Minnesota made history in September 2005 when it became the first state in the nation to mandate the use of biodiesel. The state mandate was set to increase from a B5 blend to a B10 blend this spring—but it didn’t happen. A recommendation this past winter by the commissioners of the state’s Department of Commerce, Department of Agriculture and Pollution Control Agency means the move is likely delayed until 2013. While the delay is disappointing, Minnesota producers say it won’t impact their operations.

The 2002 law establishing Minnesota’s mandate required that diesel sold within the state contain a minimum of 2 percent biodiesel by 2005. Subsequent legislation signed into law in May 2008 aimed to increase the mandate to a B5 blend in 2009, a B10 blend in 2012, and a B20 blend in 2015. Under the regulations, exceptions are made for certain engines, such as railroad locomotives, some off-road mining equipment, and heating equipment motors located at nuclear power plants. In addition, the increases in the mandate beyond B5 are only effective during summer months. During winter, it reverts to B5.

Language in the regulations stipulates that before the mandate can be increased to B10 or B15, the commissioners of agriculture, commerce and the pollution control agency are required to determine whether four statutory conditions have been met. The conditions include that ASTM specifications or equivalent federal standards for the specified blend exist, and that there is a sufficient supply of biodiesel available which is produced in-state using feedstocks produced in the U.S. and Canada.

 In addition, the commissioners must determine that adequate blending infrastructure and regulatory protocols are in place, and that at least 5 percent of the biodiesel necessary to meet the mandate is produced from a feedstock other than an agricultural resource traditionally grown or raised in the state. This includes algae, waste oils or tallow.

On Nov. 3, Dave Frederickson, commissioner of the Minnesota Department of Agriculture; Paul Aasen, commissioner of the Minnesota Pollution Control Agency; and Mike Rothman, commissioner of the Minnesota Department of Commerce, issued a letter to chairmen of six state legislative committees recommending that implementation of increase be delayed one year, until May 2013. The commissioners consulted extensively with the Minnesota Biodiesel Task force and other stakeholders and determined that the four statutory conditions have not been met completely.

In the letter, the commissioners list several questions that remain concerning the statutory conditions. First, the letter states that the Weights and Measures Division of the Department of Commerce, tasked with auditing and sampling biodiesel stored at bulk delivery facilities and retail outlets, currently sample these locations at intervals that may allow undetected violations of the mandate. The commissioners also note that the division does not have authority to audit or inspect farms or fleet facilities to ensure bulk facilities are delivering mandate-compliant fuel. The letter further asserts that although the majority of the state is equipped with adequate biodiesel blending infrastructure, southwest Minnesota is not.

The commissioners also highlight their firm support of the current B5 mandate, as well as the moves to B10 and B20, but note that several issues must be addressed beforehand. In the letter, the commissioners pledge to address the concerns related to the testing intervals and authority of Weights and Measures, the lack of infrastructure in the southwest, as well as several other issues. For example, the Department of Agriculture has promised to convene the Minnesota Biodiesel Task Force Cold Weather Issues Team to guide the state on technical issues related to the production, handling and use of biodiesel in cold weather conditions. According to the letter, the team will discuss whether future waivers on No. 1 diesel blends are needed. After some diesel fuel users in Minnesota reported problems during the winter of 2009, the Department of Commerce issued a temporary waiver of the B5 mandate for No. 1 ultra-low sulfur diesel during winter months. That waiver expired in March.

The group also notes that the commerce commissioner is required to determine the wholesale diesel and biodiesel blend price differentials in the region, as well as whether those price differentials are likely to cause economic hardship to retailers. The commerce commission filed its report in February as scheduled, noting that “data is insufficient to establish a causal relationship between the state’s biodiesel content requirement and ‘economic hardship on the retailers of diesel fuel in this state.’” If economic hardship is found, the governor can choose to delay the move to B10. The letter also notes that developments regarding the expiration of the biodiesel tax credit and resulting changes to RIN prices will be tracked. Both issues could significantly impact the relative price of biodiesel.

State Clarification, Industry Response

Matt Swenson, communications director at the state commerce department, elaborates on the issues addressed by the letter. Regarding the commissioners’ comments on the testing intervals of weights and measures, Swenson notes that current funding levels are a primary issue. “At current staffing levels, the testing interval is not expected to change,” he says. “To reduce that interval, the legislature would need to provide funding for additional full-time employees.” Increased funding would not, however, address the issues related to the division’s inability to test fuel at farm and fleet operations. To give weights and measures that authority, the state legislature would have to act.

Swenson also reiterates that all three commissioners support the state’s biodiesel mandate, and the eventual moves to B10 and B20 blends. “The commissioners agree that growing Minnesota’s biodiesel industry is in the best interest of our state,” he says. Delaying the implementation of the move to B10 will allow the agencies and stakeholders to further address the benchmarks laid out in statute—benchmarks the state must meet in order to implement B10.” According to Swenson, the state of Minnesota will be better prepared to implement the move to B10 in 2013, as the delay will allow more information to be gathered and more involvement of the stakeholder community.

