NBB In Sight

Biodiesel: A Lone Ranger in the Lone Star State
By Joe Jobe and Mike Nasi | January 10, 2007
Texas is famed for doing things its own way. In fact, it's the only state that can fly its flag alone-without the American flag. Its reputation for independence has made it one of our most unique-and popular-states. Another unique aspect of the Lone Star State is its Texas Low Emission Diesel (TxLED) fuel program. Unless the biodiesel industry can persuade the state of Texas that biodiesel won't impact the integrity of the TxLED program, Texas will become the first state in the Union to ban biodiesel blends.

If biodiesel sales became illegal in Texas, it would have a dramatic and negative impact on the entire industry, and could set it back substantially. Texas is the second-largest biodiesel producer in the United States. It is home to 12 plants, with another four under construction. With 33 B20 pumps, Austin leads the nation in biodiesel retail availability for any single city. Fortunately, due in large part to a massive effort from the biodiesel industry, biodiesel blends haven't yet been banned in Texas. The state environmental agency, the Texas Commission on Environmental Quality (TCEQ), has proposed bans on biodiesel blends under its TxLED program two times in the past two years, but has now agreed to a second waiver to allow additional scientific evidence to be explored on the underlying issue of whether biodiesel will impact the integrity of the TxLED program.

As part of the state's plan to address ozone non-attainment problems in its major cities, the TCEQ developed the TxLED program-similar to the California Air Resources Board diesel program-as a means for reducing nitrogen oxide (NOx) emissions from diesel exhaust. It took effect Jan. 31, 2006. NOx emissions, along with volatile organic compounds (VOC), are thought to be precursor pollutants for ozone formation. The program covers a 110-county area that encompasses Dallas, Fort Worth, Tyler, Longview, Austin, San Antonio, Corpus Christi, Houston, Beaumont and Port Arthur. This particular area within Texas is one of the largest diesel fuel markets in the world. Statewide, Texas is projected to use more than 7.6 billion gallons of diesel fuel in 2007.

Until 2005, it wasn't clear that TCEQ intended to regulate biodiesel blends under TxLED. The confusion was created by the fact that the TxLED rule didn't expressly deal with biodiesel. On the one hand, TCEQ didn't include biodiesel within the definition of "diesel fuel." On the other hand, biodiesel meets the TxLED aromatic and cetane specifications. Therefore, members of the industry relied upon the fact that biodiesel was either exempt from the rule or complied with it, but certainly had no reason to believe that the TxLED rules would be interpreted to prohibit biodiesel blends. TCEQ issued informal guidance in 2005 indicating that it wouldn't recognize biodiesel's fuel characteristics, but instead characterized biodiesel as an additive. TCEQ also made it clear that it would require biodiesel blends to use additives and demonstrate NOx neutrality in engine dynamometer testing protocols in order to be sold in the 110 TxLED counties.

In light of TCEQ's position, the National Biodiesel Board (NBB) pursued additive testing strategies and in May 2005 was awarded three grants to test additive-based, emission-testing strategies. However, toward the end of the year, it became clear that no testing could be completed before the effective date.

Due to the urgent situation, some members of the Texas biodiesel industry-mostly members of the NBB-rallied to form a state trade association in November 2005. They called it the Biodiesel Coalition of Texas (BCOT) and held the first meeting in Carl's Corner, Texas. BCOT's first order of business was to ensure that biodiesel would be legal after the implementation of the TxLED program. BCOT's efforts were successful, and in January of 2006, it negotiated an "Alternative Emission Reduction Plan (AERP)," which allowed biodiesel blends to be sold during the calendar year. This important development facilitated the continued growth of the industry in Texas.

Throughout the year, BCOT has worked to pursue a more permanent solution to the TxLED issue with the TCEQ and interested members of the Texas legislative and executive branches of government. At the same time, the NBB has continued to pursue the additive testing grants as a contingency plan, but in May, it encountered some hesitation on TCEQ's part to approve biodiesel-specific test protocols. A significant development occurred one month later when TCEQ refused to allow the NBB to use one of the available grants to test a straight biodiesel blend without any additives. TCEQ's refusal to allow the NBB to test the underlying assumption about biodiesel's impact on NOx caused the NBB to fundamentally rethink additive-based compliance strategies. Ultimately, the TCEQ staff continued to shift positions about how biodiesel fuel should be tested, so an additive-based compliance strategy was discontinued.

With help on the federal level from the NBB, BCOT maintained constant efforts on the home front and participated in a Texas Senate Hearing in October, during which industry representatives and state and national scientists testified before the Texas Legislature regarding regulatory barriers to the biofuel industry and the evolving science on the biodiesel NOx question. Among the experts was Dr. Bob McCormick from the U.S. DOE's National Renewable Energy Laboratory (NREL), who presented testimony about the recently published DOE/NREL study on the issue, which found that vehicle testing data showed no change in NOx levels between diesel and biodiesel fuel. He also presented recent studies performed by the Navy, Texas A&M University and North Carolina State University.

Finally, on Dec. 8, the TCEQ commissioners convened a public meeting and directed their staff to implement a policy to extend the biodiesel AERP for another year until December 31, 2007. This will allow further testing and input from the U.S. EPA, which recently announced plans to carefully consider the new data in hopes of making a more clear determination about the potential impact of biodiesel on NOx emissions. The NBB and BCOT intend to coordinate efforts to ensure that a timely resolution of the issue occurs on the national level so that further uncertainty in state programs like TxLED can be avoided.

Together, we will continue working to ensure that TxLED doesn't stand in the way of the growth of the biodiesel industry in the Lone Star State, or in any other state.

Joe Jobe is the CEO of the NBB. Mike Nasi is the general counsel of BCOT and a partner at Jackson Walker LLP. BCOT is made up of 49 feedstock developers, producers, distributors and end-users of biodiesel in Texas. The board of directors and regulatory committee of BCOT includes the following companies: ADA Resources, Ag Fuels, Austin Biofuels, Big Daddy's Biodiesel, Biodiesel Industries, the city of Denton, DFW Biodiesel, Earth Biofuels, BioSelect Galveston (formerly Galveston Bay Biodiesel), Green Earth Fuels, Organic Fuels, Pacific Biodiesel of Texas, Safe Fuels, Sierra Fuels, Smithfield Energy, SMS Biofuels and Texoga Biofuels.
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