STATEWIDE FEASIBILITY STUDY FOR A

POTENTIAL NEW YORK STATE

BIODIESEL INDUSTRY

FINAL REPORT 04 -02

JUNE 2003

NEW YORK STATE

ENERGY RESEARCH AND

DEVELOPMENT AUTHORITY
The New York State Energy Research and Development Authority (NYSERDA) is a public benefit 

corporation created in 1975 by the New York State Legislature. NYSERDA’s responsibilities include:

• Conducting a multifaceted energy and environmental research and development program to meet 

New York State’s diverse economic needs. 

• Administering the New York Energy $martSM program, a Statewide public benefit R&D, energy 

efficiency, and environmental protection program.

• Making energy more affordable for residential and low-income households.

• Helping industries, schools, hospitals, municipalities, not-for-profits, and the residential sector,

including low-income residents, implement energy-efficiency measures.

• Providing objective, credible, and useful energy analysis and planning to guide decisions made by

major energy stakeholders in the private and public sectors.

• Managing the Western New York Nuclear Service Center at West Valley, including: (1) overseeing the

State’s interests and share of costs at the West Valley Demonstration Project, a federal/State radioactive waste clean-up effort, and (2) managing wastes and maintaining facilities at the shut-down StateLicensed Disposal Area.

• Coordinating the State’s activities on energy emergencies and nuclear regulatory matters, and 

monitoring low-level radioactive waste generation and management in the State.

• Financing energy-related projects, reducing costs for ratepayers.

NYSERDA administers the New York Energy $martSM program, which is designed to support certain

public benefit programs during the transition to a more competitive electricity market. Some 2,700 

projects in 40 programs are funded by a charge on the electricity transmitted and distributed by the State’s

investor-owned utilities. The New York Energy $martSM program provides energy efficiency services,

including those directed at the low-income sector, research and development, and environmental protection activities. 

NYSERDA derives its basic research revenues from an assessment on the intrastate sales of New York

State’s investor-owned electric and gas utilities, and voluntary annual contributions by the New York

Power Authority and the Long Island Power Authority. Additional research dollars come from limited

corporate funds. Some 400 NYSERDA research projects help the State’s businesses and municipalities

with their energy and environmental problems. Since 1990, NYSERDA has successfully developed and

brought into use more than 150 innovative, energy-efficient, and environmentally beneficial products,

processes, and services. These contributions to the State’s economic growth and environmental protection

are made at a cost of about $.70 per New York resident per year.

Federally funded, the Energy Efficiency Services program is working with more than 540 businesses,

schools, and municipalities to identify existing technologies and equipment to reduce their energy costs. 

For more information, contact the Communications unit, NYSERDA, 17 Columbia Circle, Albany, 

New York 12203-6399; toll-free 1-866-NYSERDA, locally (518) 862-1090, ext. 3250; or on the web 

at www.nyserda.org

STATE OF NEW YORK ENERGY RESEARCH AND DEVELOPMENT AUTHORITY

George E. Pataki Vincent A. DeIorio, Esq., Chairman

Governor Peter R. Smith, President
STATEWIDE FEASIBILITY STUDY FOR A

POTENTIAL NEW YORK STATE

BIODIESEL INDUSTRY

FINAL REPORT

Prepared for the

NEW YORK STATE

ENERGY RESEARCH AND

DEVELOPMENT AUTHORITY

Albany, NY

www.nyserda.org

Judy Jarnefeld

Project Manager

Prepared by 

LECG, LLC

Project Manager

John Urbanchuk

with Technical Assistance by 

MARC-IV, 

IBFG and 

Advanced Fuel Solutions

Cofunding from

New York State Department 

of Agriculture and Markets

NYSERDA April 2004

Report 04-02

NYSERDA 7681
Feasibility of a New York Biodiesel Industry 

LECG, LLC i May 5, 2004 

STATEWIDE FEASIBILITY STUDY FOR A 

POTENTIAL NEW YORK STATE 

BIODIESEL INDUSTRY 

Agreement 7681 

NOTICE 

This report was prepared by LECG, LLC and MARC-IV in the course of performing work 

contracted for and sponsored by the New York State Energy Research and 

Development Authority and the New York State Department of Agriculture and Markets 

(hereafter the "Sponsors"). The opinions expressed in this report do not necessarily 

reflect those of the Sponsors or the State of New York, and reference to any specific 

product, service, process, or method does not constitute an implied or expressed 

recommendation or endorsement of it. Further, the Sponsors and the State of New York 

make no warranties or representations, expressed or implied, as to the fitness for 

particular purpose or merchantability of any product, apparatus, or service, or the 

usefulness, completeness, or accuracy of any processes, methods, or other information 

contained, described, disclosed, or referred to in this report. The Sponsors, the State of 

New York, and the contractor make no representation that the use of any product, 

apparatus, process, method, or other information will not infringe privately owned rights 

and will assume no liability for any loss, injury, or damage resulting from, or occurring in 

connection with, the use of information contained, described, disclosed, or referred to in 

this report. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC ii May 5, 2004 

Preface

The New York State Energy Research and Development Authority (NYSERDA) is 

pleased to publish “A Statewide Feasibility Study for a Potential New York State 

Biodiesel Industry.” The report was prepared by LECG, LLC, with technical assistance 

from MARC-IV, IBFG, and Advanced Fuel Solutions, and cofunding support from the 

New York State Department of Agriculture and Markets. This report primarily considers 

the cost implications associated with various statewide policy options, and is not 

intended to recommend specific policies, address environmental impacts or provide sitespecific or detailed feedstock assessments. Available information regarding one 

important feedstock, yellow grease, is quite sparse. We recognize that the federal 

energy bill currently pending could have a significant impact on the conclusions of this 

report, and that as of printing time, the likelihood of the bill’s passing is uncertain, as are 

specific details regarding any potential national biodiesel incentives or programs that 

may comprise final federal energy legislation. Nevertheless, it is our hope that the report 

will be useful as New York discusses and develops its own biodiesel policy. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC iii May 5, 2004 

TABLE OF CONTENTS

INTRODUCTION...............................................................................................................9

TASK 2: CURRENT AND FORECAST SUPPLY AND DEMAND OVERVIEW .............10

Subtask 2.1: Distillate Fuel Demand – Current and Forecast Growth.................10

Subtask 2.2: Feedstock Supply Analysis ............................................................12

Subtask 2.3: Co-Product Demand/Disposal Analysis .........................................28

TASK 3: PRODUCTION ANALYSIS – BIODIESEL AND BYPRODUCTS .....................36

Subtask 3.1: New York State Production Options...............................................36

Subtask 3.2: Feedstock Supply Channels...........................................................51

Subtask 3.3: Existing Biodiesel Production Facilities, Capacities and Trends ....53

Subtask 3.4: Agricultural Impacts........................................................................60

Task 4: Market Assessment............................................................................................62

