NBB has been working with the Owner-Operator Independent Drivers Association as well as the American Trucking Association to continue to throttle up trucker outreach efforts. In July, Willie was on hand at Carl's Corner Truck Stop when Carl Cornelius was given NBB's Pioneer Award for being the first truck stop in the nation to offer biodiesel blends exclusively. Since then, additional truck stops have begun offering B20 almost every week. Besides music, Willie has demonstrated his devotion to farmers and truckers. In Willie's words, biodiesel offers the opportunity for America's farmers to fuel America's truckers, and for America's truckers to support America's farmers. The exciting part is that this is not just a nice ideal; they are doing it.
 
 Joseph Jobe
 National Biodiesel Board
 Executive Director

NBB In Sight

Clean Diesel Technologies Inc. (CDTI), a developer of diesel emissions-reducing products like fuel-borne catalysts and urea injection systems for selective catalytic reduction of NOx, announced its appointment of Walter Copan to the position of CDTI's vice president and chief technology officer (CTO). 
 
 Copan has extensive experience in related fields. He most recently served with Golden, Colo.-based NREL as principle licensing executive of technology transfer, where he was responsible for partnering with industry, government and research circles to commercialize clean energy and energy efficiency. Before that, Copan spent 28 years with Lubrizol Corp., at which his most recent post was managing director of technology transfer.

CDTI appoints Copan as new VP, CTO

On the heels of unprecedented success this summer, the biodiesel industry prepares for Congress' return from August recess to start the fall session. Upon its return to Washington, Congress will confront a Supreme Court battle, a stem cell tissue debate and pressing issues for the biodiesel industry. Some of those matters include Congress wrapping up the remainder of the fiscal year 2006 (FY06) appropriations bills and budget reconciliation.
 
 Specifically, the biodiesel industry will have an eye on the FY06 agriculture spending bill, which includes funding for two key programs: the Commodity Credit Corporation (CCC) Bioenergy Program and the biodiesel education program. The biodiesel industry secured these two key programs under the 2002 Farm Bill. 
 
 In the CCC program, which was authorized at $150 million per year, success had been achieved at procuring the authorized amount in early years of the program, only to fall short in FY05 at $100 million. As Congress will rush to the finish line, the biodiesel industry and the American Soybean Association will look to better the House FY05 mark of $60 million and the Senate mark of $90 million. Even with the tax incentive in place, this program remains vital to making biodiesel a success in its infant stages, notwithstanding maintaining a good competitive edge as prices at the pump continue soaring in light of Hurricane Katrina.

 
 The FY06 appropriations bill also holds funding for the biodiesel education program. The 2002 Farm Bill authorized the National Biodiesel Education Program at $1 million annually, or a total of $5 million for fiscal years 2003 through 2007. The education program was developed to educate, research and promote growth in the biodiesel industry. In the FY06 bill, the biodiesel industry seeks again to have this program fully funded. 
 
 One of the other key priorities for Congress this fall will be budget reconciliation. Budget reconciliation is an exercise where Congress reevaluates how and at what levels existing authorized programs are funded, then it cuts programs, takes that savings and applies it to the deficit or budget shortfall. This means any on-budget spending is a prime target. The USDA budget is no exception. The biodiesel industry will have to be prepared to fend off any attacks on key programs in the USDA budget.
 
 This fall, like last fall, the biodiesel industry expects a productive session full of achievements to move the industry forward.

U.S. Congress' new priorities to affect biodiesel

In a move that is expected to increase biodiesel sales, the Internal Revenue Service (IRS) has issued a modified guidance document for the biodiesel federal excise tax credit. Biodiesel industry experts say it clarifies several unanswered questions that will allow the incentive to be used to the fullest extent possible, a positive step forward in its implementation. 
 
 The excise tax credit amounts to one cent per percentage point of biodiesel blended with petroleum diesel for "agri-biodiesel," such as that made from soybean oil, and a half-cent per percentage point for biodiesel made from recycled cooking oil. It is taken at the blender lever with the intended effect of lowering the cost of biodiesel to consumers in taxable and tax exempt markets. 
 
 Although this document is not the final rulemaking, it amends the initial guidance document (IRS Notice 2005-4) published in December 2004, by clarifying several specific issues. Those include, among other things: 
 -Clarification of what constitutes a "biodiesel mixture" (one gallon of diesel fuel blended into 99.9 gallons of biodiesel, or "B99.9") 
 -Clarification that a biodiesel mixture includes both dyed and un-dyed fuel. This means the incentive will apply in the heating oil market as 
 well as the off-road market 
 -Clarification of the biodiesel certification process for sales of biodiesel through a reseller. This creates a mechanism so that the tax incentive claimant may obtain the required biodiesel certificate directly from the biodiesel producer or indirectly from a biodiesel reseller
 -Provisions for commingling of biodiesel and agri-biodiesel 
 -Clarification on eligible feedstocks for agri-biodiesel (palm and fish oil will qualify for agri-biodiesel incentive) 
 -Clarifications on applicable forms to claim credit and credit calculation

 
 The petroleum industry has reacted favorably to the new guidance. "We appreciate IRS responding to our concerns," said Holly Tuminello, Petroleum Marketers Association of America vice president. "These changes will make the entire program flow smoothly and create an incentive for more companies to consider handling biodiesel." 
 
 The tax incentive, established originally as part of the American JOBS Creation Act of 2004, would have expired in 2006. It will now be extended through 2008 as a result of the energy bill's passage July 29. The President signed the bill into law Aug. 8. 
 To view the IRS guidance, visit http://nbb.org/news/taxincentive/
 Biodiesel%20Notice%202005-62.pdf.

IRS clarifies direction on biodiesel tax incentive

Registration is up and running for the third annual National Biodiesel Conference & Expo to be held in San Diego on Feb. 5-8, 2006. A new Web site, www.biodieselconference.org, is devoted to registration for this growing annual event, as well as the most up-to-date information on the offerings of the conference.
 
 The premier level of education on biodiesel is available at the conference sessions in tracks such as marketing, users, technical, petroleum and original equipment manufacturers. 
 
 With an already large list of exhibitors confirmed, this promises to be yet another enriching conference with networking and educational opportunities. With Super Bowl Sunday setting the tone before the conference, there's plenty of room for catching some entertainment, too.

Register for 2006 National Biodiesel Conference & Expo

Biodiesel users can find out where to buy biodiesel on the National Biodiesel Board's (NBB) Web site. The "Buying Biodiesel" section grows weekly, currently listing almost 500 retail pumps and more than 1,500 distributors throughout the nation. The manufacturing facilities are also rapidly increasing and have a section on the Web site as well (Guide to Buying Biodiesel).
 
 These varying points of accessibility are represented by U.S. maps, and by clicking on states.
 
 Biodiesel supporters who did not find a biodiesel pump or distributor in his or her area on NBB's maps before should check back periodically as the maps are updated every two weeks. Retailers and distributors who market ASTM biodiesel can submit their locations to NBB from the site as well.

Biodiesel.org is source for growing availability

Rafael Nieves joined BBI International's Project Development team in Golden, Colo., in July. As project manager, he will work closely with BBI International clients to develop biofuels projects. Previously, Nieves worked at NREL's National Bioenergy Center as a senior researcher and later as a senior project leader. He has worked in the renewable energy sector for more than 20 years.

 
 Howard Brockhouse joined BBI International's Media Division in Grand Forks, N.D., in late August as an advertising account manager. He is responsible for managing accounts and sales for BBI Media's publications. Brockhouse brings more than a decade of sales and marketing expertise to BBI International. He holds a bachelor's degree in business with an emphasis in marketing and communications from the Carlson School of Management at the University of Minnesota.
 
