Things aren't settled yet in the state of Texas. Biodiesel supporters are still dealing with the TxLED rulings that are directly affecting the industry in one of its largest potential markets.
By Ron Kotrba & Dave Nilles | December 01, 2005
In July 2005, Biodiesel Magazine published an article titled, "Houston, Do We Have a Problem?" This timely feature placed a Texas-sized spotlight on the impending and restrictive air quality control measures taken by the Texas Commission on Environmental Quality (TCEQ) to manage the release of diesel-borne NOx.

NOx is conventionally thought to be a major contributor to smog and ground-level ozone. The U.S. EPA has designated a large and heavily populated 110-county region in Texas as an air quality non-attainment zone. The air quality in metropolitan Houston, Dallas, Fort Worth, San Antonio and surrounding areas has repeatedly failed to meet U.S. EPA threshold standards.

To reverse or combat further ambient degradation, the TCEQ has taken an aggressive measure to regulate diesel fuel composition, mandating all on- and off-road diesel-including biodiesel blends-to be reformulated and tested, the results of which must show a specified reduction in NOx emissions compared to conventional diesel before the state can certify any diesel-based fuel for distribution, sale or use in the control zone, said TCEQ program coordinator Morris Brown.

Texas Low Emission Diesel (TxLED) fuel typically exhibits 5.7 percent to 7 percent NOx reductions in diesel emissions testing, Brown said. To reach this reduction in NOx emissions, a diesel fuel must meet a minimum cetane requirement of 48 and an aromatic hydrocarbon content of 10 percent or less by volume. Any fuel meeting these TxLED properties can legally be blended, sold and used in the affected region once certified by TCEQ. TCEQ will also accept diesel formulations certified by the California Air Resources Board (CARB), the EPA's Environmental Technology Verification Program or the EPA's Volunteer Diesel Retrofit Program, Brown said.

Understandably, this puts the squeeze on biodiesel blends while creating impediments to challenge the state's biodiesel market. "It is the market," said Biodiesel Industries' Jake Stewart, referring to the Interstate 35 corridor. "It's 80 percent of the market or more. It might as well be all of Texas."

All ASTM D 6751 biodiesel meets the aromatics and cetane specifications for TxLED, but because the commission has come to the supposition that, without question, biodiesel blends emit higher NOx, this assessment has guided the commission's inflexibility in, at the very least, revisiting any part of the regulation to tighten up any potential loose ends in the ruling. This stance may lead to even wider restrictions (outlined in more detail in this article).

But for now, the TxLED's three-phase implementation is already taking effect. Delayed one month due to Hurricane Rita, the first deadline took effect in October. According to a Sept. 23 TCEQ release, the rule applied to producers and importers beginning Oct. 31, bulk plant distribution facilities Dec. 15, and retail fuel dispensing outlets, wholesale bulk purchase/consumer facilities and all other affected entities by Jan. 31, 2006.

Getting tested � and approved

The New Technology, Research and Development (NTRD) program in TCEQ issued approximately $2 million in reimbursement grants to help applicants pay for the testing of their formulations in order to become state-certified as TxLED compliant, Brown said. Applications for grant funding are no longer being taken, and whether or not future grant-funding rounds will be available is yet to be determined, according to Brown. He said 14 projects were issued grants to test biodiesel blend formulations.

Of those receiving grants, only one has had its product certified for biodiesel blends. GTAT California LLC's Viscon additive was tested this summer at Olson-EcoLogic Engine Testing Laboratory in Fullerton, Calif., and approved in September. GTAT's Pat Porter said the Viscon additive, which is not subject to EPA registration requirements, met and exceeded the TxLED standards.

GTAT originally tested its additive with ASTM 975-compliant No. 2 diesel fuel. Stewart said his company then worked with GTAT to fulfill a biodiesel component of the testing. Porter told Biodiesel Magazine that TCEQ officials informed him that Biodiesel Industries submitted an application for its biodiesel using the proprietary Viscon additive.

Stewart said Biodiesel Industries paid for that testing out of its own pocket and didn't receive an NTRD grant. He said his company spent time developing a biodiesel blend with the most room for NOx reduction. "We absorbed a lot of risk," Stewart said. "But it beat the risk of not doing something."

Stewart added, "Once we realized TxLED was here to stay with biodiesel, the best avenue of choice was to play by the rules and go aggressively for certification. We were fortunate that we met the bar."
Currently, Biodiesel Industries' B20 with Viscon is the only approved biodiesel blend certified by TCEQ for use in the TxLED-affected areas.

