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Published June 30, 2014, 09:15 AM

Soybean growers welcome higher biodiesel blend, but there are critics

Spring was wet and difficult, and many of Bill and Karolyn Zurn’s late-planted soybeans are still small and scant in the soggy soil. The Callaway, Minn., farm couple won’t harvest a good crop this fall unless the rest of the growing season cooperates.

By: Jonathan Knutson, Agweek

CALLAWAY, Minn. — Spring was wet and difficult, and many of Bill and Karolyn Zurn’s late-planted soybeans are still small and scant in the soggy soil. The Callaway, Minn., farm couple won’t harvest a good crop this fall unless the rest of the growing season cooperates.

But even if their crop doesn’t turn out well, the Zurns have reason to remember 2014 fondly. A new state biodiesel mandate, which the Zurns and other soybean growers pushed hard to win, will boost demand for soybean oil by 50 percent.

“We (Minnesota soybean growers) feel biodiesel is very good for farmers, it’s renewable, and it’s good for the Minnesota businesses that produce it,” Bill Zurn says.

On July 1, Minnesota — the nation’s third-leading producer of soybeans — begins the B10 mandate. The edict requires most diesel fuel sold in the state to contain 10 percent biodiesel in warm-weather months.

It’s the highest such mandate in the country.

To supporters, including soybean growers and the American Lung Association of Minnesota, the biodiesel mandate helps the state’s economy and environment.

Growers say the mandate creates another market for soybean oil, bolstering soybean prices and helping the rural economy.

The American Lung Association says the state’s expiring B5 (5 percent biodiesel) mandate reduces emissions equal to removing about 35,000 vehicles from the road and removes an estimated 644 pounds of carbon dioxide annually. Going to B10 will remove even more, the association says.

To critics, including the Minnesota Trucking Association, the mandate is badly flawed.

“It’s blatantly unfair and costly to the trucking industry,” says John Hausladen, the group’s president and CEO.

B10’s reliability is suspect, especially in cold weather, he says.

Meeting the demand

Biodiesel blends with petroleum diesel can range from 2 percent (B2) to pure biodiesel (B100). Illinois, which led the nation in soybean production in 2013, offers a tax credit for using B11.

The B10 requirement reverts temporarily back to B5 after Sept. 30. Next year, and in subsequent years, B10 will be available for sale from April 1 to Sept. 31, with B5 in force the rest of the year.

About 40 million gallons of biodiesel, most of it made from Minnesota soybeans, are used annually with B5. Another 20 million gallons, also made primarily from Minnesota soybeans, will be used each year under B10, the soybean industry says.

Meeting the additional demand isn’t expected to be a problem. The state produces about 63 million gallons of biodiesel annually, with plants operating in Isanti, Brewster and Albert Lea, according to the Minnesota Department of Agriculture.

The biodiesel industry supports more than 5,000 jobs in the state and has annual production of $928 million, the ag department says.

Other uses

Soybeans, sometimes known as “the miracle crop,” have many uses, including human consumption. Most are processed for their oil, with the meal fed to livestock. A 60-pound bushel of soybeans produces 11 pounds of oil and 47 pounds of meal.

Finding new uses for soy oil, and expanding existing uses of it, is particularly important because of the transfat issue, says Mike Youngerberg, senior director of field services for the Minnesota Soybean Growers association.

The use of transfat in processed food, which has concerned public health advocates for years, could be banned by the U.S. Food and Drug Administration.

If so, demand for soybean oil that contains transfat would plummet, costing the U.S. soybean industry a 2-billion-pound-per-year share of the edible oil market.

Already, the transfat issue has caused U.S. soybean growers to lose a 4-billion-pound annual share of the edible oil market since 2007, according to the U.S. soybean industry.

Biodiesel provides an important alternative use for soy oil, Youngerberg says.

Biodiesel also is attractive because of its environmental benefits and because it diversifies the state’s fuel pool, he says.

