Biodiesel promise

BY 2030, every heavy-duty truck in the United States could be fueled with a 20% (B20) biodiesel blend. Reaching that milestone will take a lot of work, but it can be done.

A number of factors make biodiesel a good fit as an alternative fuel for the trucking industry. The fuel is very similar to petroleum-based diesel and can be used without engine modifications. Biodiesel offers similar fuel economy, horsepower, and torque while providing superior lubricity.

The potential of biodiesel is getting plenty of notice. Most recent was the endorsement from the American Trucking Associations (ATA). During its annual Management Conference and Exhibition in October in Boston, Massachusetts, the trucking industry group adopted an energy resolution that seeks to increase the diesel fuel supply; improve the balance between environmental concerns and fuel efficiency; eliminate boutique diesel fuels; and promote use of biodiesel blends up to 5% (B5).

“ATA is proud to endorse the use of biodiesel blends of up to 5%,” says Rich Moskowitz, ATA regulatory affairs counsel. “It fits in with our mission of ensuring an adequate diesel fuel supply — something that is critical to the trucking industry.

“Biodiesel offers a viable means of extending the fuel supply, and the federal subsidies can make biodiesel blends competitive with petroleum-based #2 diesel. We're hopeful that the federal incentives will remain in place long enough for the biodiesel industry to get fully established.”

ATA's endorsement follows the landmark Energy Policy Act of 2005 that was signed into law on August 8 by President George W Bush. The act contains a number of provisions that should stimulate greater biodiesel use by the trucking industry.

Darryl Brinkman, chairman of the National Biodiesel Board, was there when the energy bill was signed by President Bush. “The future has never been brighter for biodiesel,” he said at the time. “Today is an important milestone for our industry, which worked hard to secure approval of an energy bill with the biodiesel tax incentive and other biodiesel provisions. Congress and President Bush recognized that biodiesel is an important part of the solution for America to reduce its dependence on foreign oil, and at the same time, boost the economy and benefit the environment.”

During a tour of Virginia BioDiesel plant in West Point, Virginia, earlier this year, President Bush said it is vitally important to develop fuels like biodiesel and ethanol as alternatives to petroleum-based diesel and gasoline. Currently, the United States imports 65% of its crude oil needs, and the country is growing more dependent on foreign oil every day.

“We need to do more with biodiesel,” President Bush said. “It burns more completely and produces less air pollution than gasoline or regular diesel. Biodiesel also reduces engine wear and produces almost no sulfur emissions, which makes it a good choice for cities and states working to meet strict air quality standards. And every time we use homegrown biodiesel, we support American farmers, not foreign oil producers.

“More Americans are realizing the benefits of biodiesel every year. In 1999, biodiesel producers sold about 500,000 gallons of fuel for the year. Last year, biodiesel sales totaled 30 million gallons. That's a sixty-fold increase in five years. More than 500 operators of major vehicle fleets now use biodiesel, including the Department of Defense and the National Park Service.

“In the past three years, more than 300 public fueling stations have started offering biodiesel. You're beginning to see a new industry evolve. We've got a lot of innovators in America, just like the folks here at Virginia BioDiesel.”

Biodiesel provisions

Provisions in the Energy Policy Act of 2005 that are directed at biodiesel include:

  • Extension of the Biodiesel Tax Credit — This tax incentive, established originally as part of the American JOBS Creation Act of 2004, would have expired in 2006. The tax credit is now extended through December 31, 2008. It amounts to a penny per percentage point of agri-biodiesel (such as soybean oil) blended with petroleum-based diesel, and a half penny for biodiesel from other sources. The credit is taken at the blender level, and the intended effect is to lower the cost of biodiesel to consumers in taxable and tax-exempt markets.

  • Renewable fuel standard (RFS) — The biofuels package in the act establishes a renewable fuel content requirement. It calls for 7.5-billion gallons in renewable fuels by 2012. While the primary focus is on ethanol (production of which should double), biodiesel will be a part of the renewable fuels mix.

  • Credit for installation of alternative fuel refueling infrastructure — This provision lets taxpayers claim a 30% credit for the cost of installing clean-fuel vehicle refueling systems. As the rules are currently written, facilities must handle biodiesel of at least 20% (B20) to qualify.