Biodiesel Industries' biodiesel meets ASTM D 6751 specifications, but Brown said the company indicated that its biodiesel was a special, proprietary formulation exceeding ASTM standards.

Stewart said Biodiesel Industries does use a slightly different process to produce its biodiesel. "It gives it properties that drop NOx production," he said. "It's all ASTM, but there are certain parameters that you can control and increase or decrease, many of which are known in the industry."

Now possessing the only certified and registered brand of biodiesel for use in the TxLED control zone, Biodiesel Industries can legally sell the use of its state-certified license to other producer/blenders seeking to avoid a temporary shutdown in the business of blending biodiesel. "If they want to sell their licenses, they would be required to ensure that the person to whom the license is being sold is using the exact formulation," Brown said. He said that the TCEQ has authorization to enforce the proper licensing requirements by pulling samples at any point in the supply chain for testing. If results show an improper use of the licensing, Brown said both the company issuing the license and the purchaser may be liable for any possible infractions.

Stewart said four groups are working with Biodiesel Industries to sublicense. He added that interested companies are encouraged to contact him regarding sublicensing, which requires a one-time licensing fee. "It would be a basic sublicensing agreement," Stewart said. "We would sublicense our (production) parameters in a non-disclosure agreement."

After that it would be a matter of purchasing the Viscon additive from GTAT. He said the sublicense fee is intended to recoup the costs for testing and any risk absorption. "This will help get through the turbulence until the NBB (National Biodiesel Board) gets through its tests," Stewart said. "We all want a generic solution to this."

Stewart stated two reasons why Biodiesel Industries' approved blend isn't that generic solution for all B20. First, extending the certification to all producers would require divulging proprietary information to the entire industry. More importantly, it would require extending the umbrella of the company's EPA registration. Finally, Biodiesel Industries paid for the testing itself and is interested in recouping that money.

"Biodiesel Industries didn't indicate that they wanted to extend approval of its formulation to all B20 blends meeting ASTM specifications," Brown recently told Biodiesel Magazine. "They said it was a different formulation." Brown also said an applicant could make the certification available to all ASTM compliant B20 if that intention were indicated in their test plan. Viscon was also TCEQ-approved for use with all ASTM D 975 No. 2-diesel fuels, not one specific No. 2 brand.

However, GTAT is not required to register its Viscon additive with the EPA, while Biodiesel Industries is required to do so with its biodiesel.

Stewart pointed out that for his company to allow all producers to operate under its TCEQ-certified blend, all companies would have to operate under Biodiesel Industries' EPA registration number. "In doing that, you have responsibilities for all of the fuel that comes out under that number," Stewart said. "You can imagine the problems if we opened that up and carried that responsibility blindly."

Since the NBB is not a producer, the belief is that they can shape a certification that would apply for everyone. They wouldn't, by nature, be required to register under the EPA, therefore making it a different scenario than Biodiesel Industries.

Besides the obvious EPA ramifications, Biodiesel Industries is attempting to recoup on its investment. "Any other company that doesn't receive state money and is using its own private money-and doesn't have industry groups yet involved-has every right to recoup minimally the time and cost invested," Stewart said. "At the same time, we don't want people taking advantage of the situation. That is why we are conscious of the current situation and being very undiscriminating and opening it up for all [through sublicensing]."

Getting out of a jam
Biodiesel Industries built and operates one plant in the TxLED-affected area. Stewart said its Denton, Texas, facility-Biodiesel Industries of

Greater Dallas Fort Worth-is ramping up production after starting up in March and is now supplying biodiesel to Willie Nelson Biodiesel Co.
Peter Bell of Distribution Drive, a distributor for Willie Nelson Biodiesel, said that it wasn't until the first deadline was near that he realized the state lumps blenders and producers together. His company had actually quit shipping biodiesel for four days until a sublicense deal was struck with Biodiesel Industries. "We take unregulated fuel-biodiesel-and it is classified as an additive," Bell said. "We blend it with a regular fuel, therefore we are [considered] a producer."

Bell credits Biodiesel Industries with saving the industry in Texas until the NBB gets its fuel blends approved.
Bell said Distribution Drive had sold 25,000 gallons of biodiesel-blended fuel per day in the TxLED region before the deadline. Now it can only sell B20 blends. "We had B40 and B95," Bell said. "Those pumps are now bagged."