 Kory Wallen has joined Biodiesel Magazine as a staff writer and photographer. Wallen, a recent graduate of the University of North Dakota (UND), holds a degree in photojournalism and has broad writing and editing experience. While at UND, Wallen was a photo editor, staff writer and features editor for the Dakota Student newspaper. He was also president of the North Dakota Chapter of the Society of Professional Journalists. More recently, Wallen worked as a freelance photographer for the Associated Press.

BBI International announces new hires

The Energy and Environmental Research Center (EERC) located on the University of North Dakota (UND) campus in Grand Forks, N.D., recently hired and promoted several staff members. Specific to transportation biofuels was the promotion of Ted Aulich, who advanced from research manager to senior research manager. Aulich's expertise in fuel chemistry and fuels analysis is applied to developing economically feasible production technologies for biodiesel, ethanol and other renewable fuels. He began with the EERC in 1985 as a student before joining full time in 1986. Aulich holds two bachelor's degrees: one in chemistry from UND, and the other in biology from St. Thomas College in St. Paul, Minn.

EERC promotes Aulich

Seattle Biofuels LLC has named Martin Tobias as CEO and chairman. Seattle Biofuels owns and operates Seattle Biodiesel LLC, a 2 mmgy plant that began commercial-scale production in mid-2005 in Seattle, Wash. Tobias is responsible for the strategic vision and growth strategy for the company, as well as fundraising and project financing. He helped raise $2 million in equity financing that will be used to build more biodiesel plants and expand capacity at Seattle Biodiesel. Tobias is the founder of Loudeye Technologies and a current venture partner with Ignition Partners.

Seattle Biofuels announces hire

At the Indiana State Fair in August, the Indiana Soybean Board signed an agreement with the Indiana Corn Grower's Association and Indiana Corn Marketing Council to pool their efforts in building stronger market demand for soybeans and corn, and provide better service to Indiana farmers.
 
 Beginning immediately, the Indiana Soybean Board will manage the 2005-'06 program activities for the two corn organizations that will focus on ethanol promotion, research and commercialization of new corn uses, and stronger biofuels and check-off program legislation. The Indiana Soybean Board already has a similar agreement with the Indiana Soybean Growers Association.
 
 "As we move Indiana agriculture forward, we must create partnerships that will increase efficiency, speak in common voices and grow demand for Indiana farmers," said Becky Skillman, Indiana Lt. Governor and Secretary of Agriculture and Rural Development.
 The Indiana Soybean Board is made up of 36 elected farmers, who direct investments of soybean check-off funds on behalf of more than 25,000 Indiana soybean farmers. For more information, visit www.indianasoybeanboard.com.

Indiana Soybean Board signs management agreement

GreenShift Corp. announced the formation of Mean Green BioFuels Corp., a development-stage company that has acquired rights to a new patent-pending technology for the cost-effective conversion of corn oil into biodiesel fuels. Mean Green intends to finance, build and operate a 30 mmgy biodiesel facility on the eastern seaboard of the United States. It also plans on investing and developing additional biofuels production facilities as well as distribution and diesel blending facilities.

GreenShift announces corn oil extraction plan

It won't be long before the early chill of winter descends upon the northern reaches of the United States and Canada. The season's first flakes of snow-the ones that reach the tips of children's outstretched tongues and melt on sidewalks-represent the annual onset of winter. 
 Seen initially as a wondrous spectacle, the cold and snow that inevitably follows can become dreaded nuisances in every sense. 
 
 Temperatures in Minnesota-where the country's first B2 mandate just went into effect-on occasion plunge to minus 40 degrees Fahrenheit. Combine those temperatures with steady straight-line winds of appreciable magnitude, and it becomes hard to even venture outside to start the car. If that vehicle has a compression ignition engine burning blended biodiesel, take solace in the fact that the industry has made great strides in addressing the renewable fuel's cold flow issues.
 
 Orientation

 Climatically speaking, North America is about as diverse as any continent on Earth. Latitudinal changes and variations in elevation, along with proximity to the warmer coastal environments, all contribute to differences in climate. For biodiesel producers, blenders and users in the northern, higher and, for the most part, inland regions of the continent, these geographic concerns drive various actions taken in the winter months to combat fuel operability problems. 
 
 Like clockwork, when temperatures during those fall nights start consistently dipping well below the freezing mark, blenders and retailers roll out their winter-blend diesel. In colder climates, the winter blend often consists of No. 2 diesel mixed with No. 1 fuel oil (kerosene) in such blends as 40/60 or 50/50 respectively, said Rod Lawrence, Magellan Midstream Partners LP's manager of quality control. Magellan has been providing testing, assets and fuels through seven terminals to get Minnesota's B2 mandate off the ground. "You're blending No. 1 and No. 2 for climatic reasons," Lawrence said. Were it not for the fear of the freeze, it wouldn't be prudent to blend No. 1 with No. 2 because of kerosene's lower Btu content. Lawrence told Biodiesel Magazine that No. 1 diesel's cloud point temperature-or the temperature at which crystallization of the paraffin molecules in diesel fuel can be observed-is approximately minus 40 degrees, whereas the cloud point of No. 2 diesel is between 4 degrees and 6 degrees with extremes reaching 14 degrees. 
 
 Along with blending No. 1 and No. 2 diesel fuels in the colder months, other strategies are commonplace in preventing cold-related usability issues with diesel fuel. Additives might be used to suppress the pour point and cold filter plugging point of petroleum diesel. The fuel lines of some diesel vehicles travel to the engine and return to the fuel tank before reaching the fuel pump and filter. This circulates warm fuel and prevents it from crystallizing.. Many diesel owners and operators park their diesels inside or near a building in cold months to keep from having operability problems, according to the National Biodiesel Board (NBB). 
 
 Petro-diesel storage, on the other hand, isn't quite as critical as the storage of neat biodiesel. "Diesel fuel is not ordinarily stored in a heated tank," said Robert Dunn, a food and industrial oils chemical engineer with the USDA's Agricultural Research Service National Center for Agricultural Utilization Research (NCAUR) in Peoria, Ill. Of course, that's not the case for B100, which can start crystallizing at approximately 35 degrees.
 
 Cold weather measures taken to prevent biodiesel flowability troubles essentially boil down to two issues: the treatment, transportation, storage and handling of neat biodiesel prior to and during blending, and the transportation, storage and use of biodiesel blends (B2, B5, B20). 
 
 The NBB's Cold Flow Impacts paper states what many other biodiesel connoisseurs already surmised-in cold weather, biodiesel blends up to 20 percent really need no additional treatment over and above what is already taken with petroleum diesel fuel. The consideration then must ultimately and very importantly rest on the transportation and storage of neat biodiesel prior to and during blending.
 
 Moiety math-addition and subtraction 
 It's well known that adding certain materials to biodiesel or any other fuel can enhance its performance, including cold flow. Interestingly enough, the opposite is also true. Particular portions of biodiesel fuel also can be removed to improve its cold weather characteristics.
 

 Although the word "additive" reverberates with the zing of a magic bullet, there really is no such thing. Whether it is emissions or cold flow, various additives aren't cure-alls for biodiesel's few weaknesses. They can help in some circumstances, however. "[Additives] don't affect cloud point," Dunn said. "They will affect pour point, under some circumstances CFPP (cold filter plugging point), but they really don't affect LTFT (low temperature flow test) that much, at least in our experience. Most of our experience is with blends of biodiesel, conventional diesel and biodiesel by itself." Dunn said while the cloud point is a conservative gauge of flowability, the pour point is too extreme to measure. 
 
