Higher blend of biodiesel -- 10% -- coming to Minnesota's pumps

In a boost for the biofuels industry, Minnesota on Tuesday becomes the first state in the nation to mandate a 10 percent minimum blend of biodiesel in diesel fuel sold at the pump.

While only 2.7 percent of Minnesota's vehicles operate on diesel fuel, the mandate is still a major gain for the biofuels industry.

Sales of biodiesel, refined from soybean and other oils, are expected to jump in Minnesota from 40 million to 60 million gallons per year. That's near the total capacity of the state's three biodiesel production plants.

"It keeps us at the forefront," said Steven Rupp, vice president of Ever Cat Fuels of Isanti, referring to Minnesota's position as the first state to impose a biodiesel blending mandate in 2005.

Sixteen other states now have mandates or tax incentives to blend biodiesel with petroleum-based diesel, according to the National Biodiesel Board, a trade group. Illinois offers a tax break to blend biodiesel at 10 percent or more, but only Minnesota mandates that high of a blend.

About 128,000 diesel vehicles operate in Minnesota. Since 2009, the state has required 5 percent biodiesel at the pump. The mandate for 10 percent, or B-10, was enacted by the Legislature in 2008 but delayed until now so fuel-blending capacity could catch up. Under the law, the biodiesel blend eventually will reach 20 percent.

The mandate has been resisted by some automakers and car owners.

"Biodiesel wants to degrade. The fuel can degrade in the tank, and it can also degrade in the engine oil," said Bill Woebkenberg, senior engineer for fuels policy in the United States for Mercedes-Benz.

Sen. Melisa Franzen, DFL-Edina, owner of a diesel vehicle, led an unsuccessful effort during the legislative session to delay the mandate, citing concerns about D-10's effects on older vehicles.

Biodiesel industry officials counter that the fuel has been used by buses and government fleets at 20 percent mixtures for years without problems. Fuel sold at the pump is required to meet standards set by a technical body that includes officials from the fuels and the auto industry.

"Meeting the specifications is absolutely key, and Minnesota fuel producers, blenders, and fuel regulators have put into place programs that help to ensure the biodiesel being used meets the … specifications," Steve Howell, technical adviser to the National Biodiesel Board, said in an e-mail.

To address concerns that biodiesel can thicken into jelly in cold weather — a problem experts say can happen with all No. 2 diesel fuel — Minnesota will drop to a 5 percent blend from October through March.

The higher blend should lower the price at the pump because biodiesel has been selling for less than petroleum-based diesel, Poster said At the same time, he said, biodiesel has boosted prices for soybean producers by more than 70 cents per bushel while reducing pollution and greenhouse gases.

Not everyone sees biodiesel as a good deal. Kyle Kottke, general manager of Kottke Trucking, based in Buffalo Lake, said he tells drivers of the company's 85 trucks to fill up with petroleum-based diesel sold in neighboring states. He said B-5 sold in Minnesota tends to be 4 cents to 5 cents per gallon more expensive. With B-10, said Kottke, "I fear it will get worse."

Minnesota's mandate comes at a time when the biofuels industry has struggled for continued support in Washington. A federal biodiesel tax credit expired last year, and the U.S. Environmental Protection Agency is reassessing the targets for all biofuels under the federal renewable fuel standard.

Soybeans are the state's No. 2 commodity behind corn. The beans typically are crushed to produce oil and a high-protein meal for animal feed. But the oil, mostly sold as a hydrogenated product, lost market share in the early 2000s as food makers and consumers turned away from trans fats, said Mike Youngerberg, senior director of field services for the Minnesota Soybean Growers Association.

Over the past decade, helped by an on-again, off-again $1-per-gallon blender tax credit, the nation's biodiesel industry has grown to 175 processing plants. In 2013, they produced a record 1.8 billion gallons of diesel fuel, the diesel board said.

Biodiesel plants increasingly are making biodiesel from other oils including nonfood, byproduct corn oil from ethanol plants. Renewable Energy Group's plant in Glenville, Minn., and Ever Cat Fuels in Isanti both can process corn oil. Ever Cat also processes waste vegetable oil into biodiesel.

Poster said he hopes the mandate will spur development of additional biodiesel plants in Minnesota. In 2012, he said, biodiesel's boost to soybean prices added $219 million to the state's rural economy.

"That is why we are pro-biodiesel," he said. "It is good for the air, but it is also good for farmers."

David Shaffer • 612-673-7090 Twitter: @ShafferStrib