A great debate arose in 2007 as the emergence of subsidized "renewable" diesel clouded biodiesel's future as an alternative on-road fuel. The latest numbers demonstrate that 80 percent of U.S.-made biodiesel is exported out of the country, largely to Europe, because there's no "market"-no methyl-ester-specific standard-for biodiesel in the states. Many believe the only way biodiesel will find a commercial transportation-fuel market here is through government intervention: a specific national standard, exclusivity of the blender's credit, extension of the tax credit and special Farm Bill incentives for oilseed production dedicated to biodiesel manufacturing. "The future of biodiesel is going to be contingent on a couple of things," says Richard Moskowitz, vice president of regulatory affairs for the American Trucking Association. The ATA could represent a large U.S. biodiesel market if the 37,000 members the organization represents would choose to use it. "Biodiesel has to be priced the same or less than petroleum diesel-the trucking industry will change its purchasing decisions on as little as one penny a gallon. We can't afford to pay more for our fuel than our competitors are paying. With biodiesel, if we have to use certain cold-weather improvers there's a cost to that. Because of the lower energy content, if we have to burn slightly more fuel, there's a cost to that. With biodiesel there's a need for fuel filter changes ahead of regular maintenance-and there's a cost to that." Then Moskowitz mentions the infamous National Renewable Energy Laboratory quality study. "Fifty percent of the samples failed to meet spec-that has to be fixed to way less than 1 percent. We don't have those issues with petroleum diesel and we shouldn't have them with any substitute that we consider using." Moskowitz was part of a closed-door briefing in mid-October in Washington D.C., organized by Hart Energy Consulting, the International Fuel Quality Center, and the Global Biofuels Center. The meeting was called, "Can Renewable Diesel and Biodiesel Coexist?" Its purpose was to initiate healthy dialogue and educate those involved.

U.S. biodiesel producers were already battling their own demons this spring when the Internal Revenue Service broadly interpreted "thermal depolymerization," a term crafted into the 2005 Energy Policy Act, to also include coprocessed "green" diesel, and Fischer Tropsch-style distillates synthesized from biomass. "Clearly there is confusion on what constitutes renewable diesel," says Brian Appel, chairman and chief executive officer of Changing World Technologies Inc. Appel was a panelist at the briefing. "There was a consensus that renewable diesel and biodiesel-and any other alternative fuel-are here to stay," he says. "There should be 1,001 ways to make a liquid fuel. I'm happy to see the effort the biodiesel industry has made and I think they'll find tremendous success in the home heating oil and industrial fuels markets." His intimation bodes poorly for biodiesel as a transportation fuel. CWT owns an 8 MMgy renewable diesel plant in Missouri that uses turkey waste in a thermal depolymerization process to make fuel for the stationary power market. "It's between a No. 2 and No. 4 fuel oil-it's got characteristics of both." Appel claims pioneer status because he was instrumental in coining the "renewable diesel" label and persuaded Congress to include the provision in the 2005 Energy Bill.

Ultimately, the chief issues that have to be addressed to create a peaceful coexistence between renewable, green and biodiesels are eligibility of the tax credit and the original intentions of Congress; by what quality standards renewable diesels will be judged, and what regulatory processes must these new fuels undergo; feedstock supplies; and simply accepting there is a common goal beneath all of the political posturing and perceived threats to investments. The staunchest biodiesel supporters agree the fight can't be bio versus renewable diesel, or even alternatives versus petroleum. "At the end of the day, biodiesel and renewable diesel have to use the petroleum infrastructure," Appel points out. "We need to be careful so the oil companies are engaged in these types of fuels."

