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WisBiz In-Depth: State Lagging in Biodiesel Production

By Gregg Hoffmann

With gas prices continuing to rise over the summer, interest has grown in biodiesel fuel as an alternative.

Yet, it’s not easy to find it in many areas of Wisconsin, and the state lags behind Iowa and Minnesota in the production and distribution of the fuel.

“Things are growing now in Wisconsin, but it still is in the very early stages,” said Kai Curry, president of the Twin Cities Biodiesel Co-op, which does business in western and central Wisconsin.

The National Biodiesel Board lists only one production plant in Wisconsin, operated by Renewable Alternatives in Green Bay, which produces biodiesel from soybeans. According to the Board and the state's Department of Administration, only a handful of retailers can be found.

Curry’s co-op sells primarily to other co-ops, businesses and individuals in increments of five gallons, 55 gallon drums or when possible by filling bulk tanks. Demand in Wisconsin has been high for Twin Cities’ product because of a lack of production in the state.

Biodiesel is a growing industry nationwide. In 1999, 500,000 gallons of the fuel were sold across the nation. In 2003, that number grew to over 25 million gallons.

The fuel is produced from domestic, renewable resources. Biodiesel contains no petroleum, but it can be blended at any level with petroleum diesel to create a biodiesel blend.

Biodiesel is made through a chemical process called transesterification, where glycerin is separated from fat or vegetable oil. The process leaves behind two products -- methyl esters -- the chemical name for biodiesel -- and glycerin, a valuable byproduct usually sold to be used in soaps and other products.

In addition to using vegetable fat from restaurants and other sources, the fuel can be made from soybeans and rape seeds, also used in the making of canola oil.

Fuel-grade biodiesel must be produced to strict industry specifications in order to insure proper performance. According to the National Biodiesel Board, biodiesel is the only alternative fuel to have fully completed the health effects testing requirements of the 1990 Clean Air Act Amendments. Biodiesel that meets the standards and is legally registered with the Environmental Protection Agency is a legal motor fuel for sale and distribution.

It can be used in compression-ignition (diesel) engines with little or no modifications. Biodiesel is biodegradable, non-toxic, and essentially free of sulfur and aromatics.

Why hasn’t it taken off?

So, if all of this is true, why hasn’t biodiesel fuel taken off? First, you do have to operate a diesel vehicle to use the fuel.

Second, making it cost effective has been a challenge. But, recent federal tax incentives for distributors of biodiesel have helped with that factor.

“Last year, we were selling it at $3.75 per gallon. This year, we have gotten the price to $2.75, which is competitive with regular gas in a lot of markets,” Curry said. Biodiesel has sold in the Green Bay area for $2.45 per gallon.

The demand for biodiesel also has not been as much a problem in recent months as the capacity to produce enough of it. “We can’t keep up with the demand right now,” Curry said. “There just isn’t enough of it around.”

West Central Cooperative in Ralston, Iowa, is the largest producer of biodiesel in the Upper Midwest. Curry said two plants in Albert Lea and Brewster in Minnesota will soon be online and be larger than the West Central plant.

Biodiesel production plants are located across the U.S., in Europe and Australia. But, there is only the one officially listed plant in Wisconsin.

Several sources for this story said they had heard of possible startup plants in Madison and elsewhere.

William Cote, an aircraft inspector for United Airlines, has started Biodiesel Racine. “My original hope had been to produce and sell biodiesel at one of the exchanges along I-94,” Cote said. “You’re looking at millions of dollars for that though, so now I’m looking at buildings in Sturtevant and Racine, and considering more on establishing myself through selling to trucking companies and businesses that know what they use every month.”

You can buy biodiesel in the state. BiodieselNow.com, perhaps the leading voice of the industry, lists Cenex co-ops in Cottage Grove and West Salem, Progressive Farmers Co-op in DePere and Rote Oil in Lake Geneva as outlets for the fuel.

Co-ops in Arlington, Jefferson and Kansasville also sell biodiesel, but do not have pumps, according to the site.

Political Interest

Biodiesel also has drawn the interest of politicians. The governor's special task force on alternative energies included biodiesel among its renewable fuels.

Republicans Rep. Al Ott of Forest Junction and Sen. Rob Cowles from Green Bay introduced a measure earlier this year that is aimed at assuring consumers of the integrity of the product when they purchase biodiesel fuels. Their bill has passed the Rural Affairs and Renewable Energy Committee in the Assembly, but has not yet been voted on by the full Legislature.

"This bill is about making sure Wisconsin consumers know exactly what they are purchasing when they choose to buy biodiesel fuels," Ott said. "As we see increases in the use of this type of fuel, creating a standard definition is an important step to take."

The proposal creates definitions of the terms 'biodiesel' and 'biodiesel blend' when they are used for labeling and advertising purposes. Under the bill, if fuel is labeled or advertised as biodiesel, that fuel must be 100-percent biodiesel. When it’s called biodiesel blend, it must contain at least 2 percent biodiesel.

This summer the state Legislature passed and the governor signed a bill proposed by state Sen. Joe Leibham of Sheboygan that could increase the use of biodiesel fuel in Wisconsin. Leibham says his measure would create an incentive for local school districts to use cleaner-burning biodiesel fuel in their school buses at virtually no expense to the district.

Specifically, the bill directs the state Department of Public Instruction to apply for a Clean School Bus USA Grant, a program administered and funded by the Environmental Protection Agency. This grant program would be available to all school districts in Wisconsin and would allow a participating district to recover any increased costs associated with introducing and using biodiesel as a supplement or replacement for petroleum diesel fuel. The bill was signed into law by Gov. Jim Doyle last week.

The Clean School Bus USA Grant Program awarded $5 million in grants nationwide in 2004. The United State Congress has increased that allocation to $7.5 million for fiscal year 2005.

The University of Wisconsin and several governmental bodies around the state have been using biodiesel fuel in their vehicles. In 2003, the Wisconsin Alternative Fuels Task Force and the UW-Milwaukee Center for Alternative Fuels hosted a conference on biodiesel fuel.

A message board on BiodieselNow.com was loaded with Wisconsin people looking to buy biodiesel fuel. Users of the message board exchange information on where the fuel can be found and how their cars have performed on it.

“The demand is there,” Curry said. “It will continue to grow as gas prices remain high. We need to work on the supply side.”

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