More stringent biofuel standard suspended

Minnesota regulators have temporarily suspended a new and more stringent standard for biodiesel use due to shortages of the product.

On May 1, the amount of biofuel that must by state law be blended into diesel jumped from 10 percent to 20 percent. But production at one of the state's two main biodiesel plants — Minnesota Soybean Processors in Brewster, Minn. — has been shut down since earlier this month.

With the plant idled, the Minnesota Department of Commerce on Monday issued a "waiver" for B20 — diesel that contains 20 percent biofuel by volume — until June 30. In the interim, fuel retailers can use B10, or diesel with 10 percent biofuel content. Biodiesel is made chiefly from soybean oil, corn oil or recycled cooking oil.

"Unexpectedly, one of the state's largest suppliers to distributors has been unable to produce any biodiesel during this time of peak demand for fuel," Commerce Commissioner Jessica Looman said in a statement. "Despite this temporary short-term issue, the bigger picture is that the production, blending and distribution infrastructure for B20 is now well established."

Some in the fuel industry question that.

"A lot of us were very concerned the state didn't have an adequate blending system," said Jake Reint, a spokesman for Flint Hills Resources, owner of a large refinery and fuel terminal in Rosemount. With the B20 mandate, "the state is so much more exposed to supply disruptions."

Flint Hills, an arm of Kansas-based Koch Industries, has been able to secure biodiesel for Rosemount, but the supply has been tight, Reint said.

Minnesota's biodiesel mandate — even at the previous 10 percent level — is far higher than in other states. And the requirement has long been controversial.

Groups from the trucking, automotive and oil industries sued in 2015 to have the state's 10 percent mandate abolished, saying it violated federal clean air and renewable energy laws. A federal judge disagreed.

Minnesota has three biodiesel makers — though one is very small — while Iowa producers also serve the state. Minnesota Soybean Processors, a farmer-owned cooperative that also crushes soybeans, normally churns out 47 percent of the state's biodiesel, according to the Commerce Department.

But the plant hasn't been able to produce biodiesel since May 9 or load trucks with inventory since May 16. So the Commerce Department temporarily waived the B20 requirement, which is borne by diesel fuel retailers but essentially fulfilled at wholesale fuel terminals.

Minnesota Soybean Processors Chief Executive Scott Austin didn't return calls for comment.

"From our understanding, the [Brewster] soybean processing plant and biodiesel plant had been scheduled for a turnaround," said Mike Youngerberg, senior director of product development at the Minnesota Soybean Growers Association.

A turnaround is a period when equipment is serviced and upgraded. The turnaround at Brewster had been scheduled more than a year in advance, Youngerberg said.

However, "when they started the plant back up, it did not work as planned," he said.

Youngerberg said that biodiesel producers and fuel-terminal operators have been preparing for many months for the B20 standard. Bruce Heine, a spokesman for Tulsa, Okla.-based Magellan Midstream Partners, echoed that sentiment. Magellan is a big operator of fuel terminals and gasoline pipelines in Minnesota, and it has added storage tanks and other equipment to handle more biodiesel, he said.

Still, over the last month, Magellan notified the Commerce Department of four biodiesel "outages" at its terminals that serve Minnesota. (The department gave B20 waivers for retailers who got product from Magellan terminals during the outages.)

Despite Magellan's work before B20's May 1 arrival, "we had to make additional modifications in May to fine-tune the system," Heine said. At other times over the past month, Magellan's terminals were faced with a lack of biodiesel supply from producers.

In Minnesota, the B20 season will normally run from April 1 through Sept. 30. During colder months, the state requires B5, which contains only 5 percent biodiesel.

Mike Hughlett • 612-673-7003