Biodiesel Industry, NBB Celebrate 20 Years
As we head into 2013, the National Biodiesel Board kicks off the celebration of its 20th anniversary. Not only is this an accomplishment for the organization, it is an accomplishment for the entire biodiesel industry.
NBB was started as a research and development group in 1992 by a group of farmer leaders. Soybean oil was a surplus product of soybean production and processors found themselves building larger and larger tanks to store the surplus inventory. The country had just emerged from the first Gulf War and soybean farmers envisioned an opportunity for this surplus product that would contribute to energy security. There was no biodiesel industry in the U.S. at that time, and biodiesel was only produced as a specialty fuel.
Many of the soybean farmer leaders had been through some of the early challenges of the ethanol industry back in the gasohol days, and did not want to repeat similar missteps. The farmers took the next seven years to fund NBB's efforts to do engine durability, compatibility and emissions testing. An ASTM commercial specification was passed. We conducted health effects testing to make biodiesel a legally registered fuel with the U.S. EPA and compliant with the Clean Air Act. Biodiesel became one of the best-tested fuels because of the robust technical program carried out by NBB in the 1990s. The American Soybean Association worked to achieve policy milestones such as getting biodiesel designated as an alternative fuel and qualified to meet alternative vehicle-fuel fleet purchase requirements.
But after millions of dollars of investment, there was still only a small, half-million-gallon-per-year government fleet market for biodiesel, and farmers were growing weary.
As a few biodiesel companies began to emerge, they began participating in NBB meetings, and weighing in on industry direction. Since they were making hardly any money or having losses on their biodiesel operations at that time, they indicated that they could not afford the $10,000 annual dues to join as NBB members. At an NBB meeting in March 1999, my first meeting as CEO, biodiesel producers made a proposal. They proposed a dues structure for producer member companies of a penny per gallon. This proposal acknowledged that dues would be low at first, but as the industry grew, their ability to contribute to industry-wide efforts would also grow proportionally. While dues have been adjusted down several times since, NBB still operates based on a volume-based dues structure. We have been able to highly effectively leverage our revenues in a unique way. The soybean checkoff and some federal grants continue to support our technical, communications, fuel quality, sustainability, awareness and other important programs. Meanwhile, our biodiesel producer dues are leveraged and focused in the area of federal and state policy.
In the early years, the U.S. industry often looked to the European biodiesel industry for guidance, and it became very clear that demand in Europe for biodiesel wasn’t due to some grand marketing efforts, but rather through effective energy policy. Energy policy would be required to crack the economics and, of course, economics drives everything. Once effective policy could create an environment where economics could begin driving development, that development would be perpetuated by innovation spurred by competition.
In 2002, NBB held a meeting with the most influential agricultural leaders and the ethanol industry, stating NBB's commitment to pursue a biodiesel blenders tax credit. The industry leaders agreed to support this initiative and NBB’s largest initiative to date was launched. In November 2004, President Bush signed the 2004 Energy Bill, which included the biodiesel tax credit. The tax credit proved highly effective leading to explosive growth in 2005 and 2006. But extensions of the program were increasingly difficult to achieve. The original renewable fuel standard, or RFS1 as it came to be known, was passed in 2005, and NBB worked to make sure that biodiesel qualified. But the program was primarily an ethanol program designed for the gasoline market and did not work for biodiesel.
In early 2005, a bill was introduced by newly elected Sen. Barack Obama, called the “alternative diesel standard” to broad, bipartisan support. This was a comprehensive alternative fuels program, and NBB began working with other stakeholders and members of Congress to make it workable for biodiesel. This proposal was in some ways a precursor to RFS2. For the next three years, NBB again rallied resources to launch its largest-ever initiative to date. NBB’s goal was to achieve a workable and successful RFS2, which would work for biodiesel in ways the RFS1 did not.
This led to the creation of the advanced biofuel category with the carve-out for biomass-based diesel. After a huge, sustained effort, we achieved this goal with bipartisan support leading to President Bush’s signing of the Energy Independence and Security Act in December of 2007. It took two years for the preliminary rule to be issued. The preliminary rule would have disqualified approximately 70 percent of the available feedstock for biodiesel based on life-cycle carbon numbers that utilized flawed indirect land use change (ILUC) models. NBB had recently launched its sustainability program, which invested in sound science to improve ILUC modeling and fill data gaps. This effort was effective and a workable final rule came out in 2010.
2011 saw a transition for the industry, where the RFS2 demonstrated its effectiveness as a stabilizing energy policy, catapulting the biodiesel industry above a billion gallons for the first time. The program continued to demonstrate success in 2012, and is on track to exceed 2011 volumes. RFS2 has become, by far, the policy cornerstone and biggest driving force for the industry.
The future is exciting for biodiesel. Energy policy will continue to be important for the near- and medium-term. But that energy policy will continue to stimulate growth and innovation in areas hardly imagined today. Our nation’s energy picture absolutely must change to a more diversified and domestic portfolio of energy options. The U.S. biodiesel industry has demonstrated that it is one of the most resilient industries ever. Now we are larger, stronger, and more diverse. We are battle-tested, seasoned and salty. We know adversity. We eat it for breakfast. Then we eat it again for second breakfast, elevensies, lunch, tea, dinner... we ain’t just fresh out of the Shire. We can handle adversity and we will. Twenty years from now, I predict that we will have prevailed in doing our part to diversify the fuel pool and will have proven that we were the ones on the right side of history.
Joe Jobe, CEO, National Biodiesel Board