About 10 percent of the soybean oil produced from Minnesota soybeans is used in biodiesel, Youngerberg estimates.

About half of Minnesota-raised soybeans are sent outside the state, with the rest used in state, he says.

Bill Zurn says it’s difficult to overstate how much biodiesel has boosted soy oil prices.

“If it hadn’t been for biodiesel, the price of soy oil would really have been in the tank,” he says.

It’s possible that soybean growers eventually could raise bean varieties with higher oil content, in part because of increased biodiesel use.

But higher oil content inevitably would cut into bean protein content, a major drawback, Youngerberg says.

“We’ll just have to see about that (higher oil content.) It will depend on where’s the best value,” he says.

Poster child’ for biodiesel

The controversy over a biodiesel mandate isn’t new. Minnesota soybean growers have battled for years to win state residents’, businesses’ and politicians’ support of biodiesel and the mandate. The Zurns, who grow primarily soybeans and corn, have been on the front line of the fight.

Bill is a past president of the Minnesota Soybean Growers Association and the current chairman of the Minnesota Soybean Research and Promotion Council’s new uses committee.

Karolyn represents Becker and Mahnomen counties on the Minnesota Soybean Growers Association’s board of directors.

The association handles legislative work for more than 4,000 soybean farmer-members.

The council oversees the investment of soybean checkoff dollars. The federally mandated checkoff program requires soybean producers to pay a fee on the soybeans they sell, with the proceeds used to promote, educate and develop market opportunities for soybeans.

In 2002, Minnesota approved the nation’s first biodiesel mandate. That edict required nearly all diesel fuel sold in the state to contain at least 2 percent biodiesel by 2005, provided certain conditions were met. The stipulations included making sure Minnesota had sufficient in-state biodiesel production.

Persuading Minnesota companies to produce enough in-state biodiesel was challenging, Bill Zurn says.

But the production goal was met and Minnesota went to B2 in 2005 and then to B5 in 2009.

“We’ve been sort of the poster child nationally for biodiesel because we had B2,” he says.

He smiles when asked why Minnesota has been so prominent in biodiesel.

“Advanced, smart leadership,” he says.

Minnesota soybean growers won another victory in 2007, when a state statute was passed that called for raising biodiesel use even higher. B10 was to be implemented in 2012.

The 2012 move was delayed, however, until several criteria, including making sure “adequate blending infrastructure and regulatory protocol” were met. The Minnesota departments of Agriculture and Commerce, along with the Minnesota Pollution Control Agency, decided in September 2013 that the criteria had been reached.

Legislative fight

But a coalition of opponents, including Minnesota’s trucking industry, worked in the recent Minnesota legislative session to scuttle implementation of B10.

Karolyn Zurn says the state soybean growers association took the opposition seriously. The association added part-time lobbyists during the session in its effort to get B10 approved.

Some legislators didn’t understand biodiesel and needed to be educated about it, she says.

Legislation was proposed to scrap the higher mandate, but failed in committee.

“We were on the issue constantly,” she says. “With the extra effort we put in, we could see the turn of the tide. Up until the end, though, we still didn’t know. It (approval) wasn’t a given.”

Lawmakers eventually reached a compromise that garnered enough support to win B10 approval.

Truckers’ concerns

The legislative compromise doesn’t satisfy all the critics.

Hausladen, the president and CEO of the Minnesota Trucking Association, calls the mandate “bad state policy.”

The mandate is unfair because some industries, including nuclear power plants, mining and logging, are permanently exempt from it, he says.

“How are these industries somehow so important that they don’t have to use it, but trucking does?” he asks.

The exemption for those industries “makes the argument that biodiesel can’t be relied on for essential industries,” Hausladen says.

No. 1 diesel, the type of diesel used in particularly cold weather, also is exempt from the mandate, he notes.

No. 2 diesel, sometimes known as “regular” diesel, is not exempt.