Subtask 4.1: Current New York Market Segmentation........................................62

Subtask 4.2: Distribution Channels .....................................................................72

Subtask 4.3: Economic Sensitivity Analysis of Regional versus National 

Scenarios.................................................................................................76

TASK 5: PUBLIC POLICY OPTIONS .............................................................................77

Subtask 5.1: Existing Federal Energy and Environmental Programs..................77

Subtask 5.2: State Biodiesel Initiatives ...............................................................86

Subtask 5.3: New York Policy .............................................................................91

TASK 6: ANALYSIS OF NEW YORK STATE PUBLIC POLICY OPTIONS AND 

ASSOCIATED COSTS AND BENEFITS ........................................................................94

Subtask 6.1: Fuel-based Incentives, Policies and Impacts .................................95

Subtask 6.2: Production-based Incentives, Policies and Impacts .......................99

TASK 7: TECHNOLOGY TRENDS, RESEARCH, DEVELOPMENT AND 

DEMONSTRATION NEEDS .........................................................................................102

APPENDIX 1.................................................................................................................110

APPENDIX 2.................................................................................................................114

APPENDIX 3.................................................................................................................121

APPENDIX 4.................................................................................................................125
Feasibility of a New York Biodiesel Industry 

LECG, LLC 1 May 5, 2004 

STATEWIDE FEASIBILITY STUDY FOR A POTENTIAL NEW YORK STATE 

BIODIESEL INDUSTRY 

Agreement 7681 

EXECUTIVE SUMMARY 

The market for diesel fuel in New York is substantial. Total distillate fuel use in New 

York is estimated at 3.2 billion gallons in 2002 and is projected to increase at an annual 

rate of about 1.2 percent over the next decade. A B2 mandate covering all end uses 

would create a market of 64.1 million gallons that would increase to 73.7 million gallons 

by 2012. A more limited mandate covering on-highway diesel uses beginning in 2007 

and expanding to include residential, commercial, industrial, and utility uses in 2009 

would create a market of 23.3 million gallons in 2007 increasing to 70.6 million gallons 

by 2012. 

 New York can supply some but not all of the feedstock requirements for a 

statewide biodiesel industry. 

The maximum capacity of New York to produce biodiesel is currently estimated at 

about 30 million gallons. This is projected to increase to 40 million gallons by 2012. 

This assumes that all of the soybeans grown in New York are crushed using current 

technology (mechanical extraction that yields 7.8 pounds of oil per bushel) and all of 

the oil produced along with all of the yellow fat produced in the State is used to 

produce biodiesel. Consequently, New York could theoretically meet all of the 

demand for a B2 mandate covering on-highway transportation fuel by 2007 and 

about half the demand created by a full B2 mandate by 2012. 

 New York agriculture would be a major beneficiary of a biodiesel industry. 

Soybeans are the major oilseed currently produced in New York. While oilseed 

crops have never been grown extensively in New York State, the area devoted to 

soybeans has increased significantly over the past 20 years. Soybean acreage 

increased to 40,000 acres in the 1990-1991 growing seasons, 100,000 acres in 

1997-1998, and about 150,000 acres in 2001-2002. In 2003, New York growers 

produced 5.3 million bushels of soybeans on about 144,000 acres. 

Commercial farmers have successfully produced other oilseeds – notably winter 

canola and sunflowers -- on limited acreage in New York in the 1980s and 1990s. 

We believe that both of these oilseed crops could be successfully produced in New 

York if there were lucrative markets. However, New York has limited capacity to 

process these crops and they would divert acreage that otherwise would be planted 

to soybeans. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 2 May 5, 2004 

The major field crops produced in New York are hay, corn, winter wheat, and 

soybeans. Taken together these crops were planted to nearly 2.9 million acres in 

2003. Over the past 25 years the number of acres planted to these crops has 

declined nearly 27 percent. Most of this land was lost to development, however 

some acreage shifted to higher value crops such as fruit and vegetables, or was 

taken out of production. 

The demand for vegetable oil to produce biodiesel is significant enough to provide an 

incentive for New York farmers to shift acreage from other crops to soybeans, and 

bring idled land back into production. In the absence of a national energy program or 

New York State biodiesel policy we expect that New York soybean acreage will 

continue to expand reaching 188,000 acres by 2007 with additional land coming from 

idled acreage and modest shifts from hay, corn, wheat, and vegetables. 

The additional demand for soybean oil to supply a New York biodiesel industry under 

a combined B2 mandate and supply incentive policy is expected to increase soybean 

acreage by an additional 99,000 acres to a total of 287,000 acres by 2012. 

Approximately 26,000 acres are expected to come from hay, 20,000 from corn, 

10,000 from wheat, and the remaining 43,000 from idled land and other crops. 

These acreage shifts can accommodate the production of an additional 11.2 million 

bushels of soybeans between 2007 and 2012 without jeopardizing the amount of hay 

or corn silage needed to supply New York’s declining dairy herds. 

Although acreage shifts from hay and corn will lead to a decline in cash receipts of 

$38.9 million for these crops between 2007 and 2012, additional soybean revenues 

of $85.5 million will result in a net gain of $46.2 million for New York farmers over the 

same period, or $6.6 million per year. Since the acreage shifts are relatively modest; 

little or no additional equipment or services should be required; and since both 

soybeans and alfalfa fit into existing crop rotations with corn, most of the increase in 

cash receipts should fall to the farmer’s bottom line and increase net cash income. 

 A New York Biodiesel industry would require distributors to make investments 

in infrastructure that would create economic benefits. 

The key to implementation is using biodiesel blends in existing petroleum tanks and 

infrastructure. This is accomplished by blending biodiesel as far upstream as 

possible, i.e. petroleum terminals. Therefore, efficient implementation of a B2 

incentive or policy would necessitate participation from terminal owners throughout 

the State, not necessarily the fuel dealers. Each of the 85 active deep-water storage 

terminals would need to determine which infrastructure upgrades their respective 

terminal would require. These include, but are not limited to; splash blending, preset 

rack blending, wild stream rack blending, and header supply wild stream blending. 

The cost associated with this investment is estimated at approximately $64 million. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 3 May 5, 2004 

 A New York B2 incentive or policy should be phased in over time and should 

be linked to biodiesel capacity in New York. 

A mandate that would require that diesel use for one or more end use segments 

contain a certain percentage of biodiesel (e.g. two percent, or B2) should be phased 

in to allow adequate time for the necessary capital investment for production and 

infrastructure to be made and should be tied to New York biodiesel capacity. For 

example, a mandate would not become effective until at least 10 MGY of biodiesel 

capacity is in place. Consider that it takes about 18 months from decision to 

production for a new biodiesel plant. This means that legislation passed in 2004 that 

becomes effective in April 2005 would result in the first gallon of biodiesel delivered 

in late 2006 or early 2007. Therefore, a reasonable B2 mandate for on-highway use 

could take effect in 2007 and be expanded to residential home heating oil and other 

uses in 2009. 