 Cold flow-improving additives are blended in doses far less than 1 percent by mass, mainly due to cost. Most cold flow-enhancing additives on the market were developed for conventional diesel fuel, but they work just as well for biodiesel, Dunn said. 
 
 The chemical bases for these additives are paraffin-like structures. "That would be like an acetate or copolymer group," Dunn told Biodiesel Magazine. The additives don't prevent the formation of crystals though. "What it does do is prevent the growth of that individual crystal," he said.
 
 Contrary to blending in additives, the cold characteristics of biodiesel can also be improved by removing solids from a chilled volume of the fuel. This process is called dry fractionation-a common variation of this is winterization. "[Dry fractionation] changes the fatty acid profile to make it more amenable to lower temperatures," said Gary Knothe, a research chemist with the NCAUR. On the downside, when this procedure is done, it makes the combustion properties worse by lowering the cetane number, which has a negative effect on emissions-specifically on NOx. 
 
 "Essentially, what you do-I'm talking about winterization now-is you cool it down, filter it, filter out the stuff that gets solid and keep the stuff that remains liquid," Knothe said. The solids are the saturated esters. The remaining liquid is mainly unsaturated esters. While Knothe expressed concern about the detrimental effect on emissions after removing saturates, Dunn said his concern in leaving just the unsaturated esters was a reduction in the fuel's oxidative stability. In spite of its faults, Knothe said he gathers the industry has some interest in using winterization. 
 
 Composition
 The chemical composition of the fatty acid esters is a determining factor in how that fuel will react to the cold. Therefore, choices in feedstock and conversion process alcohols have consequential effects on the resulting biodiesel's cold flowability. 
 
 If cold weather concerns are an issue, careful consideration should be given to using the right feedstock. "What really defines the cloud point, or the cold flow, of biodiesel is its level of unsaturated or polyunsaturated esters that are present in it," Dunn said. Soybean oil typically has 15 percent to 20 percent saturated esters by mass. Numbers like that are typical for most varieties of first-use vegetable oils, whether it's canola, soy or mustard. "The vegetable oils are better than, say, tallow or waste vegetable oil (WVO)," Knothe said. 
 WVO has a higher cloud point than virgin vegetable oils, but not as high as tallow (see chart). Although WVOs are typically vegetable oils, 
 

 Dunn said once they are used for cooking applications, hydrogenation and chemical transitions that occur during the extreme frying temperatures cause the resulting WVO to contain higher melting points and, thus, higher cloud points. First-use animal fats, or tallow, have much more saturated content by mass than vegetable oils or WVOs. "Tallow might have 40 percent to 45 percent [saturated esters], palmitic or steric-very high melting point-type esters," Dunn said. All things considered, feedstock is the main variable when looking at cold flow properties of biodiesel. 
 
 A producer's choice of alcohol for the reaction process during production can also affect the resulting esters' cold flow characteristics, according to Knothe, who has done considerable research on this. Structures of the fatty compounds that make up biodiesel can be altered during the production process by using alcohols other than methanol to branch the fatty acid esters. Replacing methanol with isopropyl or ethanol will give way to isopropyl esters or ethyl esters, respectively. "Take isopropyl for example," Knothe said. "It lowers the melting point of individual components by about 12 degrees to 13 degrees Celsius lower than other methyl esters. Ethanol [as a reactant] would be beneficial in terms of cold flow. Ethyl esters have lower melting points than methyl esters. That's one reason I'd like to say that, actually, methanol is the worst alcohol to make biodiesel with. The only justification is that it's the cheapest alcohol. Ethanol and isopropyl give better biodiesel." 
 
 The logic of logistics
 From the time B100 gets stored on-site by the producer to the time the blended product heads for the retailer, the biodiesel's transportation, storage and blending are of the utmost importance to ensure successful low temperature pouring. One of the Cold Flow 
 
 Blending Consortium's lead conclusions in the group's collaborative look at cold blending, titled Biodiesel Cold Weather Blending Study, was that biodiesel, in general, must be kept at 10 degrees above its cloud point upon blending with diesel fuel for a successful merger of the fuels. 
 
 In Minnesota, Magellan already has the tools in place to put this supposition into practice. Magellan has spent a considerable amount of time studying this in the lab, Lawrence said. It started its first biodiesel blending project in 1995, and the company has honed its practices down to a science. 
 
 For starters, the trucks offloading neat biodiesel at Magellan's terminals are either heated or insulated, according to Lawrence. "Some may have to travel hundreds of miles," he said. Insulation alone may do the trick-Lawrence said he has visited plants where the biodiesel is stored on-site at temperatures up to 100 degrees, so if the fuel gets loaded into an insulated tanker truck at those temperatures, staying 10 degrees above the biodiesel's cloud point shouldn't be a problem. Most biodiesel plants, however, recommend on-site storage temperatures of 80 degrees, Lawrence noted. At Magellan terminals, the B100 tanks are kept at a comfortable 60 degrees, well above the cloud point for methyl soyates. Of course, with tallow's high melting and cloud points, this temperature would not be able to reach the "plus 10 degrees" spec with respect to tallow's cloud point prior to blending. "It is unlikely that [WVO- and tallow-based biodiesel] will meet our cold flow specs in the colder months," Lawrence told Biodiesel Magazine. 
 
 Magellan terminals also house top-of-the-line heated tanks and fuel lines for proper proportional blending. Proportional, or injection, blending is the only recommended blending practice in freezing temperatures. The sequential, or splash, blending of warm biodiesel with colder diesel fuel can cause thermal shock, or severe and instant crystallization of the biodiesel, disallowing it to blend successfully. "There's a smaller amount of change in the crystals with proportional blending," Lawrence said. 
 
 The technology offered by Magellan's refined blending systems is helping the industry reach that frosty peak atop the cold flow learning curve. The fuel is tested as it comes into the terminal, Lawrence said. Afterwards, tanker truck drivers simply punch in their code, and the system is programmed and automated to dispense whatever blend is needed via the blenders' requests. Additives are also blended at the terminals, as individual blenders require. Although it's an option, nitrogen agitation really isn't required to agitate the fuel to prevent the formation of large crystals. "When you're looking down that hatch as the fuel is being pumped in at 600 gallons per minute, you'll find that is ample agitation," Lawrence said. 

 
 Magellan's assets and blending terminals are more large scale than other facilities in the distribution chain. One up-and-coming storage tank manufacturer, Calgary, Alberta-based TankSafe Inc., has already made a name for itself in western Canada's oil and gas industries and in the U.S. chemical storage market. Biodiesel storage is naturally its next progression. The company manufactures and markets "environmentally responsible" dual-containment, aboveground, heated storage tanks. According to Reinhard Schuetz, professional engineer and president of TankSafe, the company's uniquely designed tanks offer several advantages over others: superior insulating value, added mechanical protection, minimum 110% secondary containment capacity to safely accommodate overflow, while avoiding product and ground contamination, and substantial energy savings. TankSafe's heated tanks can reduce energy consumption from approximately 200,000 Btus per hour, which some conventional fire-tube heated tanks use, down to approximately 8,000 Btus per hour, or less using its patented design, Schuetz said. TankSafe can also provide a split tank for storage of biodiesel on one side with petroleum diesel on the other. The company could install the necessary manifolds, pumps and flow valves to properly blend the mix within an attached and warmed utility shed to help prevent thermal shock. "We have a very effective and economical means for biodiesel storage," Schuetz said. 
 
 Overall, many approaches are available for successful biodiesel storage, blending and use during the frigid winter months. As the industry's growth plows through concerns over biodiesel's low temperature performance, inventive researchers, technology and good old-fashioned gusto will surely assist in keeping the flow. 
 
