Biodiesel gains as alternative fuel

You might say that biodiesel is the “other white meat” of alternative fuel sources.

Joe Jobe, executive director of the National Biodiesel Board, says sales of the vegetable oil-based fuel reached 30 million gallons in 2004. That is substantially below the estimated 4 billion gallons in sales for ethanol.

“We are about where the ethanol industry was in 1980,” said Jobe, who spoke on biodiesel's potential at the Mid-South Farm and Gin Show. “The ethanol industry passed their excise tax credit in 1979, and, in 1980, they had about 30 million gallons in sales.”

Like the producers of the real other white meat, biodiesel makers haven't been sitting on their hands, according to Jobe, who heads up the National Biodiesel Board's research and promotion efforts from offices in Jefferson City, Mo.

“When I became executive director back in 1999, we had sales of about 500,000 gallons,” he noted. “We had undertaken a long-term development process to try to get all the technical, regulatory and research and development issues out of the way, taking our cue from the challenges and successes of the ethanol industry.”

During that time, researchers tested biodiesel in more than 50 million road miles, including events like the Sun Rider Exhibition that circumnavigated the globe on B100 or 100 percent biodiesel fuel.

“We tested B100 in virtually every diesel engine application and in every diesel engine type that could be done,” he said. “Hopefully, we can avoid some of the technical and other rocky issues that the ethanol industry had to face early on.”

Most of that effort was spearheaded by the soybean industry, he said. “If you are thankful about where biodiesel is today, you can thank a soybean farmer leader for that because the United Soybean Board and the American Soybean Association have gotten biodiesel where it is today.”

The big, new news for biodiesel, he said, is the passage of the biodiesel tax incentive late last year. The federal excise tax credit is available to companies that blend biodiesel with petroleum diesel.

“If I'm Mississippi Biodiesel, for example, and I sell B100 to a local distributor like Sayle Oil Co., which is a blender, Sayle can apply for a tax credit from the IRS,” said Jobe. “That's important because much of the biodiesel supply is currently sold to government fleets or for off-road use by farmers, which are tax exempt.

“We worked very hard with the Senate Finance Committee and the Joint Committee on Tax to make the tax credit available in tax exempt markets,” he said. “So no matter where the ultimate blend ends up, the tax credit is accessible.”

Most biodiesel is sold in one of three blends — B2 (2 percent biodiesel, 98 percent petroleum diesel); B20 (20 percent biodiesel and 80 percent petroleum); or B100 (100 percent biodiesel).

“B2, which is often sold as a lubricity additive, is the fastest growing market for biodiesel,” said Jobe. “It's becoming more important because the EPA is de-sulfurizing diesel fuel. As you remove the sulfur, the refinery process also removes the lubricity in petroleum fuels.”

Jobe explained that lubricity is the characteristic required for diesel fuel injection systems that is added to keep the rotors, pumps, gaskets and seals all properly lubricated.

Currently, B20 commands the largest share of the biodiesel market. That blend is used in about 500 major commercial fleets, including all branches of the military, NASA and a number of municipalities.

There's no doubt that biodiesel has a ways to go to catch up with ethanol in public perception, said Jobe. Recent surveys indicate that while 88 percent of respondents had heard of ethanol, 73 percent had never heard of biodiesel.

The level of awareness was much higher among farmers, but the majority of growers surveyed (73 percent) said they were not using biodiesel on their farm. Asked why, 78 percent of those said it was because they did not believe biodiesel was available in their area.

On a more positive note, 81 percent said they would use a biodiesel blend if it was available in their area. That's why expanding the number of outlets has become a top priority for the National Biodiesel Board.

“We're up to about 300 retail pumps nationwide,” said Jobe. “It's not generally available at the retail level in the Mid-South, but we're working with distributors like TransMontaigne in Greenville, Miss., to make it more available.”

The board has also been working with auto and farm machinery manufacturers like Chrysler and John Deere Co. to encourage greater use of biodiesel blends in their engines.

Chrysler recently began filling up its diesel Jeep Liberty vehicles with a B5 blend of biodiesel and petroleum diesel when they leave the factory. And Deere is recommending a B2 biodiesel blend in all its combines.

“Sen. Charles Grassley, R-Iowa, drove the first combine to receive a B2 factory fill off the line at the Deere Waterloo, Iowa, works just the other day,” Jobe said.

What does the increased use of biodiesel mean to the farmer? If every trucker in the United States used a B2 blend, it would mean the use of 664 million gallons of soy biodiesel and 474 million bushels of soybeans annually.

“The Food and Agricultural Policy Research Institute at the University of Missouri estimates that for every 100 million gallons of biodiesel sold, we will see an increase of 10 cents per bushel in the price of soybeans,” said Jobe.

“It would also decrease soy meal costs which would lower livestock feed by 5 percent and increase meal exports because soybean oil often acts as a drag on the overall soybean market.”

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