  • Small agri-biodiesel producer tax credit — Agri-diesel producers can qualify for a 10-cent per gallon tax credit. The credit is applicable for up to 15 million gallons of agri-biodiesel produced and is limited to producers with annual production capacities under 60 million gallons.

SAFETY-LU, the highway funding legislation that was completed in mid-year, contained a biodiesel engine testing provision. This initiative dedicates $5 million a year (FY 2006-2010) to continue a collaborative research project testing biodiesel in advanced diesel engine and fuel system technologies for use in light, medium, and heavy-duty vehicles, as well as off-road equipment.

States are doing their bit to encourage biodiesel use. Minnesota has gone the furthest, mandating a 2% (B2) biodiesel blend for all diesel fuel sold in the state. The requirement took effect in September. Minnesota reportedly leads the nation with annual biodiesel production of 63 million gallons.

“An economic study completed by the Minnesota Department of Agriculture estimates that using just B2 blends will increase demand for soybean oil in Minnesota by 92 million pounds — that's the equivalent of 8.5 million bushels of soybeans,” says Bob Worth, president of the Minnesota Soybean Growers Association. “However, we already have school bus fleets, trucking firms, and municipal fleets using B20 (20% blend).”

Although the Minnesota mandate stands out as one of the most far-reaching state initiatives, several other states also have passed significant legislation to promote biodiesel supply and demand. Arkansas established a fund granting up to 10 cents a gallon to biodiesel producers. Hawaii lowered the state excise tax for biodiesel blends.

Illinois enacted a partial state sales tax exemption for biodiesel blends from B1-B10 and a full exemption for B10-B100, which runs through 2013. Indiana is providing sales tax credits for biodiesel producers, blenders, and retailers.

Qualified biodiesel producers in Missouri are eligible for a monthly grant of 30 cents a gallon for the first 15 million gallons produced annually, and they can receive 10 cents a gallon for up to 15 million gallons in additional annual capacity. Texas provides a production incentive grant of a net 16.8 cents per gallon for 18 million gallons per plant per year. The biodiesel portion of biodiesel blends also is exempt from the Texas excise tax.

Pennsylvania developed an alternative fuels incentive fund to provide grants to schools, municipalities, political subdivisions, and non-profit groups to cover the incremental purchase costs of B100 and B20 biodiesel, fueling infrastructure, and vehicle retrofitting. The state also reimburses qualified renewable fuels producers up to five cents a gallon.

Even country music star Willie Nelson got into the act of promoting biodiesel use. He and three business partners have established a company called Willie Nelson Biodiesel to market the fuel nationwide. Truck stops are among the retailers that have been targeted by the company.

Trucking interest

With all of the publicity and government incentives, many trucking companies are taking a serious look at biodiesel. For instance, Superior Bulk Logistics recently began a test with B5 biodiesel at three locations serving its Superior Carriers and Carry Transit operations.

“Among other things, we want to see how the fuel performs during cold weather,” says William J O'Donell, president and chief operating officer of Superior Carriers. “We're going to use the fuel at the Superior Carriers terminal in Markham, Illinois, and the Carry Transit terminal in Bridgeview, Illinois. We'll also have B5 biodiesel at our Lakeland, Florida, terminal that serves both fleets.

“We're still learning about biodiesel at this point, and we still have a lot of questions. Will we have problems with gaskets and seals? Will our filters plug (from cold weather problems or microbial growth)? Will we see a loss of horsepower or fuel economy?

Superior Bulk Logistics executives aren't alone in their questions and concerns. Other trucking companies are asking many of the same questions. Topping the list of concerns are the following: Price differential, performance fears, quality and uniformity, and availability.

Price may be the easiest issue to address, and it is one that is improving steadily. As petroleum-based diesel prices soared above $3 a gallon in October, B20 biodiesel was retailing for $2.90 a gallon in locations such as Denver, Colorado.

“In the past, B20 blends were priced at 20 to 30 cents more than petroleum-based diesel,” says Steve Howell, technical director for the National Biodiesel Board. “With crude oil prices climbing and the tax incentives now in place, biodiesel is selling for less than petroleum-based diesel in some parts of the country. Biodiesel costs should continue to fall as larger plants are built and production volumes increase.”

