Biodiesel support remains strong despite Massachusetts' suspension

By Erin Voegele | September 01, 2010
One day before Massachusetts' biodiesel mandate was set to go into effect, the state's department of energy resources (DOER) announced it would delay implementation due to cost concerns. "It is the finding of the DOER that implementing a minimum biofuel content requirement in diesel transportation fuel and heating fuel is not feasible on the basis of unreasonable cost," said the DOER in a statement.

The recent expiration of the $1 per gallon blender credit for biodiesel was cited by the department as a primary factor in the decision to suspend the mandate. According to the DOER, the absence of the tax credit would result in a 3 cent per gallon increase in a 2 percent biodiesel fuel blend. Logistical compliance challenges were also cited by the department as playing a role in the decision to suspend the mandate.

As an alternative, the DOER has proposed a voluntary program that it said will encourage the use of biofuels that meet the standard of the mandate. Under the voluntary program, any entity in the diesel or heating oil sector that wishes to use an advanced biofuel may choose to report its usage to the DOER. The DOER, in turn, will use the reported information to develop a streamlined process to qualify fuel and report on its usage. "In so doing, DOER hopes when market conditions permit, it can implement the biofuel mandate with minimal administrative burden to those entities affected," said the department in its statement.

According to Michael Ferrante, president of the Massachusetts Oilheat Council, the decision to suspend Massachusetts' biodiesel mandate came as no surprise. In addition to financial concerns, Ferrante said the state was facing significant compliance issues related to logistics. "They haven't been able to fully grasp how to regulate the flow of fuel, and truly put a mandate in place for fuel that comes from [out of state]," he said.

Much of this difficulty stems from the fact that many retailers in the Northeast sell products into neighboring states, said Matt Cota, executive director of the Vermont Fuel Dealers Association. While many have been disappointed with the DOER's decision to suspend the B2 mandate, national Oilheat Research Alliance President John Huber said the action will not affect the commitment made by the oilheat industry last year to increase the use of biodiesel-blended products.

Even without a mandate in effect, Ferrante estimates that about one-third of Massachusetts' estimated 350 retail heating oil dealers offer biodiesel-blended heating oil. While the suspension of the mandate is disappointing, Ferrante said he doubts it will impact the commitment of those already offering these products. "They are going to continue to do so because they believe in the fuel quality," he said. "I don't think they are going to be deterred by the delay, and I think they see the value in continuing [to offer those products]."
While some have speculated that Massachusetts' action may set a precedent other states could follow as they face their own economic concerns, Shelby Neal, director of state government affairs at the National Biodiesel Board, said that what has happened in Massachusetts is not representative of what the NBB is seeing in other areas of the country. "The reality is that the vast majority of states are very committed to using biodiesel, and I think that they will continue to use biodiesel," he said.

According to Neal, the Northeast has actually shown more interest in biodiesel than any other region in the country. "I think that because the area is so reliant on petroleum fuels, both in the transportation sector and the heating oil sector, they really understand the way biodiesel can help them," he said. "The level of excitement for biodiesel and interest in biodiesel in the Northeast is higher than anywhere else in the country." In fact, New York City passed a bill in late July mandating the use of biodiesel blended heating oil.

Ralph Groschen, senior marketing specialist at the Minnesota Department of Agriculture, agrees that Massachusetts' action is unlikely to set a precedent for other states to follow. "Like any industry, you are going to have good times-and we've had those-and, you are going to have tough times, which we are having now," he said. "I think it's good for people involved in the industry…to maintain our composure and not stir the waters making it sound like a big crisis…If we are going to replace imported fossil fuels with domestic renewable ones, we are going to have to stick it out through thick and thin."

Even though some state biodiesel incentives and mandates may fall victim to financial concerns in the current economic environment, support at the federal level remains strong. According to Al Mannato, fuels issues manager at the American Petroleum Institute, API's members are supportive of the biodiesel industry. Mannato said the most significant factor affecting the ability of API members to blend more biodiesel is a lack of production, which Mannato attributes to the expiration of the biodiesel tax credit.

While Mannato said the API doesn't anticipate any problems in meeting next year's federal biodiesel mandate of 800 million gallons, there is concern over the U.S. EPA's decision to combine this year's mandate and last year's mandate, requiring a combined total of 1.15 billion gallons of biodiesel to be blended by the end of the year. As a result of the EPA's decision, the API and the National Petrochemical and Refiners Association have filed a lawsuit against the agency. According to Mannato, the court granted the API's request for an expedited briefing schedule. He said a final decision is expected later this fall. "The standard this year [put in place by the EPA], we believe is retroactive, and therefore unlawful," Mannato said. "That is why we brought the suit. We really don't have a general problem with the renewable fuel standard, just with its retroactive application this year."
 
 
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