Mandated boost in biodiesel blending not in state's cards yet

Minnesota won't implement a state law next spring mandating a 10 percent blend of biodiesel in most diesel fuel sold in the state, a state official said Friday.

The state currently mandates that diesel fuel sold at the pump contain a 5 percent blend of biodiesel, which is refined from soybeans, waste oils, industrial corn oil and animal fats.

Under state law, the mandated biodiesel blend was supposed to increase to 10 percent, or B10, during warmer months beginning in 2012.

But Minnesota's commissioners of agriculture, commerce and pollution control, which must certify that the state is ready to implement B10, decided this week that it wasn't, said Greta Gauthier, government relations director for the state Agriculture Department.

"They are going to stay with the current status," Gauthier told the Star Tribune. "They felt there was still some outstanding questions and a great deal of uncertainty at the federal level."

Gauthier said one question is whether southwest Minnesota had adequate capacity to blend enough biodiesel into the fuel supply. A new blending facility that opened in Sioux Falls, S.D., this week may solve that problem, but the commissioners decided to wait and see.

The biodiesel industry, which has three production plants in Minnesota, has relied on a $1 per gallon federal tax credit to blenders. The credit expired this year, and its renewal is complicated by the "fiscal cliff" that could trigger across-the-board budget cuts Jan. 1.

Scott Hedderich, director of corporate affairs for biodiesel producer Renewable Energy Group, said the Minnesota decision was not a surprise.

"The commissioners hedged their bets until Washington sorts out the budget," he said.

The biodiesel company based in Ames, Iowa, operates seven biodiesel refineries, including one in Glenville, Minn., that is undergoing a $20 million upgrade to produce biodiesel from a wider variety of oils and fats.

Minnesota has two other biodiesel plants: Ever Cat Fuels in Isanti and Minnesota Soybean Processors in Brewster.

Bruce Goodrich, CEO of trucking company R & E Enterprises of Mankato, said he was pleased with the delay. The trucking industry is a major user of diesel fuel and is likely to be the most affected by the law.