Over the past 10 years, the American biodiesel industry has grown from a few scattered plants producing thousands of gallons to an industry with an estimated capacity of 1 billion gallons, poised to help meet the world's growing demand for renewable fuels. The biodiesel industry can take great pride in how far it has come in just a few short years. Yet challenges remain, including high feedstock costs, tight credit markets, an ill-informed food-versus-fuel fight and the European Union's desire to create a cushion for their producers. After 10 years the industry is poised for a period of growth through mergers, acquisitions and overall consolidation.

Today's biodiesel customers demand more than ever before: enhanced quality, consistent supply, improved infrastructure, creative pricing options and technical expertise. In part because of the renewable fuels standard (RFS), major oil companies and large petroleum distributors are leading the way for the biodiesel industry as they become increasingly active in voting for ASTM specifications, original equipment manufacturer acceptance and legislative policy. They are becoming more educated on the benefits of biodiesel. Yet, like all customers, they want good service and a quality product. These customers are under immense scrutiny as members of Congress and the American public watch and react to petroleum prices on a daily basis. It's fair to say, we are both facing challenges and need each other to succeed.

In a few short weeks, the first-ever biodiesel carve-out takes effect as part of the RFS. This critical piece of legislation opens the flood gate of demand from our biggest customers who are already partnering with some in our industry to aid them in implementing U.S. EPA regulations. The greening of corporate and municipal America offers another steady stream of demand for biodiesel and biodiesel education.

Major petroleum companies and distributors will be placing orders by the millions of gallons. They will expect biodiesel quality to be ever-improving as their credibility gets put on the line. In order to meet the demand of their downstream customers and the requirements of the RFS, the petroleum industry will demand producers participate in the BQ-9000 programs and offer certified, quality product in large volumes.

As our industry steps up to the challenge of the petroleum market, we must build infrastructure and increase our distribution efficiency. In July, Renewable Energy Group stepped into this new era of industry growth by acquiring the assets of U.S. Biodiesel Group. The strategic transaction included a 35 MMgy biodiesel production facility, terminal and infrastructure system in Houston as well as a liquid storage terminal in Stockton, Calif. This consolidation of production and marketing capabilities is an example of how petroleum customers will receive large volumes from fewer producers while limiting their own capital investment for biodiesel infrastructure. These are the attributes the petroleum industry demands and is the direction our industry is moving.

Increased rail transportation, deepwater access, integration into the national pipeline and biodiesel blending systems which seamlessly integrate biodiesel into the existing petroleum infrastructure are all critical aspects in meeting an immediate customer need.

Individual biodiesel producers will be affected by this shift into consolidation. Now is the time to take stock in what your organization can offer in a partnership with another biodiesel company or with the petroleum industry.

Because so little consolidation has occurred in the biodiesel industry, early adopters stand to gain the most as we enter this new growth period. Merging marketing agreements offer the opportunity to expand and diversify a small producers' geographic market share through a marketing partnership. Because petroleum companies are a nationwide customer, our industry must be a nationwide supplier. Renewable fuels managers at large petroleum companies will be looking to ink deals with a small number of primary, national suppliers who can offer multiple distribution locations.

As we look to the next 10 years in the industry, we face new challenges and exciting opportunities. Our customers will continue to set the pace for what's next in product quality and how we can partner to make biodiesel more readily available.

Jeff Stroburg is chief executive officer and chairman of Renewable Energy Group Inc. Reach him at jeff.stroburg@regfuel.com or (515) 239-8121.