 Ron Kotrba is a Biodiesel Magazine staff writer. Reach him by e-mail at rkotrba@bbibiofuels.com or by phone at (701) 746-8385.

Cold winters aren't stopping states like Minnesota and Illinois from placing biodiesel mandates on the books, even when low temperature performance is a concern. To cultivate additional winter-market growth, the biodiesel industry has the summit of cold flow's learning curve locked in its sights.

Keeping The Flow

The average Minnesota diesel fuel user likely didn't notice much difference in their fuel on Sept. 29. At least that was the biodiesel industry's hope leading up to the state's highly anticipated switch to B2 biodiesel blends. 
 
 Minnesota again set the standard for renewable fuel usage by passing a law in 2002 requiring B2 in all on-road diesel fuels. The law finally came to fruition in late September after the required 8 mmgy of in-state biodiesel production was certified by the state's Department of Agriculture. The B2 switch was expected to go smoothly leading up to the date of implementation.
 
 With three biodiesel plants supplying more than enough product to meet the state's 16 mmgy demand for biodiesel, the industry is hoping that B2 is just the beginning for the state. The recent run-up in energy prices has, in some markets, caused retail biodiesel costs to be cheaper than that of petroleum diesel fuel.
 
 "Mandate or no mandate, biodiesel works right now," said Tom Kersting of Minnesota Soybean Processors. His plant, located in Brewster, Minn., came on line in late August and is ramping up to full production. SoyMor, a Renewable Energy Group-designed facility, is producing triple the capacity needed to spur the state's biodiesel mandate. FUMPA Biofuels was the state's first commercial-scale biodiesel producer.
 Producers and other stakeholders in the B2 requirement are weighing in on what it means to the state, the industry and the future of biodiesel.
 
 Enforcing the requirement
 The Minnesota Department of Commerce's Weights and Measures Division is charged with enforcing the 2 percent biodiesel blend, as with all other petroleum specifications within the state. According to Director Carol Hockert, the biodiesel blend is essentially "just another specification" that must be tested.

 
 Hockert said her division didn't have to change its procedures much to prepare for the mandate. However, it did spend three years developing a test method for the blend. "With a 2 percent, total you can't have an uncertainty of 1 percent to 2 percent," Hockert said. "We had to have the repeatability of the test down to 0.2 percent-small enough so that we can measure it."
 
 Jim Hedman led the division's efforts to develop the B2 test. "We were working with an unknown," he said. "We've got some equipment available that might be applicable. That's the place to start, and it worked out."
 
 Eighteen inspectors will be testing fuel statewide with equipment based on a Fourier transform infrared spectrometer. However, initial enforcement will rely heavily on auditing bills of lading, according to Hedman. 
 
 Hockert said fuel samples would be collected at the point of sale, including either retail pumps or the fuel terminal before bulk deliveries are made to fleet users. Those selling the fuel are ultimately responsible for selling a legal product, Hockert said. "But if we test it and it fails, we check the bill of lading," she added. "If it says the product was B2, then we check up the supply chain."
 
 Inspectors typically test terminals several times per year in order to avoid widespread testing failures. It appears the infrastructure is in place to avoid such issues. Hockert and Hedman toured the Magellan Mainstream Partners blending terminal in Alexandria, Minn., this summer and came away confident that proper blending procedures and equipment are in place. 
 
 "We, the Department of Agriculture and the industry realize that because we are on the forefront, if there are problems and issues that come up, people will see them," Hockert said.
 
 Coming clean out of the gates
 Perhaps the biggest concern with the B2 requirement's implementation is making sure it goes as smooth as possible. The incredible amount of work done in the months leading up to Sept. 29 was meant to avoid that. The Minnesota Biodiesel Task Force, formed in 2003, addressed many of those issues. Initiated by Gov. Tim Pawlenty, the nine-member group advised the state's Department of Agriculture on methods to increase biodiesel production and use in Minnesota. 
 

 Now the biggest concern may boil down to availability. Several officials have raised the possibility, however slight, that the southwest region of the state may have a difficult time supplying enough B2 to meet demand. Despite most of the state's biodiesel production occurring in the region, most of its diesel fuel comes from blending terminals located across the border in Iowa.
 
 Several Iowa terminals haven't prepared for B2, according to Hockert. However, Ralph Groschen, marketing specialist with the Minnesota Department of Agriculture, estimates that 90 percent of Minnesota's in-state terminals are ready for B2. "Plans are being addressed to cover the southwest area of the state," he said.
 
 Most other terminals importing B2 into Minnesota are set to meet the fuel requirements. CHS Inc., formerly Cenex Harvest States, has been providing biodiesel-blended diesel fuel to Minnesota consumers since the early 1990s, according to Darin Hunhoff, director of bulk distribution services at CHS.
 
 "I don't think [the mandate] is going to affect us as a petroleum company as far as getting fuels into the marketplace," said Don Olson, CHS Inc.'s vice president of refined fuels. "We've been doing it for a number of years." Olson added that terminals investing in biodiesel-specific equipment actually aids his company. "This cleans up the logistics and effectiveness of getting the fuel into the marketplace," he said.
 
 Olson was a member of the Minnesota Biodiesel Task Force and was quick to voice his concern about the initial lack of infrastructure to handle the mandate. However, CHS and other groups answered that call by putting in biodiesel-compatible storage and distribution systems. Magellan has implemented injection blending systems in terminals throughout Minnesota and North Dakota. CHS' terminal in McFarland, Wis., blended diesel up to B5 without any problems over the past year, according to Olson.
 
 Drew Combs, CHS' director of supply and economics, said there are approximately 27 terminals within and outside Minnesota that supply fuel to the state. Approximately half of those have the infrastructure needed to blend B2 correctly according to Combs. The issue is whether the remaining terminals will construct biodiesel-blending equipment or if petroleum marketers who purchase diesel from these terminals will be forced choose to splash blend the product.
 
 Making quality count
 Considering Minnesota's harsh winters, tackling cold flow issues was an understandable priority for the task force (see "Keeping the Flow" on page 24 for more details on cold flow issues). Hedman said blending techniques require that neat biodiesel does not sit in blending equipment. Essentially, once biodiesel-blended diesel leaves the blending rack, there should be no concerns about cold flow issues. Once a homogenous blend has been established, the B2 should act identical to regular No. 2 diesel fuel. Terminals have solved those issues with heated tanks and lines. 
 
 The only potential problem Hedman said might occur could be due to biodiesel's solvent properties. "In a sense, it's kind of like the ethanol story all over again," he said. "Cars that never had a taste of ethanol were initially shifted to a 10 percent blend. Deposits that had formed in the storage tank could be loosened up. I don't think that's going to happen, but it is one potential problem."

 
 Combs said CHS does have concerns about biodiesel feedstock. Tallow-based biodiesel is not as cold-flow advantageous as other feedstocks.
 
 "There won't be any issues with B2," Hedman said. "I'm not speaking as a biodiesel promoter or advocate. My connection is that it is now a fuel specification. It's my job to enforce it."
 
 Getting the information out
 The Minnesota Biodiesel Task Force and National Biodiesel Board spent much of the past three years preparing biodiesel producers and blenders for the B2 requirement. The Minnesota chapter of the American Lung Association (ALA) spent much of the past summer preparing consumers and fuel station owners for the implementation. The volunteer group sent brochures to vehicle fleets, service stations and approximately 25,000 diesel vehicle owners throughout the state, according to Tim Gerlach, the state's ALA director for outdoor air programs. "The basic message was, 'This is coming, this is a great thing,'" he said. "'It's cleaner air and good for your vehicle.' We just tried to alleviate any concerns people had about 'What are they doing to our fuel?'"
 
