Biodiesel Increases Soybean Growers’ Revenues by $2.5 Billion

The See for Yourself Domestic Marketing program participants departed Minnesota early Sunday morning to attend the National Biodiesel Conference and Expo in Grapevine, Texas.  Our group includes 17 soybean growers, plus representatives from the biodiesel, diesel mechanics and trucking industries.

During lunch, speakers from the National Biodiesel Board (NBB) shared information on the industry. The NBB’s mission is to increase demand of commercially produced biodiesel in the U.S. The Minnesota soybean check-off provides $225,000 in funding for the NBB.

Tom Verry, director of outreach and development for the NBB, noted that in the last four years, biodiesel has provided U.S. soybean producers an additional $2.5 billion in revenues. Locally, biodiesel has added $63 million to Minnesota soybean revenues, or $5,125 for every 500 acres of soybean production. Long term, biodiesel consistently adds 25 cents to the value of a bushel of soybeans.

We also learned that production of biodiesel has grown from a half million gallons in 1999 to a peak of 700 million gallons in 2008.  Production in 2009, dropped to 475 million gallons as economic factors forced some biodiesel plants to reduce or suspend production.

A recently released EPA Renewable Fuels Standard (RFS2) rule should help revitalize the industry. “Essentially, the RFS2 rule does for the whole U.S. what the B2 mandate did for Minnesota,” said Chuck Neece, director of manufacturing for Farmers Union Industries, which operates FUMPA, Minnesota’s first biodiesel plant.  Based on the new rule, Neece believes shuttered plants will come back online. For the larger plants, it may take 30 days to staff up and become operational, he said.

Checkoff Dollars Demonstrate Biodiesel’s Greenhouse Gas Reductions to EPA

The biodiesel industry got a boost on Feb. 4, when the Environmental Protection Agency issued its final rule on the Renewable Fuels Standard (RFS2), which provides for a renewable component in U.S. diesel fuel. RFS2 requires the use of 500 million gallons of biomass-based diesel in 2009, increasing gradually to 1 billion gallons in 2012.  The rules require that 1.15 billion gallons of biodiesel be used domestically in 2009 and 2010 combined.

To qualify as a biomass-based diesel, the fuel must reduce greenhouse gas emissions by 50 percent compared to petroleum diesel.  “Biodiesel is the only fuel available in commercial quantities in the U.S. that meets the EPA definition of Biomass-based Diesel,” said Larry Schafer who works with NBB on policy issues. “Biodiesel is the best green fuel in the world today.”

Schafer told us that the NBB, funded by checkoff dollars, was instrumental in getting biodiesel to qualify under the (RFS2) rules. Incorrect assumptions and calculations by EPA in the proposed rule, had biodiesel’s greenhouse gas (GHG) emissions exceeding those of petroleum-based diesel. NBB noted significant shortcomings with EPA’s initial lifecycle methodology, including inaccuracies pertaining to nitrogen fixing with soybeans, co-product allocation, energy balance and ag efficiencies.  NBB also noted flaws with EPA’s international land use assumptions.

NBB  assembled a technical team that prepared a 400-page technical response. This resulted in the EPA determining that biodiesel produced from domestic soybean oil reduces GHG emissions by 57 percent compared to petroleum-based diesel fuel. Furthermore, EPA acknowledged soybean-based biodiesel could reduce emissions by as much as 85 percent. Though NBB continues to object to the use of international Indirect Land Use Charges in EPA’s GHG methodology, the methodology employed in the final rule represents a significant improvement over the proposed rule change.

This was an important victory. “How well we defend soybean-based biodiesel carbon reduction benefits will determine how big a role soybean-based biodiesel will play in the Renewable Fuel Standards and in state Low Carbon Fuels Standards,” said Tom Verry of NBB.

The stakes are high. California, Connecticut and Oregon all have passed low carbon fuel standards (LCFS). California’s low carbon fuel standards, alone, create a 1 billion gallon potential biodiesel market by 2020. Eleven Northeast and mid Atlantic states are considering LCFSs that could create a market for 1.8 billion gallons of biodiesel by 2020.

Our day culminated with a Super Bowl party for 500 conference attendees at the Glass Cactus. We donned our favorite team’s jerseys and enthusiastically cheered them on while watching the big game on a huge 9 ft. X 16 ft. big screen TV.