Interest in building biodiesel plants is spreading, but is hopping on the biodiesel production bandwagon a wise investment?

The consensus is that biodiesel refineries have potential as an investment, but their success hinges on federal legislation.

Nevertheless, a farmer-owned cooperative in Minnesota is taking a cautious approach toward building such a plant.

Bob Kirchner is a farmer from Brewster, MN, and president of the board of directors of Minnesota Soybean Processors, a farmer-owned cooperative. He says breaking ground on the cooperative's crushing facility last fall was the first step toward achieving its goal — building a biodiesel refinery.

Although Minnesota Soybean Processors unanimously supports refining biodiesel, no firm commitments have yet been made to build such a plant.

“We want to have the first stage of the project well on its way,” Kirchner says. “We made an early commitment to pursue biodiesel production, but I think we need to see a federal energy bill first. Without some government support, we may still go into it, but on a smaller scale.”

The cooperative's current project is a $55 million crushing facility with the potential of processing 100,000 bu of soybeans per day, or up to 35 million bushels annually. It's scheduled to be operational in November.

Kirchner's advice for other farmer groups interested in biodiesel production is to do what his cooperative did — take it slow. “If you're going to have a solid project, it just takes time,” he says.

An advantage for Minnesota Soybean Processors is its collaboration with the South Dakota Soybean Processors, he says, which recently added a food-grade soybean oil refinery to its crush plant. “We have two separate legal cooperatives sharing a common, experienced management team,” says Kirchner. Sharing a management team saved costs and saved the Minnesota group from making novice mistakes.

“This project became more doable with the help of an established co-op,” he adds. “I believe the project would have presented more risk than we could have taken on if we hadn't found an alliance.”

Steve Howell, a partner in the Independent Biodiesel Feasibility Group (IBFG), Kearney, MO, sees some solid potential for interesting collaborations. “You could see joint ventures between farmer groups and large industrial companies,” he says. “A joint venture between a local co-op and an ADM or a Cargill, especially with legislation that could provide some pretty significant tax credits for farmer-owned cooperatives, could be advantageous.”

He says if you're going to put up a plant, you need to look at what biodiesel demand could be in your area, evaluate your feedstock supply and take a look at the potential biodiesel demand in and around your potential site.

“It sounds pretty simple, but in reality it's not,” says Howell. “There are a lot of factors to consider and you really need to take a look at all those in order to make a smart business decision.”

Whether or not biodiesel will be the next ethanol depends on state and federal legislation, Howell says. “The (true) price of petroleum products doesn't show up at the pump — the cost of the military to protect foreign oil in Iraq, tax and exploration credits and everything the petroleum companies get — those costs show up in the price we pay for taxes. They're buried so deep no one realizes they're there.”

Biodiesel continues to be one of the American Soybean Association's (ASA) top legislative priorities. Krysta Harden, ASA's Washington representative, says the goal is to have a biodiesel tax provision introduced as a free-standing bill as soon as possible and have it ready for any revenue package that might be appropriate.

“We're going to be ready for any vehicle that makes some sense and that our sponsors and supporters on the Hill think would work instead of waiting for an energy bill that may or may not move through Congress quickly,” she says. “This year Congress has outlined other priorities that may be addressed sooner than energy issues.”

Harden anticipates that Congress will approve biodiesel legislation because of growing acceptance of the fuel and the interest in investing in new energy sources.

There is some progress at the state level as well. Last year, Minnesota lawmakers passed a statewide mandate requiring biodiesel use. The legislation calls for all diesel fuel sold in the state to contain 2% biodiesel. However, a key requirement for the measure to take effect is that the state must reach a biodiesel production capacity of 8 million gallons by 2005.

Minnesota's legislation has created a lot of interest, says Max Norris, director of technical services and commercial development and senior scientist with the Agricultural Utilization Research Institute (AURI), Crookston, MN. AURI provides support to groups with genuine potential for developing a biodiesel plant.

Norris believes federal legislation that puts biodiesel on a level playing field has to be enacted before anyone's really willing to take a big leap into the refinery business. He says AURI encourages beginning entrepreneurs, both small and large to become involved only after “judicious due diligence regarding all elements of the manufacture, marketing and sale of biodiesel have been undertaken.

“Any facility has to meet product specifications, and if they fail to do that, the problems will affect the entire biodiesel industry,” he says. “In general, biodiesel is a wise investment, but potential investors have to keep an eye on the horizon. It will be a better investment if we get a bill passed that includes elements for alternative fuels.”

AURI has been working with groups in Minnesota with the potential to get biodiesel refineries up and running in order to meet state mandate goals. The group that shows the most promise so far is Minnesota Soybean Processors.

Study Biodiesel Plant Handbook Before Building

A manual to help potential biodiesel plant investors make educated decisions has just been published. The Biodiesel Plant Development Handbook was developed by the Agricultural Utilization Research Institute (AURI), Crookston, MN, the Minnesota Soybean Research and Promotion Council, Mankato, MN, and the Independent Biodiesel Feasibility Group (IBFG) of Kearney, MO.

The handbook guides potential investors through the process of reviewing factors like feedstock sources, available production processes and markets.

To obtain a copy of the handbook, contact Leland Tong of IBFG at 816-635-5737. Minnesota residents can contact AURI at 800-279-5010 or www.auri.org.

U.S Biodiesel Manufacturers

Company City State
Biodiesel Industries Las Vegas NV
Imperial Western Products Coachella CA
Stepan Company Millsdale IL
West Central Soy Ralston IA
Griffin Industries Cold Spring KY
Ocean Air Environmental Lakeland FL
AGP Sergeant Bluff IA
Pacific Biodiesel Kahului HI
Iowa Lakes Processing Milford IA
World Energy Alternatives Cincinnati OH
Corsicana Technologies, Inc. Corsicana TX