 The Minnesota Biodiesel Task Force's education duties aren't over either. The group will formally meet for another two years to ensure the transition goes smoothly.
 	
 Is B2 just the starting point?
 The B2 mandate was originally proposed as a B5 blend, according to Groschen. However, it was scaled back to ensure its passage into law. With the physical properties between B2 and B5 being minimal, it begs the question: Will higher blends come next? After all, the Minnesota legislature passed a bill moving from 10 percent ethanol blends in gasoline to 20 percent blends.	
 
 B5 is well accepted by engine manufacturing companies, according to Groschen. "It looks pretty certain that it will meet specifications," he said. "It was demonstrated during testimony [for the B2 mandate] that B2 wouldn't have an effect on cold flow. B5 would probably fit into that parameter as well."
 

 Gerlach said B2 might just be the beginning. "The simple fact is if you can get 2 percent now, all fleets starting to blend biodiesel could get B20," he said. "B2 came in, now you can get B20. E10 came in, now you can get E85."
 
 This September marked the third full year since Hennepin County began using B5 blends in its 630-vehicle fleet. The fleet has encountered no problems and is budgeted to use 380,000 gallons of fuel next year.
 
 Fleet Manager Mike Judkins told Biodiesel Magazine that other area fleet managers are expressing little reservation about the move to B2. "It should be a nonevent based on our experiences here," he said.
 
 Most fuel blending terminals are constructing equipment capable of handling more than a 2 percent blend. "Once we have a successful winter, there will be a push toward a 5 percent blend," Olson said. "… A majority of these terminals are putting in capabilities."
 
 Given the rise in popularity of biodiesel and the increase in production, it doesn't seem long before other states follow Minnesota's lead in making biodiesel a natural part of the fuel supply. "Minnesota was the first, but it won't be the last," Kersting said. 
 
 Dave Nilles is associate editor of Biodiesel Magazine. Reach him by e-mail at dnilles@bbibiofuels.com or by phone at (701) 746-8385.

Minnesota's long-awaited 2 percent biodiesel requirement has finally taken effect. Key stakeholders are weighing in on the implications of the state's groundbreaking use and acceptance of biodiesel.

Let B2 Begin

We have a regional plan," explains Tommy Johnson, co-founder and CEO of Earth Biofuels Inc. "It takes Texas and Oklahoma as the westernmost states and Tennessee as the northernmost." Johnson is referencing a huge, laminated map of the United States, which hangs on a wall in front of him. "Then go straight across the southeastern part of the country," he continues, making cutting motions with his hands in basically carving out a swath of territory. "Mississippi, Arkansas, Alabama, South Carolina, Georgia and Florida. That's the part of the country where we'll focus." 
 
 We're in a boardroom at parent company Apollo Resources International Inc. The magnificent view of downtown Dallas seems apropos, except for the fact that Johnson is wearing a baseball cap with shorts and a short-sleeve dress shirt. Suffice it to say, this isn't your statesman-like chief executive. Rather, with a trimmed mustache and slight belly-one that conveys more age and success than overindulgence-he comes across more like a seasoned football coach. This observation, as I discover, also applies to his business style. Indeed, having defined the playing field as if the map were a chalkboard and this were a locker room, Johnson proceeds to outline the game plan.
 
 Founded in 2004, in Jackson, Miss., Earth Biofuels started with a small test facility in nearby Meridian. The company's biodiesel fuel was refined exclusively from waste vegetable oil and sold to local school bus fleets. When demand grew, they switched to soybean oil feedstock and ramped up production to a current capacity of about 2 mmgy. What happened in that time, however, might be an omen for the burgeoning biodiesel industry: Apollo, which is a publicly traded oil and gas company (AOOR.OB) with assets ranging from a pipeline in Oklahoma to an oil company in Kaliningrad, Russia, has acquired a controlling interest of Earth Biofuels, 80 percent as of August. 
 
 For Apollo's Chairman and CEO Dennis McLaughlin III, biodiesel is essential to his corporate vision and energy philosophy. "Biodiesel plays a vital role in the 'decarbonization' of fuels," he says, referring to the trend away from carbon-rich energy sources-such as dirty coal and oil-toward cleaner fuels like natural gas and biofuels. "It's also essential," he adds, "that we dramatically reduce our dependence on foreign oil through whatever means necessary." McLaughlin, a passionate entrepreneur, has 20 years experience in the oil and gas industry. In 1995, at the age of 30, he was recognized by Entrepreneur Magazine for building and managing one of the fastest growing small businesses of the year. He sees biodiesel as a bridge to the hydrogen economy, evidenced by Apollo's stake in Energy Ventures LLC. a hydrogen technology company.

 
 So with an infusion of public funds and the expertise to back it up, Earth Biofuels set out on its current path, one that includes building or acquiring no fewer than 10 biodiesel refineries in the next five years and expanding its distribution network in the form of Earth Biofuels gas stations, truck stops and franchise pump locations. 
 
 "Just north of Houston," Johnson says with a finger on the city, "we have a terminal that we'll close on this Tuesday. In Arkansas, we're working with a crushing facility to buy half of their company. In Memphis we're working on a joint venture for a 10 mmgy facility. There's a facility in Jackson [Mississippi] we're trying to close on, and together with Meridian, that fills a pretty good size of that market." These, of course, are in addition to the most pressing phase of the company's development plan: Oklahoma. 
 
 With support from Apollo, Johnson successfully lobbied in the state for a 20-cent tax credit. Passing unanimously, the bill prompted immediate plans for a 10 mmgy plant in Durant, Okla., a rural town of about 13,000 in the Chocktaw Nation just 95 miles north of Dallas. Scheduled for completion this quarter, it will mark the first step in a strategy to serve the entire state. "We're looking up in Tulsa, and a third one will be in the far western part of the state," Johnson says. "That will give us 30 mmgy and will more or less cover that state."
 
 True to their Texas roots, Johnson and Apollo are, indeed, thinking big. Their cradle-to-grave vision includes every step of the supply chain from co-op farming contracts and bean crushing to blending and selling biodiesel at the pump. "We have a huge appetite for capital," Johnson admits, stepping away from the map, "and we're gonna get big fast through growth and acquisitions."
 
 The big picture presentation is no doubt impressive. And through the tone of a halftime pep talk, Johnson is thoroughly convincing. But there's more to see than maps and cityscapes. The thrust of my trip is to visit the Durant site to see some action and gauge the company's role in the biodiesel industry. Having arranged to test drive a 2005 Hummer H1 Alpha, Johnson and I climb aboard and head north. Powered by a 6.5-liter Duramax turbo diesel, the $140,000 assault vehicle feels uniquely suited to this task. 
 
 Biodiesel Ph.D.
 Durant was chosen, in part, because of its proximity to Dallas-to Apollo headquarters and a huge market. The fundamental plan follows the hub-and-spoke model with central production facilities distributing to retail locations within a 100-mile radius. Setting out on the hour-and-a-half drive north, Johnson delves deeper into the company's philosophies-namely, the value of human resources and getting the right people on board. 
 
 To this end, they've recruited Dr. Miquel J. Dabdoub, a Brazilian professor from the University of São Paulo, who's name is virtually synonymous with biodiesel across South America and Europe. Dabdoub will consult on technology and plant design. In turn, the company will license his highly sought-after technology in the United States. "He's the foremost authority on biodiesel in the world," Johnson states matter-of-factly, over the din of the H1's engine, "and he's a part of our team."
 

