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Back in May 2008 Gov. Tim Pawlenty signed a bill that is going to increase Min-nesota’s current 2 percent biodiesel mandate to 20 percent by 2015.
On May 1, 2009 the first step in meeting that incremental mandate was met when the state’s biodiesel went from a two percent to five percent blend.
According to the legislation, the previous two percent biodiesel mandate, increased to five percent as of May 1, is set to increase to 10 percent May 1, 2012 and to 20 percent May 1, 2015.
The biodiesel industry is poised to meet those new mandates.
“We will easily be able to meet the de-mands on the in-creased production for this step up to five percent,” said Chuck Neece of Farmers Un-ion Industries. “In 2012, that will increase to 10 percent biodiesel, which means there will need to be about 80 million gallons of bio-diesel to blend.
“Half of that, 40 million gallons, would have to come from in-state production.”
Between the bio-diesel plant in Brew-ster and the plant near Redwood Falls operated via Farmers Union Industries, state production is currently at 33-35 million gallons.
So, the need would only have to increase another five million gallons to ensure the de-mands for 2012, ex-plained Neece.
Current standards set forth in the legislation keep the biodiesel content at five percent year round, but when it increases to 10 percent in 2012, Neece said the warm months would be at 10 percent and the cold months would be at 5 percent due to blending capacity concerns.
The increases are not automatic, however. There is built-in flexibility, including an ap-proval process before moving to higher blends. This allows the legislature, biodiesel producers and other stakeholders to gauge supply and demand impacts before moving to the next stage.
“In fact, each year a letter has to go to the state, and there are a number of interested parties involved in putting the letter together,” Neece said. “Included in that (letter) is last year’s performance, economics, capacity and a number of other factors. It will tell the legislature whether or not the industry is ready for the next increase.”
Neece said even with soybeans currently running at more than $11 per bushel, the bio-diesel industry can hold its own on production.
“The price of soybeans does not dictate the price of soybean oil,” Neece said. “You need to look at what the protein side is worth, what’s the crushed margin.
“If soy oil stays reasonable and they get enough out of the protein side, then we’re stable. It is a balancing act between those two factions. The whole emphasis behind making soy oil in the first place was getting a better price for soy oil, because it was literally dragging the soy market down. There wasn’t enough money on the oil side.”
Even with the current economy in tough shape, Neece said he sees a turnaround for renewable fuels in the near future.
“I think our current energy prices are re-flective of the economy in general,” Neece said. “People aren’t driving as much, production is down, unemployment is up.
“When those things come back into balance, energy prices will come back up. Renew-able fuels will become much more important because people will start looking for thing to help with energy cost.”
Also included in the mandate legislation:
• A first-in-the-country palm oil ban. Virgin palm oil cannot be used to produce bio-diesel to meet the mandate, which helps assure Minnesota does not contribute to environmental destruction and rainforest clearing associated with palm oil production.
• A focus on Minne-sota and Midwest production. The increasing levels of biodiesel content can only go into effect if Minnesota is producing at least 50 percent of the mandated production level in-state from feedstocks produced in the U.S. and Canada, assuring this market share would benefit Minne-sota farmers and bio-diesel producers.
• An opening of the door for the next generation.
Five percent of the mandate needs to be met with biodiesel produced from alternative feedstocks (waste oil, algae, etc.), which helps to diversify bio-diesel production and shifts away from food and feed crops.
• An assessing of the costs and benefits.
Reports to the legislature are required annually on price and supply of biodiesel, as well as the impacts of the mandate on the Minnesota biodiesel in-dustry and the use of Minnesota crops and materials used for bio-diesel production.
Back in May 2008 Gov. Tim Pawlenty signed a bill that is going to increase Min-nesota’s current 2 percent biodiesel mandate to 20 percent by 2015.
On May 1, 2009 the first step in meeting that incremental mandate was met when the state’s biodiesel went from a two percent to five percent blend.
According to the legislation, the previous two percent biodiesel mandate, increased to five percent as of May 1, is set to increase to 10 percent May 1, 2012 and to 20 percent May 1, 2015.
The biodiesel industry is poised to meet those new mandates.
“We will easily be able to meet the de-mands on the in-creased production for this step up to five percent,” said Chuck Neece of Farmers Un-ion Industries. “In 2012, that will increase to 10 percent biodiesel, which means there will need to be about 80 million gallons of bio-diesel to blend.
“Half of that, 40 million gallons, would have to come from in-state production.”
Between the bio-diesel plant in Brew-ster and the plant near Redwood Falls operated via Farmers Union Industries, state production is currently at 33-35 million gallons.
So, the need would only have to increase another five million gallons to ensure the de-mands for 2012, ex-plained Neece.
Current standards set forth in the legislation keep the biodiesel content at five percent year round, but when it increases to 10 percent in 2012, Neece said the warm months would be at 10 percent and the cold months would be at 5 percent due to blending capacity concerns.
The increases are not automatic, however. There is built-in flexibility, including an ap-proval process before moving to higher blends. This allows the legislature, biodiesel producers and other stakeholders to gauge supply and demand impacts before moving to the next stage.
“In fact, each year a letter has to go to the state, and there are a number of interested parties involved in putting the letter together,” Neece said. “Included in that (letter) is last year’s performance, economics, capacity and a number of other factors. It will tell the legislature whether or not the industry is ready for the next increase.”
Neece said even with soybeans currently running at more than $11 per bushel, the bio-diesel industry can hold its own on production.
“The price of soybeans does not dictate the price of soybean oil,” Neece said. “You need to look at what the protein side is worth, what’s the crushed margin.
“If soy oil stays reasonable and they get enough out of the protein side, then we’re stable. It is a balancing act between those two factions. The whole emphasis behind making soy oil in the first place was getting a better price for soy oil, because it was literally dragging the soy market down. There wasn’t enough money on the oil side.”
Even with the current economy in tough shape, Neece said he sees a turnaround for renewable fuels in the near future.
“I think our current energy prices are re-flective of the economy in general,” Neece said. “People aren’t driving as much, production is down, unemployment is up.
“When those things come back into balance, energy prices will come back up. Renew-able fuels will become much more important because people will start looking for thing to help with energy cost.”
Also included in the mandate legislation:
• A first-in-the-country palm oil ban. Virgin palm oil cannot be used to produce bio-diesel to meet the mandate, which helps assure Minnesota does not contribute to environmental destruction and rainforest clearing associated with palm oil production.
• A focus on Minne-sota and Midwest production. The increasing levels of biodiesel content can only go into effect if Minnesota is producing at least 50 percent of the mandated production level in-state from feedstocks produced in the U.S. and Canada, assuring this market share would benefit Minne-sota farmers and bio-diesel producers.
• An opening of the door for the next generation.
Five percent of the mandate needs to be met with biodiesel produced from alternative feedstocks (waste oil, algae, etc.), which helps to diversify bio-diesel production and shifts away from food and feed crops.
• An assessing of the costs and benefits.
Reports to the legislature are required annually on price and supply of biodiesel, as well as the impacts of the mandate on the Minnesota biodiesel in-dustry and the use of Minnesota crops and materials used for bio-diesel production.
