A plant's revival signals better times for biodiesel

The impending revival of a biodiesel plant near Albert Lea is a sign that the industry is perking up after about three years of grim tidings.

Last week, Ames, Iowa-based Renewable Energy Group announced that it had bought the assets of the SoyMor plant for an undisclosed price and expected to soon reopen it. SoyMor has been closed since 2008, a victim of high prices for soybean oil, its major input.

Since then, the biodiesel industry has been hit by more waves of woe, the biggest coming in 2010 after Congress nixed its annual federal tax credit. But the $1-per-gallon credit is back this year, new federal mandates for biodiesel use are in place and oil prices are relatively high, making biofuels more competitive.

"It's a good sign for the industry," Ben Evans of the National Biodiesel Board said of the SoyMor deal. "What we are seeing all across the country is that plants that are at half speed are ramping up production, and plants that have been shut down are being bought and dusted off."

The biodiesel board expects production of 800 million gallons nationally this year, topping the previous record of 700 million gallons in 2008, and a big improvement over the past two years. In 2009, production fell to 500 million gallons and slid to only 315 million gallons last year.

A key to this year's resurgence is the launch of biodiesel mandates promulgated by the U.S. Environmental Protection Agency. This year, 800 million gallons of biodiesel are required to be used, a number expected to rise to 1.2 billion by 2012.

In the U.S. renewable fuels arena, biodiesel is dwarfed by the corn-reliant ethanol industry, which pumped out 13 billion gallons of product last year. Like ethanol, biodiesel is meant to help wean the nation off fossil fuels, yet has also been controversial for the government subsidies it receives.

When SoyMor went down, it took out almost half of the state's biodiesel capacity. Both it and Minnesota Soybeans Processors, which has soldiered on, have 30 million gallon capacities.

"We knew [SoyMor] was a state-of-the-art facility, and we hoped someone would buy it and reopen -- and that's what happened," said Jim Willers, a soybean grower and chairman of the Minnesota Biodiesel Council.

Renewable Energy Group, the nation's largest biodiesel producer by capacity, is familiar with SoyMor. It built the plant and managed it for SoyMor. The company declined to make executives available to discuss its plans.

Renewable Energy, which has at least five operating plants, has lost money on an operating basis in each of the past four years, according to federal securities filings. Still, it has been growing its footprint, last year buying and reopening a 60 million-gallon plant in Illinois that had been closed in 2009.

In the wake of such shutdowns, the biodiesel industry has been undergoing a consolidation, said Jerry Fruin, an economics professor in the University of Minnesota's College of Food, Agricultural and Natural Resource Sciences.