 With 13 years of lab and field research, Dabdoub has been instrumental in the design and construction of Europe's biggest facilities. "It is very important to establish this connection between Europe and advance technology," Daboub told the Durant Daily Democrat. "And I am furthering that by working on a research program of a fleet of 140 trucks for Coca-Cola in São Paulo." The professor also works closely with the major auto manufacturers-GM, Ford, DaimlerChrysler, Volkswagen, Peugot, and others-to test and develop their engines with biodiesel. 
 "He's got a massive coalition of the industry that he works for to standardize biodiesel in the world," Johnson says. "And he views the United States as the missing piece. When we build an industry, the whole world will be complete."
 
 Though the Durant plant will be Dabdoub's first major project in the United States, he recently toured some existing plants to get a feel for the industry. "We took him to a plant in Pearl, Mississippi," Johnson remembers. "In five minutes, he tours the plant and comes back and says, 'If you change this pipe and stand it up, and if you change something on the filtration system on the centrifuge, and if you'll take your filter press and expand it to this far … for less than $50,000, you'll double your production immediately.' And now they're gonna do it."
 The bottom line for both Dabdoub and Johnson, however, is not quantity. "His big angle-and he sells this in every speech he gives-is quality," Johnson says. "So we'll be meeting both the ASTM standard and the BQ-9000 standard for handling biodiesel." 
 
 
 Whole fuel 
 Earlier this year, the company took first steps toward building its retail distribution network. The vision sees 170 refueling locations within the next year, 10 percent of which would be operated exclusively by Earth Biofuels. A pilot program near Jackson opened for business in January. As a rebranded filling station under the Earth Biofuels name, Johnson devoted four of its pumps to B20. Situated along Interstate 55, just south of I-20, it's a prime spot for diesel traffic. And though it's said that the three keys to retail success are location, location, location, Johnson favors his own trifecta: product, price, and people.
 
 "We found that consumers will go way out of their way to find alternative fuel," he says. According to Johnson, Earth Biofuels customers are driving south from I-20 just to fill up with biodiesel. What they discover is that it's worth the trip, since Earth Biofuels B20 is actually cheaper than diesel. 
 
 "I always keep my price three or four cents lower than the guy across the street who's just selling diesel," he explains. "Because I know he's only making a penny and a quarter per gallon. I'm staying two or three cents lower than him, and I'm still making 38 cents." Seven months later, the guy across the street goes out of business. "I told him about biodiesel," Johnson recounts with noticeable pride, "and that the day would come that whenever you see an Earth Biofuels station, there will be a closed Exxon across the street. Because you can't compete with me on price. We have a better quality product at a lower price."
 
 In August, the company purchased its first truck stop in northern Mississippi along I-55. For these, Johnson envisions a biodiesel experience akin to that of upscale markets. "The people who know about alternative fuels are the people who go to Whole Foods," he theorizes. "They'll know that they can get their biodiesel, and they can find the food they're used to buying. If they come and pay my 30 percent margin on my biodiesel, they'll pay my 40 percent margin on potato chips and my Starbucks coffee at 900 percent."
 

 But you won't find just anyone working the pump or behind the cash register at an Earth Biofuels station. "I'm not going to hire a $5-an-hour employee to sit in there and talk [to their friends] all day," he says. "I'll pay 'em $10 an hour and get a quality person. They'll be able to answer the questions about biodiesel because we get thousands of them. People all want to know. So you'll have a real person there. They're gonna smile and try to up-sell, and you're gonna have a good experience."
 
 Durant Biofuels LLC
 Crossing the border into Oklahoma, the landscape becomes noticeably more rural. Johnson points out a bulk storage depot along the highway where they will eventually store biodiesel. "We have five places to take our fuel, and none of them are farther than 100 miles from Durant," he says. "So all we have to do is get the fuel there. And from there, it goes to retail." 
 
 The Durant facility will service the local Choctaw market and parts of northern Texas. Earth Biofuels entered an exclusive franchise agreement with an Oklahoma distribution company that will sell branded B20 pumps to no fewer than 50 stations in the area. "The minute we start making fuel in Durant," Johnson says, "everything's in place to sell 30,000 gallons per day. And that's the idea: nothing sits, everything goes."
 
 As we pull up to the construction site, which once served as a feed mill, the existing structures are in various states of being torn down and rebuilt. The offices have been completed, and a massive, turn-of-the-century grain silo has been nearly demolished to make way for a new rail spur. This will allow rail tankers to directly unload feedstock oil (from locally grown soy and canola) into awaiting storage tanks. 
 
 Fortunately for Earth Biofuels, the town of Durant pledged $500,000 to build the spur, since it will become a permanent part of the town's infrastructure. When fully operational, the plant will employ more than 100 people to the tune of $2.5 million in annual salaries, a large portion of which will be subsidized by the town itself. During lunch at the local Mexican restaurant, we're joined by Tommy Kramer, executive director of the Durant Industrial Authority, who's been instrumental in approving such measures. 
 
 "We couldn't be more excited about this project," Kramer says. "We had a city council meeting this morning that was supposed to run for an hour. It went more than two because everyone wanted to talk about biodiesel." 
 
 On the drive back to Dallas, Johnson muses once again about the long-term game plan, only it's less about Earth Biofuels and more about the greater industry. For one, he's proud to have joined forces with a forward-thinking petroleum company such as Apollo. "The one thing about biodiesel is that you can make it in your backyard," he says. "But there's a group of people that I'm a part of-the business people-who feel we can really make an industry here and really do it right." While some may tend to resist the forces of "big oil," in fear of monopolization, Johnson chooses to embrace them. 
 
 What's more, big oil might be integral to his end game. "We'll get to a point where biodiesel is 2, 3, 4 percent of the market," he says. "Then we'll get the attention of Exxon. And either we're going be big enough as a company to stand up with them or charge 'em a lot of money when they come buy us. If we build our company like we're building it now, with a trading desk-soybean and canola-and retail outlets, they'll just come buy us. They'll pay the price. In the meantime, the companies that are not following a real business plan and [not] making quality biodiesel will just go away." 

 
 In other words, the biodiesel game will have its winners and losers. And for those not prepared to go head to head with players like Earth Biofuels and others, the game may be tough to win. 
 
 Robert Reed is a California-based freelance writer. This is the first article he has written for Biodiesel Magazine.

Earth Biofuels Inc. has partnered with a public oil company in a bid to distribute its brand-name biodiesel to every corner of the South. The company has a bold game plan and a convincing leader who's so far delivering on his promises.

The Biodiesel Game Plan

It would be cliché to say petroleum marketer Growmark Inc., headquartered in Bloomington, Ill., has been "growing" steadily since its inception. But it's true.
 
 As its name indicates, the company started as a group of local Farm Bureau cooperatives 80 years ago, and today its member base stretches through Illinois, Iowa, Wisconsin and Ontario, Canada. However, the company's marketing arm touches Ohio, Oklahoma, Colorado and states in between. The company initially wanted to fill the need for fuel supply, and over the years, it slowly spread into other products: seed, propane, lubricants, steel structures, handling equipment, financing … and renewable fuels.
 
 "We are an agricultural cooperative," said Mark Dehner, Growmark's marketing manager of alternative fuels. "A lot of our customers grow a lot of corn and soybeans. If we could help further markets for them, it just made good sense."
 
 Growmark entered the renewable fuels industry in the 1970s when it began marketing ethanol in coordination with the Illinois Corn Growers Association. According to Dehner, who joined the company during this time, ethanol wasn't very fashionable back then. "When you pulled up to a pump, a lot of oil companies would designate that their fuel did not contain ethanol," Dehner told Biodiesel Magazine. "Well, ours did, and we continued to do so. It seemed we pushed the envelope for a while. Now it's widely adopted, and a fuel of choice. We feel proud to be on the cutting edge of that."
 
