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Biodiesel's Boom

As crude oil prices have risen, so have the interests of drivers seeking to purchase hybrid cars or to fuel their vehicles with a renewable resource.

By LIZA ROCHE

With gasoline staying at more than $2 a gallon, each trip to the fuel pump is a reminder of the dilemma that President Bush calls, 'America's addiction to oil.' As crude oil prices have risen, so have the interests of drivers seeking to purchase hybrid cars or to fuel their vehicles with a renewable resource. One of those alternative fuels is biodiesel, and one of its common ingredients, soybeans, is a major crop here in Illinois.

Biodiesel can be generally described as a domestic, renewable fuel for diesel engines that is created using natural oils, such as soybean oil or corn oil. Unlike ethanol, blended into gasoline, it can be used in any concentration with petroleum-based diesel fuel with little to no modifications to existing diesel engines.

Amber Thurlo Pearson, a spokesperson for the National Biodiesel Board, says the biodiesel industry is enjoying substantial growth over the last few years. In 2004, approximately 25 million gallons of biodiesel were produced. In 2005, production tripled to about 75 million gallons.

?We?re expecting it to go up again in 2006,? Thurlo Pearson says. ?There is a lot more interest.?

Increased demand for alternative fuels like biodiesel means increased investment opportunities, as many are speculating. Investment opportunities with companies that produce, distribute and sell biodiesel continue to appear. In November, for example, a conference about investing in biodiesel was held in Chicago by Platts conference organizers. Ron Berg of Platts says interest is high. ?So much so that you have to wonder if there is a bubble developing,? Berg says.

In terms of investing, even celebrities have gotten on the biodiesel bandwagon. Willie Nelson, country singer and champion of the American farmer, recently unveiled his own brand of biodiesel, called BioWillie, which is available at retail outlets in places like San Diego and Texas.

?The demand for alternative fuels is only going to grow,? says Judd Hulting, manager of domestic programs at the Illinois Soybean Association. Nationwide, more than 50 biodiesel plants are in operation, according to the NBB. Thus far just one company is in the business of manufacturing biodiesel in Illinois. Northfield-based Stepan Company is the only producer in the state, with a manufacturing facility near Joliet. The company?s Millsdale facility reports an output of 11 million gallons per year and is in the process of increasing that capacity by another 9 million gallons per year.

Illinois is a top producer of soybeans in the United States. Hulting says that is part of the reason why there are about 10 biodiesel operations proposed for in the state. It?s a goal, he says, to see three or four more facilities beside the Joliet site in the near future.

So what?s driving the push to biodiesel and other alternative fuels? In part, it?s taxes. Federal tax incentives, which were approved in 2004 and run through at least 2008, help keep biodiesel closer in price to regular diesel as consumers learn about the product?s other benefits, Thurlo Pearson says.

In the Chicago area, wholesale prices for regular diesel stand at approx-imately $1.74 per gallon. B20, a diesel blend that uses 20 percent biodiesel, sits at about $2.01 per gallon. Pure biodiesel sells for about $3.08 per gallon, according to late February figures.

Because biodiesel engines are mainly placed in trucks in the United States, truckers and local or state governments tend to be the biggest biodiesel consumers.

But that could soon change. Even in the area of passenger vehicles, some automakers are predicting brisker diesel sales. Diesel engines work about 30 percent more efficiently than gas engines and diesel-fueled cars don?t come with the sticker-shock of most hybrids, auto experts have noted.

Alternative fuel is popular among environmentalists, as well. According to the U.S. Department of Energy, aside from being considered a cleaner fuel, pure biodiesel reduces carbon dioxide emissions by more than 75 percent over petroleum diesel. Carbon dioxide emissions are considered to be one of the top greenhouse gases contributing to global warming. A 20 percent biodiesel blend reduces emissions by 15 percent.

But those less enthusiastic about the future of biodiesel have pointed to shortcomings. Biodiesel does cause increased emissions of nitrogen oxides, which contribute to the formation of ground-level ozone, or smog. In addition, the fuel can cause deposits in fuel delivery systems over time and can thicken in cold temperatures.

In December, a batch of ?poor quality? biodiesel was blended into Minnesota?s diesel supply and the combined product caused clogged fuel filters throughout the state. Truckers, who had a short reprieve from a state law that requires biodiesel be blended into all diesel sold there, reportedly remain concerned that continued problems might arise. Thurlo Pearson, however, says those problems can be fixed with proper usage.

Published: April 01, 2006
Issue: Spring 2006