Guest Editorial

Why NBB membership matters: From a farmer-leader-turned-fuel-producer
By Roger Peterson | March 01, 2006
During most of the 1990s, I served as a volunteer farmer leader representing the Minnesota Soybean Research and Promotion Council (MSRPC) on the National Biodiesel Board (NBB). I now serve on the board of directors of SoyMor Biodiesel in Albert Lea, Minn. SoyMor is one of more than 30 new plants that began production within the past year. In recent months, I have heard a couple of these newcomers comment about NBB membership and dues.

It is easy to imagine how someone penciling out various operational costs might do the math on projected NBB membership dues and question whether it is a necessary cost. However, those who have been involved in the biodiesel industry know the enormous value that the NBB provides through its federal and state regulatory, technical and informational resources; its coordination role with government and academic research; and its valuable communication role, which supports its government policy work and helps protect the industry from attacks. They also know the importance of being engaged in industry leadership efforts through the NBB.

Like many of my fellow soybean farmers, after the first Gulf War, I saw the development of a biodiesel industry as a way for farmers to contribute to our nation's energy supply. We envisioned a thriving biodiesel industry that would help revitalize agriculture and help farmers participate in the growing economy, which seemed at the time to be growing in all sectors except agriculture. Beginning in 1992, the NBB coordinated research that was funded by the soybean checkoff. The soybean checkoff is a program that collects an assessment from the grain check of all soybean farmers and invests those dollars in soybean research and education. During most of the 1990s, the NBB had only farmer representatives because there were very few entities producing biodiesel. The NBB's soybean checkoff funders were eager for a biodiesel industry to emerge so that the private sector could help fund the development programs. Meanwhile, soybean farmers like me sponsored more than $30 million in checkoff resources during the 1990s for critical research, including the $2.2 million in health effects testing for Clean Air Act compliance.

Farmers are generally long-term thinkers, and they view the investment of the roughly $1 per acre into research and development as essential to keeping their industry healthy. The checkoff program has demonstrated success. In addition to the checkoff, soybean farmers contribute personal dollars to support the government policy efforts of the American Soybean Association (ASA), which has led the legislative activities for biodiesel in Washington D.C., since the beginning.

As biodiesel production companies began to emerge in the mid to late 1990s, farmers recognized a need to include them in NBB membership and involve them in the direction and prioritization of resources. However, at that time, these companies were not selling very much biodiesel, so they were not generating sufficient revenue to contribute to the significant technical, regulatory and educational efforts that the NBB implemented.

In February 1999 at an NBB meeting in Albuquerque, N.M., the existing biodiesel producers proposed a plan to expand NBB membership to include biodiesel producers. I was serving as vice chairman of the board at that meeting. The producers proposed that their dues should be based on a penny per gallon so that biodiesel producers could contribute to industry efforts at a rate that corresponded to the level at which they participated in the biodiesel market. The concept was that farmers and fuel producers would work together in a combined effort to direct and prioritize development activities. Although fuel supplier contributions would be very small for a while, the volume-based dues structure called for a growing amount of contribution as biodiesel sales grew.

It is important to note that private company contributions can be used to support important state and federal government affairs, which cannot be performed with other sources of funding. As the industry has grown over the years, the NBB volume dues structure has evolved so that large producers are not overly burdened. The dues rate incrementally steps down to 1/10 of one cent per gallon on volumes over 15 million gallons. Also, in an effort to be fair to small producers, the minimum dues amount was cut in half, and a policy was enacted that allows small producers to apply up to two years worth of their dues toward certification fees related to BQ-9000 participation.

If SoyMor's biodiesel operations are successful and we are able to produce for a full year at full capacity, our NBB dues would amount to less than 1/3 of one cent per gallon. That represents somewhere on the order of 1/10 of 1 percent of the value of each gallon we sell. I do not view this as an expense but rather a small, critical investment in the future of our industry. The only reason our industry has the potential for success right now is because of the strong energy policy that is in place. That energy policy, on both a federal and increasingly state level, will need to continue in the foreseeable future. It will be up to the NBB and its partnership organizations to conduct the government affairs work and the coordination that will keep the energy policy strong.

I believe this historical perspective is important because those who are just coming into the biodiesel arena may not fully appreciate the fact that the opportunities they are pursuing in the biodiesel market today did not just appear by coincidence. That market was built by a lot of hard work from a lot of people. We have now entered a whole new era of growth and visibility, and the need for technical, regulatory and communications efforts has never been greater. Soybean farmer funders still see this need and are glad to see the vision from 1999 may finally materialize. As the market grows, biodiesel companies are better positioned to step up to the plate to help fund their own industry initiatives. It should be noted that a handful of leading biodiesel industry companies have been supporting legislative efforts with the NBB and ASA for a number of years-on top of their dues to the NBB. Farmer funders have shown a willingness to continue their support of critical research priorities in the foreseeable future, if private companies are willing to support the necessary energy policy work.

As an example, farmers have committed $2.1 million toward the 2007 engine testing program, which will be leveraged with over $10 million of funding from the U.S. DOE and the engine companies. This funding will be used to conduct engine certification testing with ultra low sulfur diesel fuel and biodiesel blends on the new advanced diesel technology, which will be employed on new engines after 2007. Without this critical testing, biodiesel would not be able to be used in future diesel engines. Likewise, farmers are funding hundreds of thousands of dollars for biodiesel blends to be tested under the state verification procedures for California and Texas (the No. 1 and No. 2 highest diesel fuel users in the country, respectively). I might also point out this soybean checkoff funding will benefit all biodiesel feedstocks, not just soybean oil-a commitment that demonstrates benevolent leadership in the biodiesel industry.

As a soybean farmer, I am proud to contribute $1 per acre to the checkoff program. It is 1/2 of 1 percent of the value of my crop, and it is wisely invested to see that the industry stays healthy and strong. Likewise, as a biodiesel producer, I see the investment of around 1/10 of 1 percent of the value of my biodiesel production as a critical investment in the future of the biodiesel industry. Indeed, NBB dues represent less than 1 percent of total federal and state incentives that will be applied to the biodiesel that my company produces-and it is a part of critical government energy policy that the NBB will be called upon to support. The NBB has established an impressive record of success and continues to coordinate a growing partnership among all industry stakeholders. Anyone who expects to participate in the biodiesel market should be willing to do their part to invest in the future. A unified and coordinated biodiesel industry is the only path to continued success and sustainable growth.
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