 Growmark saw ethanol demand increase when flexible fuel vehicles began appearing in state fleets. The state began searching for E85 infrastructure, and Growmark stepped up to help. "We now have 10 to 12 E85 facilities that we service with our member co-ops, and we have another 10 to 12 slated for conversion or to build new," Dehner said.
 
 After seeing success with ethanol, biodiesel seemed the next logical step. In 1995, the company participated in biodiesel demonstration trials conducted by the Illinois Soybean Association throughout Illinois. Several diesel fuel stations were chosen to sell B10 and B20 blends. At the time, Dehner was working at Stephenson Service Co., a Growmark station in Freeport, Ill. "We [had] 20 customers using B20," Dehner said. "It wasn't really that scientific, but we would ask customers how they felt about [biodiesel]. We had excellent results with that."
 
 Growmark began marketing biodiesel in 2000. The company uses a "Home Grown Fuels" campaign to inform consumers that biodiesel has better vehicle performance, it's better for the environment with its clean-burning attributes, and it lessens the country's dependence on foreign oil. Since those initial demonstration trials, Dehner said biodiesel has become more economically positive. "It's just skyrocketed," he said of the industry.
 

 Growmark has also delved into e-diesel, a blend of ethanol in diesel fuel. According to Dehner, the company is working with a variety of stakeholders trying to bring e-diesel to the marketplace. "It has excellent cold weather properties and excellent emissions," he said of e-diesel. "It may not be for every diesel engine out there, but there are excellent markets out there for e-diesel."
 
 Dehner recognized it has taken some time for renewable fuels to catch on, although he feels the biodiesel industry has progressed faster than ethanol because the ethanol industry presented a model to follow. "The biodiesel industry has learned a lot from ethanol's progression: how to handle it, intricacies such as moisture and the cleansing effect of fuel in tanks," Dehner said. "Consumer acceptance was slow, but the agricultural market was interested from an 'I grow it, I want to use it' mentality. [The biodiesel industry] has created that emotional tie to the product. Economics have now helped drive it."
 
 With the passage of the Energy Policy Act of 2005, Dehner said ethanol and biodiesel infrastructure should greatly improve. "[Before the energy bill became law,] we did a lot of splash blending because there was no terminal access," Dehner said. "Now E10 is in almost any terminal, and we're seeing that progression with biodiesel, probably a little faster."
 
 To help introduce consumers to renewable fuels, Growmark member co-ops hold customer meetings that present the facts about ethanol and biodiesel. Dehner has spoken at many of those meetings. "I commend our member co-ops and personnel for doing those things," he said. "The educational process is important. Sometimes people have misunderstandings, and we just take it upon ourselves to help with that. When we're asked to do that, we think of it as part of our responsibility."
 	
 Key partnerships
 Dehner said Growmark has 43 members throughout Iowa, Illinois, Wisconsin and Ontario. But since the company expanded operations into states like Ohio, Indiana, Michigan, Missouri, North Dakota, South Dakota, Arkansas, Oklahoma, Colorado and others, Dehner admits it's tough to keep track of additional members.
 
 Growmark recognized the importance of partnerships early in its history. The company got its start in 1927 when nine local cooperatives formed the Illinois Farm Supply Co., which eventually adopted the FS trademark. The group merged with the Farm Bureau Service Co. of Iowa in 1962, creating FS Services Inc. It merged with Wisconsin Farmco Service Cooperative and Producers Seed Co. in 1965, and consolidated with the Illinois Grain Corp. to form Growmark in 1980. 
 
 In 1985, Growmark partnered with agriculture giant Archer Daniels Midland Co. (ADM), consolidating Midwest grain terminals and merchandising operations. Dehner said Growmark and ADM recently renewed their agreement so that Growmark can continue marketing grain through ADM terminals.
 
 Growmark acquired the assets of United Cooperatives of Ontario (UCO) in 1994, gaining 37 member cooperatives in the Canadian province. UCO was a 50 percent shareholder, along with Canadian energy company Suncor Energy Products, in UPI Energy LP. Today, both Growmark and Suncor work together through UPI to supply fuel to customers in Ontario. 

 
 In 1998, Growmark created a marketing alliance with Land O'Lakes in the feed business. Growmark also partnered with Novartis Seeds Inc. to offer seed solutions to their customers. 
 
 Growmark became part owner of Farmer's Forage Research (FFR), an interregional seed research cooperative in Lafayette, in 1999. Other owners included Land O'Lakes, Tennessee Farmers Cooperative and Southern States Cooperative. FFR conducted various soybean research studies for Growmark and the other owners, the company also studied corn, foliage and alfalfa, among other topics. In 2000, FFR created SoyGenetics LLC to solely operate its soybean-breeding program with Lima Grain Genetics and Land O'Lakes. Because Growmark is part owner in FFR, it also has a 43 percent ownership in SoyGenetics, according to the Lafayette company.
 
 "We look at what our mission is and what role we play with customers and how we can benefit that," Dehner said of Growmark's list of partnerships. "I'd like to think we're pretty progressive when it comes to that."
 
 Additional partnerships with Remington Seed, Agway Agronomy, Seedway Inc. and TruServ Canada Cooperative in the past few years have continued to expand Growmark's customer base, truly making them an extensive agricultural company and a strong supporter of renewable fuels.
 "Our organization is extremely serious about renewable fuels," Dehner said. "We weren't always on the popular side of the fence, but we always thought it was the right thing to do. Everyone (in our organization) has been very positive when we've asked for resources in renewable fuels. They are eager to help." 
 	
 Jessica Williams is a Biodiesel Magazine staff writer. Reach her by e-mail at jwilliams@bbibiofuels.com or by phone at (701) 746-8385.

Growmark Inc. began fuel distribution in the 1920s. Through several key partnerships, the company grew immensely in size and scope over the years, and it didn't shy away from the implementation of renewable fuels at a time when no one else would even consider it.

A Long Time At It

The Energy Policy Act of 2005 delivered key measures for the biodiesel and renewable fuels industry, including extending the biodiesel tax credit through 2008 and establishing a 7.5 billion gallon renewable fuels standard (RFS). Those successes have been previously described by the National Biodiesel Board (and are outlined in this month's Talking Point column on page 50). But the approximately 1,700-page bill also contains many other provisions affecting the energy industry. A few of the key provisions are summarized here.
 
 Wind Energy Production Tax Credit
 The federal tax code currently provides a 1.8-cent-per-kilowatt-hour (adjusted for inflation) tax credit for qualifying facilities that produce electric energy from qualifying renewable resources, including wind. The federal production tax credit (PTC) is the single largest driver in the wind industry and its repeated extension, expiration and extension has created "boom or bust" cycles in U.S. wind energy production. For instance, with a PTC in place in 2003, 1,987 megawatts of wind energy was developed in the United States. In 2004, with no PTC, only 389 megawatts of wind energy was developed. The 2005 Act extends the PTC to Dec. 31, 2007 and marks the first time the PTC has been extended without first expiring. Wind developers now have a continuous 29-month horizon for project development to occur, and the wind industry is predicting record expansion in 2005 and 2006. The PTC extension, along with other renewable energy incentives, carries a cost of approximately $3.1 billion-accounting for the single largest incentive in the 2005 Act. Once eligible, the PTC is good for 10 years. 
 

 The 2005 Act also, for the first time, allows application of the PTC to agricultural cooperatives (defined as a co-op that is owned more than 50 percent by agricultural producers). The new law allows cooperatives to pass the PTC through to its members on the basis of patronage.
 
