Biodiesel and Soybean Industry Impacts

An Energy Conversion: Making

Renewable Energy America’s Energy

August 10, 2006Presented by Bart Ruth, Past ASA President and 25 x ‘25

Steering Committee Member

What is biodiesel?

• Biodiesel is the name of a clean burning alternative fuel, 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. It can be used in compression-ignition (diesel) engines with little or no modifications. Biodiesel is simple to use, biodegradable, nontoxic, and essentially free of sulfur and aromatics.

• Added to the Merriam-Websters Collegiate Dictionary, Eleventh Edition, 2006 Biodiesel truly has arrived!

How is biodiesel made?

• Biodiesel is made through a chemical process called transesterification whereby the glycerin is separated from the 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).

Is Biodiesel the same thing as raw vegetable oil?

• No! Fuel-grade biodiesel must be produced to strict industry specifications (ASTM D6751) in order to insure proper performance. 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 ASTM D6751 and is legally registered with the Environmental Protection Agency is a legal motor fuel for sale and distribution. Raw vegetable oil cannot meet biodiesel fuel specifications, it is not registered with the EPA, and it is not a legal motor fuel.

Production Growth has been rapid!

• 2005 -- 75 million gallons• 2004 -- 25 million gallons• 2003 -- 20 million gallons• 2002 -- 15 million gallons• 2001 -- 5 million gallons• 2000 -- 2 million gallons• 1999 -- 500,000 gallons

How did this rapid growth get it’s roots?

• Initial industry wide workgroup in February 2000

• Differing views within industry on how to deal with soyoil surplus

• Strong leadership by American Soybean Association, National Biodiesel Board, and AGP to develop long term biodiesel strategy

Legislative work provided the kickstart the industry needed

• Work by NBB and the United Soybean Board to develop the fuel standard and fund the EPA and Health effects testing.

• Legislative work by soybean farmers and the American Soybean Association provided the framework for growth.

Federal Incentives

• Excise Tax Credit– $1.00/Gal of B100 from pure virgin veg oil– Credit paid to fuel blender– Extended until 2008, working on further

extension through 2012

• Renewable Fuels Standard– Requires 7.5 Billion Gal of renewables by 2012

• CCC Bioenergy Program

Transportation Fuel in U.S.• 45 Billion gallons of over-the-road diesel

fuel consumed in the U.S. in 2001• If each gallon of diesel fuel contained just

2% biodiesel, less than 1 billion gallons are needed, but that would consume 1 billion bushels of soybeans

• Annual U.S. production of slightly less than 3 billion bushel

Where are the Biodiesel markets?

• 56% On-Highway transportation

• 11% Residential

• 6% Commercial

• 6% Farm

• 5% Railroad

• 4% Marine

• Plus Industrial, off road, utilities, etc.

Biodiesel Production in Nebraska

• Currently no commercial producers on-line

• Nebraska soybean production of 200 million bushels

• Processing 25% of Nebraska’s production into biodiesel would yield 70 million gallons.

What are current trends within the industry telling us?

• Production capacity exceeds current demand.

• The industry is trending toward larger facilities.

• Feedstock availability must be assured.• New capacity will replace old, smaller

facilities.• Not all companies will survive!

What is the potential Impact?

• National demand for biodiesel expected to increase from 75 million gallons to 650 million gallons by 2015

• Current capacity from 65 Plants is 395 million gallons/year, plants that are proposed or under construction would increase production to 714 million gallons/year

Economic effects of Biodiesel Industry

• By 2015, the total impact of biodiesel production including the value of the biodiesel, glycerin, construction, operations, and jobs will be an increase of $24 billion to the American Economy

• Job creation in all sectors of the economy will exceed 39,000– John Urbanchuck, Economic study for National

Biodiesel Board

Reality or hype?

• Is the biofuels industry creating it’s own wind?

• Can we balance the growth with utilization of meal and biodiesel byproducts?

• Can the biofuels industry growth continue without expansion of the livestock industry?

The good news . . . What consumers are saying!

• 88% of consumer respondents favor financial incentives to encourage the use of renewable fuels

• 92% support the adoption of minimum standards for the use of renewable fuel by corporations

• 90% support a national goal of having 25% of the nations energy demand being met by renewable sources by the year 2025

• 80% feel that energy issues are equally important as national security and education

Biodiesel Industry Development Seminar

• Thursday, August 31

• 8:30 AM to Noon

• Country Inn & Suites, Lincoln

• 800-852-2326 to RSVP

• Sponsored by Nebraska Soybean Association and University of Nebraska - Industrial Products Center

25 x ‘25 Initiative

• 25x'25 Vision: By 2025, America's farms, forests and ranches will provide 25 percent of the total25x'25 Vision: By 2025, America's farms, forests and ranches will provide 25 percent of the total energy consumed in the United States, while continuing to produce safe, abundant, and affordable food, feed and fiber.

Acknowledgements

• National Biodiesel Board

• University of Nebraska - Industrial Products Center

• John M. Urbanchuk - LECG, LLC

• American Soybean Association

Valuable Web Resources

• www.soygrowers.com

• www.nbb.org

• www.nesoybeans.unl/ne-nsa

• www.agproducts.unl.edu

• www.25x25.org