 A B2 policy or other policy incentive will attract investment, expand the State 

economy, generate additional income for New Yorkers, and will create new 

jobs. Each policy option has different revenue impacts for the State Treasury 

and costs and benefits to consumers. 

A mandate, supply incentive, and demand incentive each are expected to attract 

direct investment to New York State. The investment will consist of capital 

expenditures to increase soybean crush capacity and build new crush capacity, build 

new biodiesel production capacity, and improve distribution infrastructure for each of 

the terminals in the State. These capital expenditures, along with the annual 

operating expenses associated with producing biodiesel, represent the purchase of 

output from other industries. These dollars will be spent and re-spent throughout all 

sectors of the New York economy thereby creating additional new demand and 

output, creating new jobs in all sectors of the economy, and generating additional 

income for New York households. The individual policy options are described below 

and are summarized in Tables 1 and 2. 

• Stand alone mandate (Policy Option 1)

A mandate that would require highway distillate to contain at least two percent 

biodiesel by 2007 and all other end uses by 2009 would affect 1.2 billion gallons 

of distillate use in 2007, increasing to 3.7 billion gallons by 2012. The mandate 

would result in a market for biodiesel in New York of 23.3 million gallons in 2007, 

increasing to 73.7 million gallons by 2012. The mandate should be linked to 

production capacity. That is, the mandate would not take effect until at least 10 

million gallons of biodiesel capacity was built in New York State. 

A mandate is expected to stimulate investment in 30 million gallons of biodiesel 

capacity that would come on line in 2007 and 2008 and would provide a marketbased incentive for New York farmers to increase acres planted and production 

of soybeans. The biodiesel would be produced from a blend of feedstocks 

comprising 70 percent yellow grease and 30 percent soybean oil. New York has 

adequate supplies of both feedstocks to meet this level of demand. In addition, a 

mandate would require fuel distributors to expand and improve terminal facilities 

to store and handle biodiesel and biodiesel blends required to meet the level of 

demand created by the mandate. The cost to expand and improve terminal 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 4 May 5, 2004 

facilities to accommodate a mandate is estimated at $64 million for New York’s 

85 terminals. 

A mandate would increase biodiesel demand but would have relatively little net 

revenue impact for New York State. The primary cost would involve the 

increased cost associated with using a B2 blend in State fleets. This is estimated 

at $622,000 over the 2007-2012 period without the tax incentives provided in the 

Energy Bill now in Congress. If the Energy Bill and associated tax provisions is 

passed, the net cost of the mandate to the State Treasury would be less than 

$25,000. 

However, a mandate shifts the costs associated with using a more expensive fuel 

blend from the State to individual businesses and consumers. Without an 

Energy Bill, the total cost to businesses and consumers is estimated at $219.2 

million between 2007 and 2012. The cost to highway users would amount to 

$102.6 million; the cost to residential home heating oil consumers would amount 

to $76.1 million. The cost to business and industry is estimated at $40.5 million 

over this same period. If the Energy Bill passes into law, total costs would fall to 

$5.1 million of which highway users would pay $3.2 million; residential 

consumers would pay $1.3 million; and businesses would pay $656,000. 

The reason for the large disparity in costs between the Energy Bill and no-Energy 

Bill scenarios lies in the Federal excise tax incentives provided by the Energy Bill. 

The Energy Bill provides an exemption from Federal Excise Taxes on diesel fuel 

of $1.00 per gallon for biodiesel made from soybean oil and animal fats and 

$0.50 per gallon for biodiesel made from yellow grease. This means that the 

70/30 blend contemplated for New York would enjoy a $0.65 per gallon 

exemption. This would be passed directly along to consumers. 

A B2 mandate would result in new investment and spending on biodiesel 

production and infrastructure investment. When the impacts of the capital and 

annual operating expenditures are considered, a mandate that results in a 30 

MGY biodiesel industry would add nearly $380 million (1996 dollars) to the New 

York economy by 2012, generate an additional $177.5 million in real household 

income by 2012, and create as many as 1,145 new jobs throughout the New 

York economy. Failure to pass the Energy Bill would reduce the economic 

impacts slightly. 

Increased income and spending will generate additional tax revenue for the State 

Treasury. The increased economic activity is expected to generate an additional 

$19.1 million in State sales, personal income, and business income taxes by 

2012. When the costs to the State are netted out against the additional 

revenues, a mandate would provide a significant positive budgetary impact for 

the State Treasury. 

• Mandate combined with an incentive for infrastructure (Policy Option 2)

Another option involves providing an incentive for expanding and improving 

terminal facilities to store and handle biodiesel and biodiesel blends combined 

with the mandate option. This incentive would offset some of the infrastructure 

costs that distributors would incur to meet mandated biodiesel demand. We 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 5 May 5, 2004 

expect that the cost to improve the existing 85 terminals in New York will be 

about $64 million. To facilitate this transformation and ease the financial burden 

on blenders and distributors, we considered an incentive of $0.25 per gallon for a 

total cost of nearly $32 million to the State Treasury between 2007 and 2012. 

Since this policy option has no additional impact on attracting biodiesel 

production capacity and annual production, the economic costs and benefits are 

essentially the same as for a stand-alone mandate. The exception to this is in 

the cost to the State Treasury. The additional costs associated with providing the 

infrastructure incentive are estimated at about $32 million. When the additional 

revenue provided by the increased economic activity is considered, this policy 

option will result in an estimated net loss of revenue to New York State of about 

$10.0 million between 2007 and 2012. 

• Mandate combined with a biodiesel supply incentive. (Policy Option 3)

An alternative policy option for consideration is combining a mandate for 

biodiesel use with a supply incentive for the production of biodiesel. This 

incentive would provide a grant of $0.10 per gallon of biodiesel produced in New 

York State up to a maximum of 10 million gallons capped at five years. 

Since this combination creates a base of demand and provides an incentive for 

producers, it is expected to stimulate investment of 40 MGY of biodiesel capacity 

and production in New York State. Reflecting the larger investment and annual 

biodiesel production provided by this option, the combination of a mandate and 

supply incentive produces the largest economic benefits to New York State. 

Under a national energy policy, this policy option would add almost $410 million 

(1996 dollars) to the New York economy by 2012; an additional $195.9 million 

would be added to the income of New York households; and nearly 1,300 new 

jobs would be created in all sectors of the New York economy. If the Energy Bill 

is not passed we expect that the mandate and supply incentive will still attract 

investment, but the total economic impact would be slightly smaller. 