 REPI and CREBs
 One criticism of the PTC has been its inapplicability to municipal or cooperative utilities, which operate as non-profits and therefore have no appetite for a tax credit. The Renewable Energy Production Incentive (REPI) was enacted as a PTC counterpart, providing a direct payment of 1.8 cents per kilowatt-hour (adjusted for inflation) to non-profits including municipalities, electric cooperatives and tribes. But REPI has always been subject to annual Congressional appropriation, which creates a great deal of uncertainty in any investment decision. And REPI funding traditionally has been very low, severely limiting the effectiveness of the program. REPI was reauthorized in the new law through 2016. Because it continues to be subject to annual appropriation, however, public and cooperative power groupsare skeptical whether REPI will increase their investment opportunities in renewable energy technologies.
 
 In an attempt to provide an alternative to REPI, the new law creates a new category of bonds, termed "clean renewable energy bond," (CREBs). The bonds allow municipal utilities and electric cooperatives to sell bonds to raise money for renewable energy projects. Bondholders are entitled to a tax credit on their federal income tax. Total financing under the program is $800 million. 
 
 Repeal of PUHCA
 Considered one of its most significant aspects, the 2005 Act repeals the Public Utility Holding Company Act (PUHCA). Enacted in 1935, PUHCA sought to curb abuses in the utility industry by imposing certain restrictions on who can invest in the utility sector (electric and natural gas), the types of investments that utility holding companies can make, and the geographic scope of holding companies.
 
 Under PUHCA, investments in or acquisitions of utility companies required registration with the Securities and Exchange Commission, which triggered restrictions on the types of business activities within the holding company. Restrictions imposed by PUHCA registration are said to have prevented investment in utility holding companies by foreign companies, financial institutions and other non-utility companies. Repeal of PUHCA eliminates these restrictions, and investment in utility sectors is expected to increase. Likewise, PUHCA currently restricts the types of businesses that a holding company may own or invest in to those which are limited to the utility business or those that are "functionally related" to the utility business. The PUHCA repeal will now allow holding companies to invest in essentially any business, subject to restrictions that apply to all transactions.
 
 PUHCA currently requires that electric utility holding company systems be geographically integrated and capable of integrated operation. This has typically meant that the holding company electric transmission systems be directly connected so that the systems have transmission paths between them to allow the systems to be physically operated as a single system. This has prevented geographically distant utilities from being able to merge or be acquired. PUHCA repeal is expected to eliminate a major obstacle to utility mergers, particularly for smaller utilities in different parts of the country.
 
 Mark Hanson and Todd Guerrero are members of the Agribusiness and Alternative Energy Practice Group of Lindquist & Vennum PLLP, a leading provider of legal assistance on bioenergy projects throughout the country. They can be reached at (612) 371-3211.

The Energy Policy Act of 2005: The Rest of the Story

Legal Perspective

On July 28, the U.S. House of Representatives passed the Energy Policy Act of 2005 (H.R. 6, 275-156) with the U.S. Senate passing the measure July 29, by a margin of 74-26. President George W. Bush signed the legislation into law Aug. 8 in New Mexico. Thanks to key biodiesel champions like Senate Finance Committee Chairman Chuck Grassley, R-Iowa, Senators Blanche Lincoln, D-Ark., and Jim Talent, R-Mo., and Representatives Kenny Hulshof, R-Mo., and Earl Pomeroy, D-N.D., biodiesel is nicely positioned with more surety and market certainty for vast market expansion. In other words, biodiesel is here to stay. 

 
 This legislation includes sweeping changes for the renewable fuels industry and most importantly for biodiesel. The energy bill conference agreement establishes the following: 
 -Extends federal biodiesel excise (VEETC) tax credit: The energy bill conference agreement extends the excise tax provisions and income tax credit for agri-biodiesel and biodiesel. The conference agreement extends the income tax credit, excise tax credit and payment provisions through Dec. 31, 2008. The JOBS Creation Act of 2004, H.R. 4520, established the credit last year. 
 -Creates a new Small Agri-biodiesel Producer Credit: The energy bill conference agreement creates a new small agri-biodiesel producer credit of 10 cents per gallon for up to 15 million gallons of agri-biodiesel made by producers with annual capacity not exceeding 60 mmgy. It's effective for taxable years after the date of enactment and sunsets Dec. 31, 2008. 
 -Modifies the Small Ethanol Producer Credit to 60 mmgy: The energy bill conference agreement modifies and enhances the Small Ethanol Producer Credit, increasing capacity for small ethanol producers from 30 mmgy to 60 mmgy. 
 -Creates incentives for alternative fuels refueling stations: The energy bill conference agreement establishes a credit for installing alternative fuel refueling property. The provision permits taxpayers to claim a 30 percent credit for the cost of installing clean-fuel vehicle refueling property to be used in a trade or business of the taxpayer, or installed at the principal residence of the taxpayer. Under the provision, clean fuels are any fuel that is at least 85 percent ethanol, natural gas, compressed natural gas, liquefied natural gas liquefied petroleum gas, or hydrogen, and any mixture of diesel fuel containing at least 20 percent biodiesel. The provision is effective for property placed in service after Dec. 31, 2005 and before Jan. 1, 2010. Separately, code section 179A (the current deduction) is repealed after Dec. 31, 2005.
 In the authorizing provisions of the energy bill conference agreement, Title XV of H.R. 6 includes a national renewable fuels standard (RFS) slated for 7.5 billion gallons of biodiesel and ethanol by 2012, beginning with 4 billion gallons in 2006. The House bill was 5 billion gallons by 2012; the Senate was 8 billion gallons by 2012. The RFS has embraced a 12-month credit-trading program and the Senate waiver language. The advanced schedule (in billions of gallons) follows:
 -2006-4.0
 -2007-4.7
 -2008-5.4
 -2009-6.1
 -2010-6.8
 -2011-7.4
 -2012-7.5
 Moving these pieces, particularly the RFS, through the regulatory process will be the next big challenge for the biodiesel industry. The RFS, and the regulations later promulgated for this program by the U.S. EPA, should generate an appropriate amount of credit for the treatment of biodiesel. The legislation gives deference to the EPA to define the credit treatment for biodiesel. In the regulatory process, the biodiesel industry will look for fair and equitable treatment, making biodiesel a vital commodity in the RFS. 
 
 The RFS is a first for the biodiesel industry, and coupled with the extension of the tax incentive through 2008, along with the aforementioned issues, the biodiesel industry is on its way to healthy expansion and growth.

 
 Mark Palmer is a Washington, D.C., representative of the American Soybean Association. Reach him by e-mail at mpalmer@gordley.com

Biodiesel provisions of the energy bill-Cliffs Notes style

October 2005

Business Briefs

CDTI appoints Copan as new VP, CTO

BBI International announces new hires

EERC promotes Aulich

Seattle Biofuels announces hire

Indiana Soybean Board signs management agreement

GreenShift announces corn oil extraction plan

Columns

Editor's Note

NBB In Sight

Legal Perspective

Talking Point

Featured

Keeping The Flow

Let B2 Begin

The Biodiesel Game Plan

A Long Time At It

October 2005.css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}

Business Briefs

CDTI appoints Copan as new VP, CTO

BBI International announces new hires

EERC promotes Aulich

Seattle Biofuels announces hire

Indiana Soybean Board signs management agreement

GreenShift announces corn oil extraction plan

Columns

Editor's Note

NBB In Sight

Legal Perspective

Talking Point

Featured

Keeping The Flow

Let B2 Begin

The Biodiesel Game Plan

A Long Time At It

October 2005