Elements of Fracture
Panelist Lisa Ryan, vice president of Alterra Bioenergy Resources Corp., which is the owner of a 15 MMgy biodiesel plant in Gordon, Ga., says she initially thought the discussion would take an "us versus them" tone. "But it was made clear this is not the case," she says. Ryan is passionate, however, about the unknowns that renewable diesel still present to the biodiesel business. "As an industry, we have had to substantiate a fuel-meaning we've had to register it with the [U.S.] EPA, we've had to go through health effects testing, we've also had to present it to the American Society of Testing and Materials, which created a special specification for biodiesel we must comply with," she says vehemently. "If they want to produce a new fuel we don't have a problem with that-whether it's renewable diesel or green diesel or anything else. We just expect them to follow suit and get the health effects testing, register it with the EPA, and let ASTM come up with a specification for their fuel against which it would be measured for quality."

Michael McAdams, executive director of the Advanced Biofuels Coalition and briefing moderator, says producers of renewable diesel will complete the same due diligence undertaken by biodiesel producers. "What I don't appreciate are some individuals who are trying to protect an investment by creating some nefarious vision of competition, which may beat them out of the box down the road," he says. "It is nefarious to say that because we haven't created an individual spec for this new product-renewable diesel-it shouldn't be sold. With that nomenclature, all they're trying to do is deny the American people more volumes of cleaner renewable fuels. That's nefarious. And it's also disingenuous." The 2005 Energy Bill provision for renewable diesel stipulates the fuel must comply with section 211 of the Clean Air Act and be registered with the U.S. EPA; and the fuels have to meet ASTM D975, the diesel fuel spec, or ASTM D396, the spec for heating oil.

According to a source within ASTM, this is a complicated gray area. Attempts to insert exclusionary language in D975, disallowing renewable diesel's coverage under the spec were withdrawn, but the source says there still is no explicit "inclusionary" language either. At ASTM's December meeting, subcommittee E will focus on passing B5 into D975 and likely will not discuss renewable diesel until June. Sources say by then renewable diesel producers like Neste Oil and ConocoPhillips will already have a strategy to get into D975.
Methyl esters can easily be distinguished from petroleum by regulators checking blend levels or fuel quality, but renewable diesel is chemically identical to its petroleum blendstock. So how will those same regulators make the distinction when necessary? It is the blend ratio after all which determines how much of the $1 per gallon credit a blender will receive. With biodiesel, transesterifying a unit of oil yields the same unit of finished fuel. Coprocessors will keep records of volumetric blending but no one knows the yields they stand to produce. Carbon dating is the only way to physically identify renewable diesel from regular No. 2 fuel, but this is impractical in the marketplace. "It may look like petroleum diesel in the lab, but does it respond the same?" Ryan asks. "Are the chemicals used to process the chicken parts and purify it so it becomes a fuel-is that harmful? How do we know they're getting all the chemicals out? With biodiesel, we know because we have a spec. There's no specification for this; there has been no engine testing, to the best of my knowledge."

UOP LLC, a "green" diesel process technology provider, says its fuel, which undergoes a hydrothermal conversion process, has better performance and cold-weather properties than ultra-low sulfur diesel. Susan Gross, spokeswoman for UOP says fuel produced by the company licensees would still have to go through EPA registration. UOP is building a refinery in Italy and hopes to establish a presence in the United States.

Focusing on specs and registration does a disservice to everyone, according to Appel. "It's the most preposterous argument I've heard in my life," he scoffs. "No one would bring that up seriously, would they? This is the myth; this is the problem when we have a very complex fuel system." Appel says the spec issue came up a couple of years ago when agreeing on definitions of language in the Energy Bill before becoming law. "There are baseless inaccuracies regarding specifications that must be met-this hurts the entire alternative fuels industry," he says. "We are technical and can respond to facts. Emotions and politics are a bit difficult for us to respond to in regard to specifications."

Manning Feraci, National Biodiesel Board vice president of federal affairs, sees things differently. "If I put a glass of biodiesel in front of you right now and said, 'That's biodiesel,' you know what it is-there's a spec for it," Feraci says. "If I put a glass of renewable diesel out there, Appel's definition, Neste's definition and others' definitions would all be different. Consumers need to know what they're getting. If that fuel starts entering the marketplace it's going to tarnish everybody."