Exempting No. 1 diesel from the mandate raises questions about biodiesel’s dependability, he says.

Truckers also oppose B10 because it means higher fuel bills for them, Hausladen says.

A survey by one of his association’s members in late June found that B5 sold in Minnesota cost 4 to 6 cents per gallon more, before tax, than diesel sold in North Dakota and Wisconsin.

Hausladen attributes that to the presence of biodiesel in fuel sold in Minnesota.

“Our fear is, that’s only going to go up July 1” when B10 begins, he says.

Minnesota’s mandate already causes some truckers to buy fuel outside the state, he says.

“I can tell you for a fact, truckers are choosing to buy fuel outside of Minnesota whenever they can, even if they’re a Minnesota-based trucking company, because of the biodiesel mandate,” he says.

The mandate brings an even-higher cost for Minnesota truckers who operate only in state and don’t have the option of buying gas elsewhere, Hausladen says.

Youngerberg says some Minnesota organizations already use B10 successfully, even in the winter.

Bill Zurn says concern about B10 is unfounded.

“B5 has been working for quite a few years, with very minor issues. Moving now to B10 in the summer months — we don’t feel that will be a problem,” he says.

The Zurns say they’ve talked with people who like biodiesel but question mandating its use.

Karolyn says she tells those people “you have to weigh the issue. Do I say I won’t vote for anything that’s a mandate? Or do you put the best common sense over whether you like a mandate or not?”

A mandate is “a tool” that achieves good things, she says.

A dealer’s view

Larry Keep, owner of Rainy Lake Oil Co. in International Falls, Minn., is a fan of biodiesel.

“The big green push is the main thing,” he says. “It’s greener for the environment, using less crude (oil). It’s more alternative fuel, less emissions.”

Keep, a 20-year-veteran of the fuel industry, is both a retailer and wholesaler.

His company has used B10 in its own trucks, even before the mandate was implemented.

“We haven’t seen any issues,” he says.

B10 can cause problems in the winter if blending isn’t done properly, he says.

“But I don’t see any problems with 10 percent in the summer time.”

Keep in mind that B10 is in force only from April 1 to Sept. 30.

S.D., N.D. perspective

South Dakota and North Dakota are major producers of soybeans. But neither state has a biodiesel mandate, and neither appears likely to get one anytime soon.

The South Dakota Soybean Growers Association doesn’t have an official stance on a biodiesel mandate, says its president, John Horter, an Andover farmer.

“Our immediate concerns are securing that we have a supply of it (biodiesel) and that our end users are confident with it,” he says.

His association’s biodiesel committee is considering two potential projects. One involves blender pumps throughout the state, the other a reimbursement of end users of soy for biodiesel.

For now, though, both are just possibilities, he says.

South Dakota has one plant that crushes soybeans, which concentrates on food products, Horder says.

About 60 percent of soybeans in the state are exported, he says.

North Dakota doesn’t have a soybean crushing plant and sends most of its soybeans whole to foreign customers, says Nancy Johnson, executive director of the state Soybean Growers Association.

That reduces North Dakota growers’ interest, at least for now, in boosting demand for soybean oil through a biodiesel mandate, she says.

But North Dakota soybean growers applaud what their Minnesota counterparts have accomplished, Johnson says.

Again in 2018?

At one time, Minnesota was scheduled to move to B20, a 20 percent biodiesel blend, in 2015.

But the 2014 legislative compromise that gave the green light to B10 includes delaying B20 until 2018.

It’s uncertain if B20 will prove as controversial as B10.

Hausladen says members of his group haven’t discussed what they might do when possible B20 implementation comes closer.

But his industry will continue to watch the issue carefully, he says.

The Zurns say it’s too early to discuss B20. For now, they’re pleased that B10 is in place.

“It’s not just the farmers (who benefit). It’s the elevators, the people who work at the elevators. The railroads. It’s the whole industry. It’s the environment,” Bill says.

“We feel B10 is good for Minnesota.”