In completing the necessary analyses and work to implement the B10 mandate in 2013, the commissioners have pledged work closely with a variety of stakeholders, including the Minnesota Biodiesel Task Force. The task force was created by state legislature in 2003 with the goal of helping the state carry out its biodiesel mandate. According to Kelly Marczak, chair of the Minnesota Biodiesel Task Force, the purpose of her group is to advise the commissioners and help them evaluate conditions and move forward in a strategic way that will lead to the successful implementation of the appropriate time. Marczak also serves as director of Clean Fuel & Vehicle Technologies at the American Lung Association of Minnesota, which has been a member of the task force since its inception.
Marczak says that delaying the move to B10 will allow the state and local biodiesel industry to be fully prepared for implementation. “It allows Minnesota’s biodiesel producers, petroleum partners and government agencies to increase their capabilities to meet the growing demand,” she says.

Regarding the mention of the future fuel waivers for blends of biodiesel containing No. 1 diesel, Marczak notes that recommendation to delay implementation of the mandate is not a reflection of fuel performance. “The move to B10 applies only to the months of April through October, and returns to the 5 percent level in November through March,” she says. “A waiver remain[ed] in effect for biodiesel in No. 1 ULSD through this [past] winter, and we have not had any issues with biodiesel in cold weather since that waiver has been put into place. It will be one of the main issues that the task force considers this year. The National Biodiesel Board is working with the National Renewable Energy Laboratory to conduct testing at a national level to address issues with low aromatic fuels and biodiesel blends. The work will be valuable to us as we consider the waiver in the future.”

New ASTM specifications for biodiesel blends could also play a role in the future of the waiver. As previously reported by Biodiesel Magazine, the ASTM Biodiesel Task Force is working to address the rare cases in which some No. 1 ULSD-biodiesel blends—which meet the appropriate specifications—caused some cases of filter clogging even though the cloud point was below the outside temperature. A ballot to create specifications for a No. 1 grade of biodiesel (current standards would become No. 2B) was out for main committee vote as of February. If approved, the new specification would provide additional assurance that fuel blends incorporating No. 1 grade biodiesel would operate down to the cloud point by including a maximum 200-second cold soak filtration time limit and a lowered monoglyceride limit of 0.4 percent.

Those in the biodiesel industry seem to agree that the delay in implementing the B10 mandate shouldn’t negatively impact the regional industry. Jim Willers, chairman of the Minnesota Biodiesel Council, notes that his association was aware that this delay was likely to occur. While not all members of the council necessarily agree with the decision, Willers says as a group the council probably does agree the delay is for the best.

Willers says that the Minnesota biodiesel industry will use the time to bolster education efforts, build support for the fuel, and showcase the state’s biodiesel production capacity, which he currently estimates to be 64 MMgy. He also notes his group will seek to enhance cold weather performance quality programs.

The council is also working to mitigate the lack of blending infrastructure in the southwestern part of the state, Willers says. There is no terminal blending infrastructure in the area, he says, noting that most of the biodiesel in the southwest region of the state is splash-blended. “The guys doing it are doing a pretty good job and we’re getting by,” he says, “but the state is worried that if you go to B10, then maybe it could become an issue. Most of our diesel fuel comes out of Sioux Falls, S.D.,” where terminal blending of biodiesel is not available, he says. To remedy the situation, Willers says that the Minnesota Biodiesel Council, Minnesota Soybean and South Dakota Soybean associations have met with some of the terminal operators in South Dakota to encourage them to start inline blending of biodiesel. “We have an interested party at this time,” Willers says, noting that the hope is the situation will be resolved by next year.

Although the biodiesel industry may not be excited about the delay, Willers stresses the local industry isn’t expected to feel much of an impact due to the delay. According to Willers, there is more than enough demand for biodiesel to keep Minnesota producers operating at capacity, even without an increase to the mandate. He also stresses that biodiesel producers in the state are ready for the mandate, and the possible delay is not due to the quality of biodiesel being manufactured or the producers’ ability to make enough of the fuel.

Dave Wendorf, director of marketing at Mcgyan Biodiesel LLC, who also works on behalf of Ever Cat Fuels LLC, says that in the grand scheme of things his company doesn’t think the one-year delay will be a big deal. “We do concur with the Minnesota Biodiesel Task Force in supporting the state’s B5 mandate for another year,” he says. According to Wendorf, Ever Cat Fuels’ 3 MMgy biodiesel plant is running at capacity, and expects to continue doing so. Even if the move to B10 is delayed, Wendorf says his company expects to continue selling the vast majority of its fuel into the local market.
David Slade, director of technical services at Renewable Energy Group Inc. and  a member of the Minnesota Biodiesel Task Force, also says he supports continuing the B5 mandate for another year. “We look forward to working with our industry partners in reaching out to the petroleum supply chain throughout the next year in increasing awareness that high-quality biodiesel is available across the state,” he says.

Author: Erin Voegele
Associate Editor, Biodiesel Magazine
(701) 540-6986
evoegele@bbiinternational.com