Biodiesel revisited Proximity to markets may limit state's biodiesel growth

By Dan Lemke

Marshall, Minn. — The new kid on the block has grown up quickly.

While ethanol has been on the Minnesota landscape for more than two decades, biodiesel is a relative newcomer, only being produced commercially in the state for a little more than a year.
 

A biodiesel-industry review, sponsored by AURI and the Minnesota Soybean Research and Promotion Council, shows in that short period of time, the biodiesel landscape has changed dramatically.

History lesson
Only five years ago, fewer than 10 biodiesel plants operated in the United States. In 1999, total U.S. biodiesel production was only about 500,000 gallons. By 2004, several new plants came online and the nation’s biodiesel production reached 25 million gallons.

Minnesota got into the act in 2005, adding 63 million gallons to the nation’s total production capacity. By the end of 2005, U.S. production tripled to about 75 million gallons.

Final 2006 production numbers are expected to be 200 million gallons — a significant increase
but far short of regular diesel’s 50 to 60 billion gallons annual consumption.

Growing nationally
The National Biodiesel Board estimates there are 65 new plant constructions and 13 expansions underway, which could bring the nation’s biodiesel capacity to nearly 2 billion gallons.

“There is a lot of biodiesel capacity in place, a lot under construction and a lot more planned,” says Max Norris, AURI’s biodiesel expert. “Folks are building right now to meet a demand that they hope will be there.”
 

Minnesota consumes about 800 to 900 million gallons of diesel fuel per year. The state now requires that every gallon contain 2-percent biodiesel — a built-in market of 16 to 18 million gallons. Minnesota’s remaining biodiesel is burned in higher biodiesel blends such as B20 or shipped to other markets. Chicago, for example, uses more than half of the nation’s biodiesel.
 

Manufacturers having to transport great distances are at a disadvantage.

Minnesota is not close to major markets where growth is occurring and that may limit production.

Pressure on soybean oil supplies is also challenging the biodiesel industry. Of the 10.18 million tons of soy oil produced in the U.S. last year, nearly 9 million tons was consumed domestically, primarily for food. Only 6 percent was used for biodiesel. But as the nation’s biodiesel industry grows, it could compete with the food industry for soy oil.

“We have to look at any or all oils and greases,” Norris adds. “We can only produce so much biodiesel.”

For a copy of the biodiesel report, go to www.auri.org or contact AURI at (507) 537-7440.