Confusion Taxes Everyone
Some say one of the NBB's biggest fears is the refineries that are coprocessing renewable diesel will suck monetary allocations dry. Biodiesel plants on average produce 30 MMgy or less. There are exceptions, however, such as Archer Daniels Midland Co.'s 85 MMgy biodiesel plant in Velva, N.D., or Imperium Renewables Inc.'s 100 MMgy facility in Grays Harbor, Wash. Capacity at those plants pales in comparison with oil refineries that can produce 500 MMgy easily. Funding is finite and the amount of money these companies can "suck out of the coffers is incredible," one source says. But the Senate finance committee has already adhered to a 60 MMgy-per-facility amendment, which passed 15-5 earlier this year when the Senate version of the Energy Bill was passed, McAdams says.

Pointing to President George W. Bush's 2006 State of the Union address calling for 35 billion gallons of alternatives and the 36 billion gallon renewable fuels standard in work-in-progress Energy Bills, McAdams says all technologies for the production of alternatives need to be given equal footing and allowed to mature. "If the objective is to move significant quantities of high-quality alternative fuels into the marketplace as rapidly as possible-if that's the stated policy goal-then you can't give one technology by designate a dollar and ask the others to live with 50 cents. In a fuels market, 50 cents may decide whether you're in business or out, so we've advocated across the board technology neutrality, feedstock neutrality and tax parity."

Some oil companies such as ConocoPhilips say animal fats from the likes of Tyson Foods Inc. will provide coprocessing feedstock, Appel says realistically animal fats are highly limited and their aggregation is difficult. "I think the argument became distorted because of the way the tax credit was going to be used by people who could compete for vegetable oils," Appel tells Biodiesel Magazine. "When you kill an animal, most of it is meat, water and blood-just a little fat. When you aggregate this material at best you're going to get a truckload or two out of a plant-150 barrels-so how are you going to get that to a refinery? It's not like soy oil that comes in tankers."

The biodiesel industry is facing double competition for its feedstock: increased prices from its own consumption of vegetable oils and secondary competition from renewable or green diesel coprocessors. Sources say these refineries prefer to buy boatloads and tankers full of palm oil rather than truckloads of highly limited animal fats, and may do so where logistics allow. "But for renewable diesel, the main feedstock was to be waste," Appel asserts. "These were going to be smaller distributed fuel production facilities that don't compete with biodiesel. We take rancid, nasty material and biodiesel takes pure vegetable oil. Now what's happened is coprocessors are trying to take vegetable oils and I think that's wrong. I think everyone knows it's wrong. And I don't think you can hide behind the energy security curtain and do everything in the name of energy security. We cannot afford to watch biodiesel and the original intent of these renewable diesel plants be injured by a broad interpretation of the tax code. We need to ask what the original intent of these types of credits was."

Proponents of free-standing biodiesel and renewable diesel production facilities are united in strong opposition to green diesel coprocessors cashing in on "their" credit. Feraci says the NBB's position is consistent with legislation proposed by Rep. Lloyd Doggett, D-Texas. "If you are a free-standing renewable diesel producer you continue to get the $1 per gallon credit. If it's biomass that's coprocessed with petroleum, that doesn't qualify. There's a distinction there. If someone is doing free-standing renewable diesel they've built a different mousetrap, and the market will evolve that way no matter what happens." Free-standing facilities stimulate the economy and add refining capacity. Coprocessors argue capital is expended on their end too (handling and storage), and their refinery carbon footprint shrinks even if their refining capacity remains the same.

As the battle rages, one can't help wonder why it's still difficult for biodiesel producers to compete economically with conventional diesel when petroleum crude oil hit record highs of $93 a barrel this fall. Speaking on behalf of the ATA, Muskowitz says, "I'm trying to support the biodiesel industry-it's just very difficult with the economics being what they are, and the operational challenges being what they are."

Ron Kotrba is a Biodiesel Magazine senior staff writer. Reach him at rkotrba@bbibiofuels.com or (701) 746-8385.