Turning to performance issues, Howell explains that biodiesel has some very attractive attributes for heavy-duty truck engines. First and foremost, biodiesel is a renewable fuel source that is very similar to petroleum-based distillate and can be used in any diesel engine in pure form or blended with petroleum diesel. No engine or fuel system modifications are needed.

The raw oil for the fuel comes from a variety of sources — soybean, corn, canola, cottonseed, sunflower, animal fats, turkey byproducts, and used cooking oils. Other components in the production process include alcohol (methanol or ethanol) and a catalyst (sodium hydroxide or potassium hydroxide). About 90% of the biodiesel on the US market today comes from soybeans.

Biodiesel significantly reduces most regulated emissions and is nontoxic and biodegradable. It has a cetane rating of 50 or better and the highest energy balance of any transportation fuel. A Department of Energy and Department of Agriculture study done in 1998 showed that for every unit of fossil energy put into producing biodiesel, 3.2 units are gained.

Lubricity benefit

High lubricity is another big plus for biodiesel, a factor that could drive demand when ultra low sulfur diesel (ULSD) begins to reach the US market in large quantities in the second half of 2006. Removing most of the sulfur from ULSD leaves the fuel with virtually no lubricating capacity. A B2 biodiesel blend is a cost-effective means of restoring the lubricity.

In addition, most biodiesel is very low in sulfur, which means it should not adversely affect the sulfur level in ULSD. Most biodiesel contains less than two parts per million sulfur. However, higher sulfur levels (up to 50 ppm) have been found in biodiesel made from waste oils used to cook foods such as onion rings.

Some of the biggest biodiesel performance concerns are focused on the risk of component damage, cold weather characteristics, and the potential for microbial growth. While these issues can pose some problems, most of the concerns are grossly overstated.

Field tests have shown that high percentages of biodiesel (especially B100) can adversely affect some elastomers, such as natural and nitrile rubbers. Blends above 20% have a solvent effect that can plug filters with sediment from the fuel system. Filters may have to be replaced frequently until the system is fully purged.

Cold weather can be a problem with higher percentage blends. Gelling begins at higher temperatures in biodiesel that it does in petroleum-based diesel. However, the National Biodiesel Board says fleets shouldn't see any problem with blends of 20% or less.

All distillate fuel degrades over time, and biodiesel is no different. The National Biodiesel Board has suggested a shelf-life rule of six months for biodiesel. In addition, fleets, storage terminal operators, and retailers need a good water management program. Water promotes microbial growth that can lead to all sorts of problems for the fuel and engine.

Biodiesel standards

Lack of quality standards for biodiesel tempered support from engine manufacturers and some potential users. There were too many instances in the past where biodiesel quality and performance varied significantly from one processor to another.

“Lack of a standard was the big reason that heavy-duty diesel engine manufacturers are unwilling to endorse any biodiesel blend over 5%,” says David McKenna, product marketing manager for Mack engines, transmissions, and axles. “We have tested biodiesel up to B20 without any real problem. Biodiesel performs just like petroleum-based diesel, and the fuel mileage is equivalent.

“Going forward, biodiesel use is the intelligent thing to do. We've got the soybeans here in the United States. Let's just get the fuel to the point that it's competitive without the tax incentives.”

Non-uniformity of biodiesel is quickly becoming a thing of the past, though. Several quality standards are now in place, including ASTM D 6751 and BQ-9000.

A quality assurance standard, BQ-9000 is intended to help ensure that biodiesel is produced to and maintained at the industry standard — ASTM D 6751. The objective is to provide a mechanism to track biodiesel in the distribution system, identify product that meets industry standards, and supply a means to reduce the chances of non-spec fuel reaching the marketplace.

However, it's important to keep in mind that fuel issues generally aren't covered by any engine manufacturer's warranty. It doesn't matter whether a fleet runs B2, B5, B20, or some other percentage of biodiesel. It also makes no real difference whether the biodiesel was produced to an industry-wide standard. The truck owner probably will have to cover engine damage caused by fuel problems.

Biodiesel availability

With the adoption of the standards, most of the biodiesel issues are being addressed. Availability is the exception and cannot be fixed overnight. Biodiesel supplies are well below potential demand; product is concentrated in the Midwest; and distribution is still very rudimentary.