As is the case with a stand-alone mandate, this policy option shifts the costs 

associated with using a more expensive fuel blend from the State to individual 

businesses and consumers. Without an Energy Bill, the total cost to businesses 

and consumers is estimated at $219.2 million between 2007 and 2012. The cost 

to highway users would amount to $102.6 million, the cost to residential home 

heating oil consumers would amount to $76.1 million. The cost to business and 

industry is estimated at $40.5 million over this same period. If the Energy Bill 

passes into law, total costs would fall to $5.1 million of which highway users 

would pay $3.2 million; residential consumers would pay $1.3 million; and 

businesses would pay $656,000. 

The costs to the State Treasury of this option are larger than with a stand-alone 

mandate and are estimated at $9 million. However, increased income and 

spending will generate additional tax revenue for the State Treasury. The 

increased economic activity is expected to generate an additional $24.3 million in 

State sales, personal income, and business income taxes by 2012 if the Energy 

Bill passes and $21.3 million in the absence of an energy policy. When the costs 

to the State are netted out against the additional revenues, a mandate would 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 6 May 5, 2004 

provide a positive budgetary impact for the State Treasury of $12.3 million under 

no national energy policy and $15.3 million if the Energy Bill were passed. 

• Stand alone supply incentive (Policy option 4) 

An alternative policy option for consideration is a supply incentive that provides a 

grant of $0.10 per gallon of biodiesel produced in New York State up to a 

maximum of 10 million gallons capped at five years. In the absence of a national 

energy policy, this type of incentive alone is not likely to attract a significant 

amount of investment in biodiesel production in New York State. The reason for 

this is that while the incentive reduces capital costs it will have no material impact 

on demand. Consequently, investors face the risk of creating supply for which no 

demand exists. 

Even with an Energy Bill, investors are likely to wait to see how major soybean 

producing states respond in increasing capacity and how New York is supplied 

with biodiesel fuel. As a result, we expect this policy option to attract a minimal 

10 million gallons of biodiesel capacity between 2007 and 2009 at a cost to the 

State of $4.5 million. 

A small capital level of investment and annual production will provide limited 

benefits to the New York economy. This option would increase the New York 

economy by only $75 million (1996 dollars) by 2012; add $35 million to 

household income; and create only 200 new jobs. Despite the relatively small 

costs to the State Treasury, the limited economic activity generated by this option 

falls short of covering the costs so that a small net loss of about $240,000 is 

generated. 

As is the case with a mandate, this policy option shifts the costs associated with 

using a more expensive fuel blend from the State to individual highway users of 

biodiesel. Without a National Energy Bill, the total cost to the transportation 

sector is estimated at about $33 million between 2007 and 2012. If the Energy 

Bill were passed with tax incentives for biodiesel, the cost to the transportation 

sector would fall to less than $1 million between 2007 and 2012. 

• Combined supply and demand incentive (Policy option 5) 

The final option investigated involved combining a demand incentive to the 

supply incentive described above. This incentive would take the form of a onehalf of one cent exemption from New York State excise taxes on distillate fuel for 

each one percent of biodiesel used. This amounts to a one cent per gallon 

exemption for a B2 blend. Since this equates to $0.50 per gallon for B100, this 

option turns out to be expensive, amounting to a cost to the State Treasury of 

$77.3 million between 2007 and 2012 ($86.0 million when the supply incentive is 

added). 

Since this combination stimulates demand, the option is expected to attract 30 

MGY of biodiesel production capacity and add between $272 and $274 million to 

the New York State economy by 2012, increase household income by $132 

million, and create about 950 new jobs. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 7 May 5, 2004 

However, the additional revenue generated by this increased economic activity is 

estimated at only $16.4 million, resulting in a deficit to the Treasury of between 

$69.3 and $69.6 million between 2007 and 2012. 

Since this policy option provides a demand incentive in the form of a reduction in 

the New York State excise tax on diesel fuel, the total costs to highway users, 

residential consumers, and businesses is considerably smaller than a mandate 

option, ranging from $105 million with no Energy Bill to $1.5 million if an Energy 

Bill passes. 

Table 1 

Economic Costs and Benefits of Alternative New York State 

Biodiesel Policy Options: No National Energy Bill 

(Cumulative 2007-2012) 

 

 OPTION 1 OPTION 2 OPTION 3 OPTION 4 OPTION 5 

 Stand Alone 

 B2 Mandate Combined Supply Combined 

 B2 Mandate Plus B2 Mandate Incentive Supply & 

 

Highway fuel 

2007 Infrastructure Plus $0.10/gal $0.10/gal Demand 

 Other Use 2009 Incentive 

Supply 

Incentive 

up to 10 

MGY Incentive 

Capacity created 30 MGY 30 MGY 40 MGY 10 MGY 30 MGY 

 

Macroeconomic Impacts 

 Gross Output (Mil 96$) $766.186 $766.186 $879.543 $137.459 $605.868 

 GSP (Mil 96$) $377.989 $377.989 $405.990 $59.021 $272.172 

 Household Income (Mil 

96$) $176.594 $176.594 $193.992 $35.269 $131.181 

 Max new jobs 1,135 1,135 1,274 200 941 

 

NY Treasury Impact: 

 Direct Cost (Mil $) $0.622 $31.872 $9.019 $4.500 $85.571 

 Revenue (Mil $) $19.053 $20.975 $21.269 $4.261 $16.258 

 NY State Sales Tax $9.863 $11.764 $11.388 $2.531 $9.515 

 NY Personal Income 

Tax $7.399 $7.548 $8.030 $1.514 $5.620 

 NY Corporate Tax $1.791 $1.663 $1.850 $0.216 $1.124 

Net Treasury Impact (Mil $) $18.431 ($10.897) $12.250 ($0.239) ($69.313)

 

Other Costs: 

Highway users ($102.639) ($102.639) ($102.639) ($33.370) ($96.521)

Residential consumers ($76.118) ($76.118) ($76.118) NA NA 

Business & Industry ($40.484) ($40.484) ($40.484) NA ($8.931)

Total Other Costs ($219.241) ($219.241) ($219.241) ($33.370) ($105.451)

Note: Each Policy Option includes infrastructure investment of $64 million. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 8 May 5, 2004 

Table 2 

Economic Costs and Benefits of Alternative New York State 

Biodiesel Policy Options: National Energy Bill 

(Cumulative 2007-2012) 

 OPTION 1 OPTION 2 OPTION 3 OPTION 4 OPTION 5 

 Stand Alone 

 Stand Alone B2 Mandate Combined Supply Combined 

 B2 Mandate Plus B2 Mandate Incentive Supply & 

 

Highway fuel 

2007 Infrastructure Plus $0.10/gal $0.10/gal Demand 

 Other Use 2009 Incentive 

Supply 

Incentive 

up to 10 

MGY Incentive 

Capacity created 30 MGY 30 MGY 40 MGY 10 MGY 30 MGY 

 

Macroeconomic Impacts 

 Gross Output (Mil 96$) $770.998 $770.998 $889.924 $160.889 $610.680 

 GSP (Mil 96$) $379.497 $379.497 $409.426 $74.051 $273.680 

 Household Income (Mil 

96$) $177.460 $177.460 $195.896 $35.269 $132.047 

 Max new jobs 1,145 1,145 1,292 200 950 

 

