A Common Thread

There was tight-knit support for biodiesel legislation in 2006 at the federal and state government levels, and from both sides of the political spectrum. Scores of new state bills sponsored by both Democrats and Republicans covered issues ranging from tax incentives to quality control. The increased activity leaves no doubt that biodiesel is increasingly becoming an important thread in the fabric of America's fuel supply.
By Lindsey Irwin | December 15, 2006
Since America's inception, and most likely for many years to come, the Republicans and Democrats tend to disagree on how to lead our nation and how best to tackle the big issues. Keeping this in mind, it is somewhat rare when a subject arises that garners support from both of the major political parties. To be sure, there are several viewpoints on how to implement the renewable fuels standard (RFS) set forth in the Energy Policy Act of 2005 (EPAct), but the big victory for the biofuels industry is that the support for the RFS is resoundingly in place. Whether bills were introduced by Republicans or Democrats in 2006, there was and still is an overall bipartisan endorsement for biodiesel that is truly making it a fuel that everyone can stand behind.

"What we have seen is that there is a lot of support for biodiesel on both sides of the aisle," says Scott Hughes, director of governmental affairs for the National Biodiesel Board (NBB). "We hope and anticipate that there will continue to be strong support for biodiesel in the new Congress."

In March, the biodiesel industry trade association opened a new governmental affairs office in Washington D.C., moving even closer to the action on Capitol Hill, Hughes says. The move couldn't have come at a more opportune time. The hill was buzzing with efforts focused on a number of biofuels-related issues, including an extension of the biodiesel tax credit. Some bills called for a two-year extension, while others aimed for a longer extension, including one piece of legislation introduced in the House of Representatives that called for a permanent extension of the tax credit, Hughes says. Unfortunately, there just "weren't many tax vehicles moving this year that those could be attached to," he noted. Although it didn't come to fruition this year, there was a lot of interest in the issue. Other bills included appropriations for the biodiesel education program, funding for biodiesel engine testing authorized through EPAct, as well as other regulatory issues. The outcome of the funding for most of these issues, however, is yet to be determined, Hughes says.

Patchwork of State Progression
While the federal government has done much to work on long-term goals to ensure the country's energy independence, policy-makers at the state level also chose to proactively pursue pro-biofuels legislation in an effort to make a more immediate impact. Indeed, action at the state level was at an all-time high in 2006. More than 275 pieces of biodiesel-specific legislation were tracked by the NBB as of Sept. 30. With 53 of those pieces eventually adopted into law, the nation's 50 states are helping weave together a strong patchwork of policy supporting the biodiesel industry that now stretches from coast to coast.

"I think it really boils down to the fact that a lot of states realize that they can play a key role in this, in terms of addressing our energy needs, and at the same time help out American agriculture," Josh Zahn, NBB's state regulatory manager says. "Many states have taken the lead, and governors, as well as a variety of state legislators, have recognized that it's just good policy."

Each state's biodiesel plan has a different makeup, shape and size. Some are in the form of packages coupled with ethanol-related legislation, others stand alone, and some are in the form of incentives, or use requirements. Still others come in the form of point of taxation clarifications, study authorizations, state fleet use requirements, promotion strategies, and the list goes on. In a recent report of the year's state legislation highlights, the NBB identified 23 different states that adopted new biodiesel laws this year, and none were exactly the same. Every state takes a different approach, Zahn says.

"Where a tax incentive would be extremely popular and workable in one state, it would be dead in the water in another state, so they really work it to fit the environment in their state," he adds.

Michigan became somewhat of a trendsetter this year, passing a seven-bill biofuels package that included legislation covering ethanol and biodiesel tax credits, infrastructure grants, new renaissance zones, the creation of a renewable fuels commission and more. Robert Craig, director of the agriculture development division at the state's Department of Agriculture, says that while the big three automakers are headquartered within the state and there has been a real commitment made to ethanol, state legislators have also focused on biodiesel.

"We are seeing more than a doubling in consumption [of biodiesel] in Michigan this year (as of Sept. 1)," Craig says. Parts of the package signed by Gov. Jennifer Granholm in July that are specific to biodiesel include a 20 percent tax cut for all biodiesel-blended fuel and B100, seats held by soybean growers and biodiesel producers on the newly formed renewable fuels commission, the installation of biodiesel pumps for state fleet vehicles by Jan. 1, 2007, and matching grants by the Michigan Strategic Fund for fuel station owners who seek to install biodiesel pumps.

Packages like Michigan's, as well as one signed by New York Gov. George Pataki this summer, which included a residential Bioheat home heating oil tax credit, the elimination of biodiesel fuel taxes, and cost share infrastructure grants, are what the NBB expects to see more of moving forward, Zahn says. The "all-encompassing" approach of proposing package deals covering all biofuels was one of two major trends seen in 2006, he says. Also common was the implementation of a variety of incentives rather than mandates or use requirements. While biodiesel mandates have been implemented in states such as Minnesota, Washington and Louisiana, others are leaning toward various incentive options instead, whether it's in the form of tax credits or production incentives, Zahn says. Although quite diverse when examined individually, each state's biodiesel policy plan is one piece of a much larger collection, sewn together by a bipartisan effort to relieve the United States of its dependence on foreign oil.

Pattern for Quality Control
With the increase in state policy support for biodiesel, the NBB expects to see a surge in production as well, forecasting that it could reach 200 MMgy to 250 MMgy by the end of 2006, which is triple the amount produced in 2005. The focus for many state legislators now will be assuring the quality of the biodiesel fuel used on U.S. highways. Zahn believes this is "far and away" the biggest challenge for the industry leading into 2007. The NBB reports that half of U.S. states have adopted the ASTM D 6751 standard, and the association's top priority will be helping the remaining states do the same, he says. "We're encouraging [more] to adopt that standard and take measures to be able to enforce it," Zahn says.

According to a recent study conducted by the National Renewable Energy Laboratory and cofunded by the NBB, approximately 50 percent of all biodiesel sampled in the United States between November 2005 and July 2006 was out of spec for incomplete processing-a number the NBB calls "unacceptable." There was, however, a six-fold increase in the number of biodiesel producers that completed the BQ-9000 voluntary certification program during the same time frame, meaning that more than 40 percent of the production capacity on the market is from accredited producers and certified marketers, according to the study. In similar research conducted by privately held Blue Sun Biodiesel, results showed that 60 percent of biodiesel produced in the United States failed to meet the ASTM specifications. Samples were taken over the course of three years from a variety of sources, according to Blue Sun. The numbers clearly illustrate a need for action to be taken against those that aren't producing up-to-spec biodiesel, says the NBB.

States such as Minnesota, where all diesel fuel is blended with 2 percent biodiesel, have adopted the standard and are currently enforcing it. Another 13 states, including Michigan, are still in the planning stages of adopting the specification, or are studying it. "As part of the seven-bill package that was passed we are developing a fuel-quality testing and inspection program [for diesel and biodiesel]," Craig says. The wheels are definitely in motion, and he expects Michigan's program to be in place in about a year or two.

At the federal level, Hughes is unsure whether or not there will be legislation concerning fuel quality. In the meantime, the NBB will continue to do whatever it can, surveying the amount of knowledge out there on the importance of standards.

"We're going back to further educate and work with those that haven't adopted [ATSM D 6751] about the importance and the need to do so," Hughes says. "We're actually working that from the grassroots level up."

Lindsey Irwin is a Biodiesel Magazine staff writer. Reach her at lirwin@bbibiofuels.com or (701) 746-8385.
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