“There is no way the biodiesel industry can handle a huge demand from the trucking industry right now,” Howell says. “Current installed production capacity is around 280 million gallons, and new capacity of 480 million gallons is under construction. In contrast, the United States uses more than 60 billion gallons of distillate fuels every year, with half of that going into on-road applications. Biodiesel is where ethanol was 20 years ago.”

New biodiesel plants in the works include one being built by the owners of Grammer Industries Inc, a Grammer, Indiana-based tank truck carrier. Operating as Integrity Biofuels, the plant in Morristown, Indiana, should be operational by March 2006. The plant is near the Bunge North America facility, one of eight soybean-processing plants in the state.

“We're using some of the latest biodiesel processing technology in this plant,” says Charles “Shorty” Whittington, Grammer Industries president. “We're starting with production capacity of 10 million gallons a year, but we employed a modular arrangement that will enable us to quickly expand the plant to 30 millions gallons a year as demand grows.”

Archer Daniels Midland Company (ADM) is building its first wholly-owned biodiesel plant. Located in Velva, North Dakota, the facility will use canola oil as its primary feedstock. Earth Biofuels Inc recently completed a new plant in Durant, Oklahoma.

Out on the West Coast, American Biofuels announced it was expanding its plant in Bakersfield, California, to 10 million gallons a year. That expansion will be completed by the end of this year. Plans are already being developed to boost annual plant capacity to 35 million gallons, and the project should start next year.

Midwest concentration

Most of the existing, and many of the new, US biodiesel plants are in the Midwest, which isn't surprising since that is the primary growing area for the soybeans that serve as the main feedstock for agri-diesel. The Midwest also is where most of the biodiesel distribution capacity is concentrated.

Biodiesel is available at more than 450 retail locations, but that is just a drop in the bucket compared with the total number of service stations, convenience stores, and truck stops that are spread across the United States. In fact, some states have as few as three retail locations with biodiesel.

There are actually more distribution locations — 1400 — than there are retail outlets. Included among the distributors are a growing number of petroleum marketers who have seen the potential offered by biodiesel.

Among the marketers that have climbed on the biodiesel bandwagon is ADA Resources in Houston, Texas. The company has been selling biodiesel to mining companies, marine operations, and truck fleets for a couple of years. Product initially came from a Houston-area chemical plant, but customer demand has grown to the point that ADA Resources had to bring in additional biodiesel from a supplier in Minnesota. The marketer now receives four railcars of B100 a month from the Minnesota supplier, which the marketer blends with petroleum-based diesel to make either B5 or B20.

Truck fleets with longhaul over-the-road operations will find it especially challenging to make a total shift to biodiesel fuel. The infrastructure is simply inadequate, especially for tractor-trailer rigs running coast-to-coast.

Distribution expansion

Expanding distribution will take time, and it will be expensive. Shipping biodiesel from the processing plants to other parts of the country will continue to be handled primarily by tank truck and rail tankcar. Barges may also be a factor in the future.

For a number of reasons, biodiesel won't be shipped by pipeline, the lowest cost means of transporting refined fuels. “Some pipeline companies are worried about the solvent effects of B100 and have said they won't handle it,” Howell says. “The main reason that pipelines are not an option is that biodiesel volumes are simply too low right now. If the volumes were higher, we see no reason why the pipelines couldn't handle lower percentage biodiesel shipments. European pipelines have had no problem handing B5.”

Biodiesel terminals are still in the early stage of development, but progress is being made. For instance, NewGen Technologies Inc announced in early October that it is purchasing three terminals in the southeastern United States and plans to dedicate its facilities to alternative fuels, including biodiesel and ethanol. The terminals have a total storage capacity of 10-million gallons with annual throughput capacity of more than 350 million gallons.

Even with the production and distribution challenges, biodiesel is earning its position as a viable alternative to petroleum-based distillates. It's a homegrown product that will help reduce US reliance on expensive imported oil.

For tank truck carriers, biodiesel is more than an alternative fuel. It's a business opportunity. Tank fleets will transport not just the finished biodiesel, but the ingredients (such as vegetable oil and methanol) that go into making the product. It's a win-win arrangement.

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