NY Treasury Impact: 

 Direct Cost (Mil $) $0.019 $31.269 $9.019 $4.500 $85.970 

 Revenue (Mil $) $21.470 $21.470 $24.320 $4.261 $16.382 

 NY State Sales Tax $12.084 $12.084 $14.021 $2.531 $9.590 

 NY Personal Income 

Tax $7.585 $7.585 $8.419 $1.514 $5.657 

 NY Corporate Tax $1.801 $1.801 $1.880 $0.216 $1.136 

Net Treasury Impact (Mil $) $21.451 ($9.799) $15.301 ($0.239) ($69.588)

 

Other Costs: 

Highway users ($3.171) ($3.171) ($3.171) ($0.870) ($1.379)

Residential consumers ($1.256) ($1.256) ($1.256) NA NA 

Business & Industry ($0.656) ($0.656) ($0.656) NA ($0.073)

Total Other Costs ($5.084) ($5.084) ($5.084) ($0.870) ($1.451)

Note: Each Policy Option includes infrastructure investment of $64 million. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 9 May 5, 2004 

INTRODUCTION 

The purpose of this report is to present the findings of a comprehensive analysis of the 

economic feasibility of creating a biodiesel industry in New York State. An integral part 

of the study is a review of possible policy options and an assessment of their costs and 

benefits to New York State and New York consumers. 

The market for diesel fuel in New York is substantial. Total distillate fuel use in New 

York is estimated at 3.2 billion gallons in 2002 and is projected to increase at an annual 

rate of about 1.2 percent over the next decade. A B2 mandate covering all end uses 

would create a market of 64.1 million gallons that would increase to 73.7 million gallons 

by 2012. A more limited mandate covering on-highway diesel uses beginning in 2007 

and expanding to include residential, commercial, industrial, and utility uses in 2009 

would create a market of 23.3 million gallons in 2007 increasing to 70.6 million gallons 

by 2012.

The maximum capacity of New York to produce biodiesel is currently estimated at about 

30 million gallons. This is projected to increase to 40 million gallons by 2012. This 

assumes that all of the soybeans grown in New York are crushed using current 

technology (mechanical extraction that yields 7.8 pounds of oil per bushel) and all of the 

oil produced along with all of the yellow fat produced in the state is used to produce 

biodiesel. Consequently, New York could theoretically meet all of the demand for a B2 

mandate covering on-highway transportation fuel by 2007 and about half the demand 

created by a full B2 mandate by 2012. 

This report addresses the major issues and tasks outlined in the NYSERDA Statement 

of Work (SOW) for this project. The section numbers correspond to the Tasks outlined 

in the SOW. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 10 May 5, 2004 

TASK 2: CURRENT AND FORECAST SUPPLY AND DEMAND OVERVIEW 

Subtask 2.1: Distillate Fuel Demand – Current and Forecast Growth 

Total U.S. demand for diesel fuel was approximately 58 billion gallons in 2002. 

According to the U.S. Energy Information Administration, diesel demand is expected to 

increase by 2.4 percent annually over the next decade, with on-highway demand 

accounting for over half of the nation’s diesel consumption. As illustrated in Table 2.1, 

diesel demand within the on-highway end-use sector will increase at 3.4 percent 

annually and is expected to account for over sixty-three percent of nationwide distillate 

fuel consumption by 2015. 

Table 2.1 

United States Distillate Fuel Demand by End Use Segment (Million Gallons) 

* Compound annual growth rate 

Source: Energy Information Administration. Annual Energy Outlook 2003 with Projections to 2025.

Report #: DOE/EIA-0383(2003). January 9, 2003 

The market for diesel fuel in New York is substantial. Total distillate fuel use in New 

York is estimated at 3.2 billion gallons in 2002 and is projected to increase at an annual 

rate of about 1.2 percent over the next decade. As shown in Table 2.2, residential 

demand for home heating is the largest end-use segment of distillate demand. Onhighway transportation and commercial use are the next largest end uses. Together, 

these three categories account for more than 95 percent of diesel use in New York. 

2002 2005 2010 2015 CAGR* 

Residential 6,492.54 7,014.93 6,791.04 6,492.54 0.0% 

On-Highway 33,370.84 37,436.64 45,140.38 51,508.51 3.4% 

Freight Trucks 30,078.13 33,323.34 39,469.52 44,456.23 3.1% 

Intercity Bus 280.46 285.32 299.11 305.56 0.7% 

Transit Bus 725.69 738.27 773.94 790.64 0.7% 

Light-Duty Vehicle 1,437.97 2,226.40 3,692.79 5,031.52 10.1% 

School Bus 848.60 863.31 905.03 924.55 0.7% 

Commercial 3,358.21 10,895.52 3,582.09 3,656.72 0.7% 

Industrial 8,059.70 8,283.58 9,029.85 9,626.87 1.4% 

Freight Rail 3,674.00 3,745.23 4,030.54 4,207.96 1.0% 

Intercity Rail 125.96 132.75 146.10 159.79 1.8% 

Commuter Rail 199.70 210.47 231.63 253.34 1.8% 

Utilities 447.76 597.01 820.90 820.90 4.8% 

Domestic Shipping 1,818.71 1,872.35 2,019.28 2,143.12 1.3% 

International Shipping 372.84 387.78 390.62 393.56 0.4% 

Military 826.01 885.99 895.13 938.24 1.0% 

Total Diesel 58,746.27 71,462.25 73,077.56 80,201.53 2.4% 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 11 May 5, 2004 

Table 2.2 

New York Distillate Fuel Demand by End Use Segment (Million Gallons) 

The composition of distillate demand in New York is projected to change considerably 

over the next decade as growth in light and heavy trucks accelerates. By 2015 onhighway use of diesel fuel will eclipse residential demand. Most other end-use 

segments are projected to grow at a two percent annual rate between 2002 and 2015. 

 2002 2005 2010 2015 CAGR 

Residential 1,413.1 1,519.3 1,449.7 1,354.5 -0.3%

On-Highway 963.4 1,082.1 1,308.9 1,497.4 3.5%

 Freight Trucks 667.2 739.1 875.5 986.1 3.1%

 Inter-City Busses 85.9 87.3 91.6 93.5 0.7%

 Transit Busses 74.7 76.0 79.7 81.4 0.7%

 Light Duty Trucks 78.3 121.2 201.0 273.8 10.1%

 School Busses 57.4 58.4 61.2 62.5 0.7%

Commercial 661.7 671.7 671.7 656.8 -0.1%

Industrial 41.0 40.3 43.7 45.7 0.8%

Farm 38.0 42.1 49.9 56.2 3.1%

Off-highway 37.8 41.9 49.6 55.9 3.1%

Rail 24.9 25.4 27.3 28.5 1.0%

Utilities 7.8 6.7 10.0 11.1 2.8%

Vessel Bunkering 14.6 15.1 16.1 16.9 1.1%

Military 1.9 2.1 2.1 2.2 1.0%

Other 0.1 0.1 0.1 0.1 3.1%

Total Diesel 3,204.4 3,446.7 3,629.2 3,725.4 1.2%
Feasibility of a New York Biodiesel Industry 

LECG, LLC 12 May 5, 2004 

Subtask 2.2: Feedstock Supply Analysis 

The most important input in the biodiesel production is the fat or oil used as a feedstock. 

