fills up his truck with biodiesel

Clarence Treat of Shawneetown, Illinois, fills up his truck with biodiesel at the Southern FS facility in Marion. One of the most critical pieces of the fuel’s future is a bill extending tax credits.

As the biodiesel industry moves toward the “adolescent” phase already reached by its ethanol sibling, proponents are closely watching market and political moves that could impact its growth.

“We describe it as being in the toddler phase; ethanol is in its teenage years,” said Illinois farmer Jeff Lynn, recently elected to serve on the National Biodiesel Board. “You don’t hear as much about ethanol because it’s more mature. Biodiesel is still fairly young.”

One of the most critical pieces of the fuel’s future is a bill released in August in the U.S. House of Representatives that, among other things, would provide an extension of tax credits for biodiesel. It would put into place a $1-per-gallon subsidy for biodiesel producers that expired last year.

“Without that blender’s credit, biodiesel isn’t as competitive as we’d like for it to be with diesel,” Lynn said. “Without that, industry doesn’t want to invest money like they otherwise would. They’re not confident it’s going to happen until they see it.”

Pennsylvania-based Lake Erie Biofuels — doing business as Hero BX — is among companies moving ahead with expansion of biodiesel production. But having a long-term tax credit would make things much easier. The company will be opening two new biodiesel plants next year — in Clinton, Iowa, and a larger one in South Roxana, Illinois.

“The clarity that bill provides gives the market a lot of direction. It makes things a lot more stable,” said company President Chris Peterson. “It’s extremely difficult to attract outside capital to finance projects. Pretty much everything we’re doing is with operating cash flow.

“We do have banks that have been with us a long time. They understand the ups and downs of the market to attract new money in the industry. It’s very difficult when nobody knows what’s going to happen with that.”

Rob Shaffer, also newly elected to the biodiesel board, agreed that the blender’s credit is critical for taking biodiesel production to the next level. He compares the pending bill to the tariffs imposed on China that have depressed soybean prices.

“It’s like us with the tariff deal,” said Shaffer, who grows soybeans on his El Paso, Illinois, farm. “We don’t know what to do next year. It’s the same with biodiesel. They can’t build facilities or hire employees. That gives them some certainty. That is huge.”

Hero BX sees the South Roxana location as ideal for its expansion into biodiesel production, close to both raw materials and the market. The Madison County, Illinois, community sits about 25 miles northeast of St. Louis.

“We like its close proximity to feedstock and short distance to St. Louis,” Peterson said. “St. Louis is a large market for used cooking oil. It’s also a big demand for diesel fuel. We’ve got it on both sides —adequate supply and demand.”

At its peak, the plant will produce 20 million gallons of biodiesel annually. It is designed to convert various materials into the fuel. Though market variances will drive the source, Peterson estimates that about 20 to 25 percent will come from soybean oil.

“We’re building in multi-feedstock capacity,” he said. “We can run anything from virgin vegetable oils to used cooking oil to distillers corn oil out of the ethanol process, and also animal fats. It’s definitely going to add some value to bean oil — how much, I don’t know.”

Regardless of the feedstock source, farmers benefit in a growing biodiesel market, Lynn said, referring to the South Roxana plant.

“They’re building it so they can use any feedstock, depending on what’s competitive at the time,” he said. “As farmers, we’re OK with that, because it all comes from agriculture anyway — animal fat, grease, cooking oil.”

Shaffer agrees.

“I produce corn, soybeans and Angus cattle,” he said. “Not only do we make biodiesel from cooking oil, but also animal fat. I used to be under the impression it all ought to be made out of soybeans. But it all involves the soybean at some point in its life.”

Demand doesn’t appear to be a problem. Lynn runs B20 year-round at his Oakford farm, in Cass County. Early issues with the blend have largely been resolved. The BQ 9000 quality assurance standards, established through the biodiesel board, has helped erase concerns.

“Some farmers are skeptical because they’ve had problems with biodiesel in the past — some gelling issues,” he said. “But that was 10 years ago, and there weren’t any standards. That burned some farmers. When they got bad fuel, it turned them off biodiesel altogether. But we don’t have those problems anymore. The standards are there now.”

Nat Williams is Southern Illinois field editor, writing for Illinois Farmer Today, Iowa Farmer Today and Missouri Farmer Today.