Other groups are not as pleased with the sublicensing agreements. Chris Sharon of DFW Biodiesel, a Fort Worth-based biodiesel supplier, feels his company is essentially being forced out of the market without a cover-all biodiesel blend.

What the future holds
With the passing and fast-approaching dates, yet only one approved brand formulation of B20 existing for the east Texas market, Brown again indicated that the biodiesel industry has had ample time to plan ahead. "The slowdown isn't coming from our side," Brown said. "The ball is in the industry's court now."

Biodiesel blenders, producers, retailers and consumers continue to await the results of NBB testing. NBB Regulatory Director Scott Hughes confirmed not only that the NBB received TCEQ approval for three separate NTRD grants to test three different biodiesel formulations, but also that the NBB will extend any approved blends out to the Texas ASTM biodiesel community at large. "That is our intent," Hughes told Biodiesel Magazine. "To certify B20 formulations using biodiesel that meets ASTM D 6751 and one of a variety of additives." He said the NBB's applications for approvals include B20 with an Octel Starreon additive, the generic cetane improver ethylhexyl nitrate, and lastly, a yet-to-be determined supplement.

Both the testing and approved grants for each formulation exceed the $100,000 mark, Hughes said. The testing, done at an approved research or testing facility, must be done in accordance with TCEQ regulations, which follow EPA guidelines. This means that all testing will take place via engine dynamometer tests. Brown confirmed that consideration would not be given to the variances seen in NOx outputs when emissions results from engine tests are compared to results from chassis dynamometer tests using the identical engine and fuel combination. These reputedly intrinsic differences, which bring the variances of real-world drive cycles and their corresponding emissions profiles to the forefront, make it difficult to definitively state across the board that biodiesel blends increase NOx.

Nevertheless, the NBB is pushing forward. "Our goal is to go through testing and get certified in the state of Texas," Hughes said. "But also, we'd like to submit the certification to CARB in California." For Texas, at least, Hughes projected a timeline of results that he hopes will come to fruition. "We are moving as quickly as possible to get the testing done and products certified by late this year or January."

Of course, the possibility exists that none of the NBB's three formulations get certified as TxLED-approved alternative diesel fuel. "I think everybody is holding their breath on this thing," Stewart said. "Until you receive the certificate in your hand, it is not a good idea to assume anything."

Containing the problem
One could view the problems TxLED has caused the biodiesel industry as having been localized to the 110-county non-attainment zone in Texas. However, those troubles could expand.

Stewart believes TxLED could lead to larger problems for the biodiesel industry if it moves beyond the Lone Star State's borders. The fear is that other non-attainment areas could adopt similar rules. "If we don't get this taken care of at the EPA level, we could see it ripple through other states that are in noncompliance," Stewart said.

Stewart said the EPA should reevaluate its biodiesel emissions data by taking into consideration more recent data. He said the goal now is to get the EPA to come out with a guidance statement and position clarifier on biodiesel.

"As long as the perception that biodiesel increases NOx exists with the EPA or [other groups], we will continue to run into these issues with state regulatory groups that are trying to comply with creating mandates," Stewart said. "It's hard for them to justify the use of biodiesel if they believe it increases NOx, even by a slight amount, if the mandate is to decrease NOx by any accounts."

One could also analyze the situation in Texas as not the root of an expanding air quality control crackdown on biodiesel NOx emissions, but rather as the product of an already spreading awareness of degrading ambient air conditions in populated areas-basically with Texas following the trail previously blazed by California.

Another concern is the possibility of consumers forgoing the TxLED rulings, essentially rendering it ineffective. "It's a wet county/dry county thing," Sharon said. "That's what it is going to do."

Sharon said it could lead to a situation where truckers or other end users buy biodiesel-blended, non-TxLED compatible fuel outside of the TxLED control area and drive through to the other side. "People can fuel up on either side and run through the eastern part of the state," Sharon said. Or consumers might buy unregulated B100-keep in mind TxLED rules only affect biodiesel blends-and mix diesel fuel with it themselves.

Nonetheless, the situation surrounding Texas' air quality-and legitimate ways to improve it while sustaining the growing renewable fuels and agriculture sectors-continues to evolve. Biodiesel Magazine will continue to keep on top of the issue. n

Ron Kotrba is a Biodiesel Magazine staff writer. Reach him at [email protected] or (701) 746-8385. Dave Nilles is associate editor of Biodiesel Magazine. Reach him at [email protected] or (701) 746-8385.
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