The focus of this section is to identify and quantify current and potential biodiesel 

feedstocks as well as to summarize factors that may impact their use for biodiesel fuel. 

The New York region, defined here as New York, New Jersey and Pennsylvania, 

produces or generates feedstocks that can be used to produce biodiesel: yellow grease, 

animal fat and soybean oil. Fats and oils imported from Canada or other foreign sources 

were not factored into this analysis for three reasons. 

• Biodiesel made from these products does not qualify for payment under the 

Commodity Credit Corporation’s (CCC) Bioenergy Program. This program 

received funding in the Farm Bill through FY 2006. It is not yet determined 

whether this program will be extended or not. If so, it is unlikely that imported 

fats and oils would qualify. 

• One of the benefits of biodiesel is the contribution it makes to reduce this 

country’s dependence upon foreign oil. Using imported animal fats and 

vegetable oils may help diversify our sources of energy but it does not help 

reduce our dependence upon foreign countries for our energy needs. 

• The amount of animal fats and vegetable oils imported into New York ports of 

entry that is suitable for use in the production of biodiesel is relatively small. 

Imports of all animal fats and vegetable oils through ports of entry in New York 

and Vermont average 6.1 million pounds annually in 2000-2002. Only a fraction 

of this would potentially be used for biodiesel production. 

Subtask 2.2.1: Supply of Oilseed Crops and potential for conversion of other 

crops to oilseeds 

Soybeans are the predominant oilseed produced in New York State and the Northeast 

region of the United States. Small quantities of other oilseeds, notably sunflower and 

canola, also are grown. As shown in Figure 2.1 and Table 2.3, between 2000 and 2002 

New York farmers harvested an average of nearly 4.6 million bushels of soybeans 

annually on 142,400 acres. According to the National Agricultural Statistics Service, 

New York farmers expect to harvest nearly 5.3 million bushels of soybeans in 2003. Ten 

New York counties concentrated in the northwest part of the State account for more than 

85 percent of total New York soybean production. 

A biodiesel industry in New York would also provide a ready market for soybeans grown 

in nearby states. Over this same period, Pennsylvania farmers produced an average of 

13.2 million bushels of soybeans while New Jersey harvested an additional 3.1 million 

bushels. In 2003, Pennsylvania soybean farmers will harvest 14.6 million bushels while 

New Jersey will produce 2.9 million bushels. Consequently, a New York biodiesel 

industry could call on an annual regional soybean production of about 22.8 million 

bushels in 2003, or the equivalent of 246 million pounds of soybean oil. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 13 May 5, 2004 

 Table 2.3 

New York Soybean Acreage and Production by County, 2000-2002 

 Harvested Area (Acres) Production (bu) 

 2000 2001 2002 Average 2000 2001 2002 Average 

Cayuga 20,500 21,500 22,400 21,467 711,400 814,400 655,900 727,233 

Seneca 24,000 22,600 18,700 21,767 707,800 773,400 537,000 672,733 

Orleans 12,300 18,300 18,100 16,233 421,000 510,900 627,600 519,833 

Wayne 13,700 15,900 14,100 14,567 505,800 566,700 484,500 519,000 

Ontario 11,100 16,000 10,600 12,567 332,000 494,800 321,700 382,833 

Livingston 9,700 10,600 5,800 8,700 289,900 330,100 179,000 266,333 

Monroe 6,300 9,100 6,500 7,300 220,200 300,700 213,600 244,833 

Onondaga 6,900 7,600 7,200 7,233 164,600 278,300 224,900 222,600 

Niagara 4,100 9,800 8,700 7,533 148,600 220,800 283,200 217,533 

Genesee 3,300 4,400 4,100 3,933 103,300 126,200 117,500 115,667 

Oswego 2,000 2,300 1,900 2,067 80,400 86,400 63,200 76,667 

Oneida 1,900 1,600 1,900 1,800 74,000 76,800 76,900 75,900 

Columbia 1,700 2,000 1,700 1,800 46,600 81,000 62,200 63,267 

Tompkins 2,100 1,600 2,000 1,900 62,100 49,800 64,700 58,867 

Clinton 1,500 1,500 1,400 1,467 60,700 69,000 45,200 58,300 

Erie 1,900 2,100 2,000 2,000 58,700 50,100 65,500 58,100 

Madison 2,000 1,200 1,800 1,667 75,700 34,800 52,100 54,200 

Yates 1,700 2,500 1,700 1,967 56,900 60,200 43,100 53,400 

Jefferson 1,800 1,900 1,500 1,733 55,000 57,100 40,000 50,700 

Montgomery 700 1,400 1,500 1,200 22,600 49,600 66,100 46,100 

Cattaraugus - 800 700 500 - 26,300 34,000 20,100 

Wyoming 700 400 400 500 24,500 12,300 12,700 16,500 

Chautauqua - 500 500 333 - 21,000 18,000 13,000 

Franklin 1,300 900 900 1,033 20,600 7,600 6,500 11,567 

Herkimer - 300 300 200 - 8,800 13,200 7,333 

Washington - 400 300 233 - 15,300 - 5,100 

Cortland - - 500 167 - - 15,200 5,067 

Saratoga - 300 - 100 - 13,000 - 4,333 

St. Lawrence - 400 - 133 - 11,000 - 3,667 

Dutchess - - 300 100 - - 9,300 3,100 

Schuyler - 300 - 100 - 9,300 - 3,100 

Chemung - - 300 100 - - 8,600 2,867 

Total 131,200 158,200 137,800 142,400 4,242,400 5,155,700 4,341,400 4,579,833 

 

Source: USDA National Agricultural Statistics Service. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 14 May 5, 2004 

Figure 2.1 

Soybean Production in New York and Surrounding States 

(Average 2000-2002) 

A limiting factor for a potential biodiesel industry in New York is soybean-processing 

capacity. Reflecting the relatively small quantity of soybeans grown, few soybean 

processors operate in New York. We have identified three major processors in New 

York that crush soybeans to produce soybean meal (used for animal feed) and soybean 

oil. Their locations are also shown on Figure 2.1 

• Sheppard Grain Company operates a soybean crushing and soybean oil 

expelling plant in Phelps, Ontario County with capacity to process 7,300 bushels 

per day. They are currently processing half that amount. According to Steve 

Sheppard, the market for meal rather than the market for soybean oil currently 

drives their production level. 

