Trucking, oil industry groups lose challenge to Minnesota biodiesel mandate

A U.S. District Court judge in Minnesota has shot down an attempt by trucking, automotive and oil industry groups to abolish the state's requirement that diesel sold at the pump contain at least 10 percent biofuel.

The business groups, in a suit filed in April 2015, alleged that Minnesota's biodiesel mandate conflicts with federal clean air and renewable fuel laws. They asked for a permanent injunction barring the state's mandate, as well as a planned increase to a 20 percent biodiesel threshold.

But U.S. District Judge John Tunheim last week ruled against the business groups, concluding that federal laws do not pre-empt Minnesota's biofuel mandate.

If the U.S. Environmental Protection Agency, which enforces U.S. renewable fuel standards, believed that the Minnesota biodiesel mandate undermined Congress' objectives, it could have sought an injunction against Minnesota, Tunheim wrote.

"That the EPA has not done this is but one more piece of evidence supporting the conclusion that the Minnesota mandate does not frustrate the means that Congress selected to implement [renewable fuel standards]," he wrote.

The suit was brought by the Minnesota Trucking Association, the Minnesota Automobile Dealers Association, the Alliance of Automobile Manufacturers, the American Petroleum Institute and American Fuel & Petrochemical Manufacturers. They named as defendants the commissioners of the Minnesota departments of Agriculture, Commerce and Pollution Control, as well as the Commerce department director in charge of regulating fuel dispensing.

The National Biodiesel Board, the Minnesota Soybean Growers Association, the Minnesota Biodiesel Council and the Iowa Biodiesel Board were all "defendant-intervenors" in the case.

"The [Minnesota Trucking Association] is very disappointed in Chief Judge Tunheim's decision," said John Hausladen, president of the group, which has 690 members. The association is now reviewing the opinion and considering its next steps with the other plaintiffs in the suit.

Biodiesel is produced from soybean oil and industrial corn oil, as well as waste grease from the food industry.

Minnesota was the first state to pass a biofuel blending law, and other states have followed.

The business groups argued that the U.S. Renewable Fuel Standard — created by an act of Congress — doesn't allow the EPA to impose per-gallon biofuel blending obligations. Thus, the Minnesota biodiesel mandate thwarts that federal regulation, as well as a prohibition by the EPA on imposing geographic limitations on biofuel blending, industry groups contend.

But Tunheim wrote that those prohibitions apply only to the EPA. "If Congress intended to limit a state's ability to impose per-gallon mandates or geographical restrictions, it could have done so."

The trucking industry said the state's biodiesel mandate drives up fuel prices and forces companies to ignore truck engine warranties that specify using diesel with no more than 5 percent biofuel. From October through March, the state's biodiesel mandate falls to 5 percent to cut the risk of fuel thickening into jelly during cold weather.

The auto industry claims it loses sales because of the state's biodiesel mandate, while oil companies say it increases their distribution costs in Minnesota.

Mike Hughlett • 612-673-7003