Talking Point

Minnesota Ready to Implement Landmark B2 Requirement
By Ralph Groschen | August 01, 2005
Later this summer, Minnesota will become the first state in the nation to require B2 in nearly all of its diesel fuel. The move comes on the heels of the recent passage of legislation to double the ethanol content in Minnesota gasoline by 2013 and bolsters the state's already firm reputation as a leader in the field of renewable fuels.

Minnesota Statute 239.77 requires that diesel fuel sold or held for sale in Minnesota contain at least 2 percent biodiesel. Exceptions for this requirement are limited to motors at nuclear power plants, railroad locomotives, and off-road taconite and copper mining equipment and machinery. The requirement includes fuel used in compression ignition (diesel) engines-not turbines or heating devices.

The statute prescribes that the mandate will be implemented when "30 or more days have passed since the Commissioner of Agriculture
publishes notice in the State Register that annual capacity in Minnesota for the production of biodiesel fuel oil exceeds 8 million gallons." Given the significant investment made in biodiesel production facilities by Minnesota farmers and businesses, it is likely that the mandate will be implemented as soon as possible under the terms of the law.

At the writing of this article, one existing biodiesel plant was operating in Redwood Falls, Minn., with a production capacity of 3 mmgy, 5 million gallons short of the amount required to trigger the mandate. However, two other plants-the SoyMor plant near Glenville and the Minnesota Soybean Processors plant in Brewster-are each expected to produce approximately 30 mmgy, and were reportedly in, or nearing, start up at press time. Before notice is published in the Register, plant operators must submit, for the Commissioner's approval, documentation verifying the annual production capacity of the plant and lab reports documenting that product made in the plant meets ASTM specifications for biodiesel.

With these considerations, it is necessary to make some assumptions to lay out a scenario of how timing of the mandate might unfold. First, we can assume that under ideal circumstances it could be possible for a plant that started production on July 19 to submit the required documentation to the department in seven days. If this happened, it would be possible for the department to submit notice for publication in the register by July 26, and the publication could appear in the State Register as early as Aug. 2. The mandate could then start as early as Sept. 2. With all due respect to Murphy's Law, it is fair to point out that this start date represents a best-case scenario.

Last year, start-up dates of April or May were projected by plant developers. If this would have happened, the mandate could have been implemented in July, and members of the petroleum industry were advised to be prepared accordingly. As it happened, weather and other factors pushed the start-up dates back. It does seem that now the end of the process is much closer at hand, and the estimates should be much more accurate. In the meantime, members of the petroleum distribution system have been busy preparing their equipment for B2 blending. Most, if not all Minnesota terminals should be ready to go and certain other border terminals including Fargo, N.D., and Grand Forks, N.D., will be ready for a September implementation of the B2 mandate in Minnesota.

The bold steps taken in Minnesota to help launch the biodiesel industry have been blessed by some timely events. At the beginning of this process, no one knew that the federal biodiesel tax credit would be passed, or that crude oil would be $60 a barrel or diesel fuel more than $2 per gallon. But those steps were taken, and it appears that Minnesota's new plants could hit the ground running in what promises to be a bull market with favorable prices.

Gov. Tim Pawlenty set a goal of making Minnesota the "Saudi Arabia of renewable energy." With 12 farmer-owned ethanol plants, a 97 percent market share for E10, more than 130 E85 stations, a statewide B2 market this year and a new goal of reaching E20 by 2013, the state is well on its way.

Ralph Groschen is an agriculture marketing specialist with the Minnesota Department of Agriculture. Reach him by e-mail at [email protected] or by phone at (651) 297-2223.
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