• Homer Oil Company operates a soybean crushing plant in Homer, Cortland 

County. They have the capacity to crush about 6,000 bushels of soybeans per 

day but currently are processing 3,500 bushels. According to Tom Kohne, the 

soybean meal market also drives Homer Oil’s operations. 

• Ag Pro, Ltd. processes 1,850 bushels of soybeans per day in Morristown, St. 

Lawrence County and has the capacity to process 5,500 bushels per day. 

According to Ag Pro, crush is limited by the current high price of soybeans and 

low milk prices, which have led to decreased demand for high-quality feed. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 15 May 5, 2004 

Each of the three New York soybean crushing operations utilizes mechanical extraction 

rather than solvent extraction to produce soybean oil. This method is less efficient and 

yields a lower quantity of soybean oil (7.8 pounds per bushel compared to 10.5 to 11.0 

pounds from the solvent extraction process used in larger plants). 

All three operations are currently operating at about one-half capacity due to weak 

market conditions for soybean meal. At maximum capacity, these operations could 

process approximately 17,270 bushels of soybeans per day yielding approximately 

135,000 pounds of soybean oil. On an annual basis this amounts to about 45 million 

pounds of soybean oil or 5.9 million gallons of biodiesel. 

Other crop acreage suitable for soybean production 

The most widely planted field or forage crop in New York State is hay followed by corn. 

Over the past several years, New York farmers planted an average of 1.7 million acres 

to hay, 1.03 million acres to corn, 127,000 acres to winter wheat, 85,000 acres to oats, 

and 13,000 acres to barley. According to the Census of Agriculture an estimated 

244,400 acres of New York cropland is idle and an additional 85,000 acres are enrolled 

in the Conservation Reserve or Wetlands Reserve Program. 

Soybeans are grown on the same area as corn and winter wheat and play a major role 

as a rotational crop to restore and enhance nitrogen in soils. New York already is a corn 

deficient state; that is, less corn is produced than is required to feed the livestock, dairy 

herds and poultry flocks in the state. An increase in soybean prices resulting from new 

demand for soybean oil to make biodiesel is likely to pull some land from both corn and 

winter wheat in New York as well as provide an incentive for farmers to bring idled land 

back into production. Although hay is an important crop for New York’s large dairy 

industry, declining dairy cow numbers reduce the annual requirement for this forage and 

are expected to free up acreage that could be planted to soybeans. Figure 2.2 displays 

the acreages of soybeans, corn, and wheat by county in New York.
Feasibility of a New York Biodiesel Industry 

LECG, LLC 16 May 5, 2004 

Figure 2.2 

Soybean, Corn, and Wheat Acres in New York and Surrounding States 

(Average 2000-2003) 

Other oilseed crops suitable for production in New York State that are not currently 

planted are winter canola and sunflowers. Winter canola, or winter rapeseed, is suitable 

to growing conditions in central and western New York State, and could produce yields 

as high as 3,500 lbs/acre.1

 Winter canola would most likely compete with acreage 

currently planted to winter wheat, soybeans, dry beans and vegetables. Based on 

strong demand, between 100,000 and 200,000 acres could be converted to winter 

canola, yielding 150,000 to 300,000 tons of canola annually. However, high levels of 

winter canola production would result in reduced soybean production as soybean 

acreage shifted to winter canola production.

Sunflowers are another oilseed crop suitable to New York State growing conditions. In 

Cornell Research trials conducted in the late 1970s, New York State yields averaged as 

high as 3,000 lbs/acre.2

 However, like winter canola, sunflowers would compete directly 

with soybean acreage as well as acreage in dry beans. Strong demand could result in 

potential sunflower acreage of 100,000 to 200,000 acres, yielding 100,000 to 250,000 

tons annually, but would result in reduced soybean acreage and production. 

 

1 Wright and Ellis, Cornell Research Trials, 1990.

2 Knapp, Cornell Research Trials, 1979.
Feasibility of a New York Biodiesel Industry 

LECG, LLC 17 May 5, 2004 

As with soybeans, a limiting factor for canola or sunflower is processing capacity. If 

these crops were to be grown, new crushing capacity would have to be built and markets 

for the meal would need to be developed. Further, the economics of crush demand for 

these alternate crops would have to be borne primarily from the oil component since the 

demand base for the meal from these crops is small. 

Subtask: 2.2.2: Supply of Animal Fats and Waste Greases

Animal Fats

These sources of biodiesel feedstocks are derived from the rendering process using 

animal tissues as the raw material. The raw material is ancillary to the slaughter and 

processing of food producing animals for edible meat. The amount of animal fats 

produced correlates to the species of animal slaughtered or processed and the degree 

of further processing that is associated with the marketing and distribution of the meat. 

The major supplies of animal fats and greases in this region are cattle (tallow), poultry 

(poultry fat) and hogs (choice white grease). 

The annual slaughter of food animals establishes the production of fats and greases. In 

a given geography such as New York State, the production will be correlated to the 

slaughter and processing of animal tissues in the region. According to information by 

the U.S. Department of Agriculture in December of 2001, there were 1,615 federally 

inspected meat and poultry establishments in New York, New Jersey and Pennsylvania. 

These facilities may slaughter, process or bone the meat. Of these facilities, 25 process 

their own edible and inedible fats while the other facilities send their fats to rendering 

companies. 

Livestock slaughter numbers for all species are significantly higher in Pennsylvania than 

in either New York or New Jersey. As a result, Pennsylvania slaughter and processing 

facilities generate the most animal fats of the three states analyzed, supplying up to 89 

percent of the total animal fat in the region. Animal fat supplies are based upon inedible 

yields at slaughter and the amount of fat comprising the inedible portion of the animal. 

The average slaughter weights of animals in each state during 2000-2002 were 

multiplied by the inedible yield and percentage of fat comprising the inedible yield to 

provide animal fat per head by species. This figure was then multiplied by the average 

annual slaughter during the same time period. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 18 May 5, 2004 

Table 2.4 

Estimated Quantities of Animal Fats Produced in New York, New Jersey and

Pennsylvania3

Species New York New Jersey Pennsylvania Total

Pounds 

Cattle 6,051,172 2,988,978 126,516,044 135,556,194

Hog 657,797 871,926 51,401,295 52,931,018

Sheep 260,856 982,433 577,464 1,820,753

Poultry 7,142,468 4,998,698 15,611,785 27,752,951

Turkey N.A. N.A 4,447,759 4,447,759

Total 14,112,293 9,842,035 198,554,347 222,508,675

If all of the animal fat generated in New York, New Jersey and Pennsylvania were 

processed into biodiesel it would produce approximately 30 million gallons of biodiesel. 

However, only 1.9 million of those gallons would be produced by feedstocks originating 

in New York. Therefore, any considerable reliance upon animal fats as a biodiesel 

feedstock would require animal fats produced in other states, particularly Pennsylvania. 

The following table contains a list of meatpacking and processing locations in New York 

and Pennsylvania with animal fat rendering capabilities. 

Table 2.5 

Animal Fat Rendering Locations

Company Name Location 

Red Meat/Poultry Processing 

Alle Processing Corp Maspeth NY 11378 

B. Rosen & Sons Bronx NY 10474 

Bilinski Sausage Mfg., Co. Cohoes NY 12047 

Boars Head Provision Co Brooklyn NY 11201 

David Mosner Bronx NY 10451 

David Mosner Nanuet NY 10954 

DeAn's Pork Products Brooklyn NY 11201 

Fairbanks Reconstruction Corp Ashville NY 14710 

Hofmann Sausage Syracuse NY 13202 

Int'l Glatt Kosher Meat Proc Brooklyn NY 11220 

Kane-Miller Corp Tarryton NY 10591 

Kansas Packing Co Kenilworth NY 11024 

Kerr's Custom Butchering South Dayton NY 14138 

London Meat Corporation New York NY 10014 

National Foods Bronx NY 10451 

Newburg Packing Corp Newburgh NY 12550 

PACE Management Painted Post NY 14870 

 

3

 Data for this table has been compiled from U.S. Department of Agriculture Livestock and Poultry Slaughter 

Reports as well as Goldstrand, R. E. 1992. An Overview of Inedible Meat, Poultry and Fishery By-Products. 

In: Inedible Meat By-Products (A.M. Peirson and T.M. Dutson,) Editor Elsevier, N.Y. and from a survey of 

representative renderers. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 19 May 5, 2004 

Company Name Location 

Red Meat/Poultry Processing 

Plymouth Beef Company New York NY 10001 

Rudolph Frey Inc. Buffalo NY 14201 

Russner Foods Buffalo NY 14201 

Schaller and Weber Inc. Long Island City NY 11101 

St. James Alpert Brands Farmington NY 14425 

Alfery's Sausage Co Mt Pleasant PA 15666 

Andrews Dried Beef Co Nazareth PA 18064 

Conagra Grocery Products Co Milton PA 17847 

Dietz & Watson Inc Philadelphia PA 19135 

Emerick's Meat & Pkg Co Inc Hyndman PA 15545 

Great Valley Meat Co Berwyn PA 19312 

Green Valley Packing Co Inc Claysville PA 15323 

H J Heinz LP Pittsburgh PA 15212 

Hatfield Quality Meats Inc. Hatfield PA 19440 

J L Miller Sons Meats Inc York PA 17103 

John F Martin & Sons Inc Stevens PA 17578 

John F Martin & Sons Inc Stevens PA 17578 

Juniata Packing Co Inc/CCK Inc Tyrone PA 16686 

Kessler's Inc Lemoyne PA 17043 

Kunzler and Co Lancaster PA 17601 

Moyer Packing Company Souderton PA 18964 

North Side Foods Corp Arnold PA 15068 

Passanante Bros Inc Bristol PA 19007 

Peters Bros Meat Market Inc Lenhartsvile PA 19534 

Pilgrim's Pride Corporation Franconia PA 18924 

Standard Beef Inc. Dunmore PA 18512 

Stoltzfus Meats Intercourse PA 17534 

Taylor Packing Co Inc Wyalusing PA 18853 

Wedco Inc Pittsburgh PA 15222 

Youndt Bros Denver PA 17517 

814 Americas Inc Elizabeth NJ 07202 

Beef International Inc Pennsauken NJ 08109 

Bringhurst Bros Inc Berlin NJ 08009 

Buona Vita Bridgeton NJ 08302 

Burger Maker Carlstadt NJ 07072 

Cameco, Inc. Verona NJ 07044 

Case Pork Roll Co Trenton NJ 08608 

Davidson Meat Prod New Bedford NJ 07719 

Kohler Delicatessen Mtg. Newark NJ 07102 

Topps Meat Co Inc Elizabeth NJ 07207 

 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 20 May 5, 2004 

Company Name Location 

Red Meat/Poultry Processing 

Renderers 

B.A. Tofte Co. Center Moriches NY 11934 

Baker Commodities Rochester NY 14603 

By-Products Group, Inc Wyalusing PA 18853 

Moyer Packing Company Souderton PA 18964 

Valley Proteins East Earl PA 17519 

Valley Proteins Pittsburgh PA 15122 

American By-Products Morristown NJ 07960 

Darling International Newark NJ 07102 

Harry Berkowitz Industries, Inc. Newark NJ 07102 

J&R Rendering West New York NJ 07093 

M&E Soap Co. Inc. Morris Plains NJ 07950 

Wagman Company Leonia NJ 07605 

Waste Greases: Yellow and Brown4

Yellow grease: Yellow grease is manufactured from spent cooking oil. Spent cooking 

oil can be vegetable oil or animal fat that was heated and used for cooking. Renderers 

“manufacture” yellow grease from spent cooking oil by filtering out the solids and heating 

the spent cooking oil to drive out moisture until the oil meets industry specifications for 

yellow grease.5

Yellow grease is best defined as a fat product that does not meet the definitions for 

animal fat, vegetable fat or oil, hydrolyzed fat or fat ester. There are no published 

statistics on the production and consumption of yellow grease. Nor has the volume of 

used cooking oils and restaurant greases generated by the foodservice industry been 

well documented either. A very influential factor in establishing accurate volumes is the 

actual yield from the material obtained from the food service site. The raw material is 

diluted with water and contains solid material such as French fry and breading particles. 

These fractions must be removed by processing. The most commonly experienced yield 

is 65 percent, though this is highly variable and considered to be proprietary by most 

renderers. Another factor in accurately determining yellow grease supply is identifying 

non-renderer grease collectors of which resale or disposal is often not recorded. 

Pilfering of grease containers is also a problem in certain locations, especially when 

market prices for yellow grease are up. 

 

4 The information for this section was collected through a thorough research of available market and 

technical literature on yellow and brown grease supply and use. Personal conversations were held with 

Ralph Groschen of the Minnesota Department of Agriculture regarding his work and conclusions, and with 

the New York City Department of Environmental Protection. The NYC DEP has regulations requiring 

grease-generating establishments to install and operated grease interceptors. Compliance is difficult to 

monitor and reliable estimates of the amount of grease collected versus the amount disposed are difficult to 

obtain. We did, however, obtain quantitative data for waste grease collected at the 14 NYC wastewater 

treatment plants in 2003, which provided an estimate of how much waste grease was going into the sewers 

on a per capita basis. Dr. Gary Pearl, President of the Fats and Proteins Research Foundation, provided 

the analysis of the quality issues regarding yellow and brown grease as well as other technical information. 5 Groschen, Ralph, Minnesota Department of Agriculture, "Overview of: The Feasibility of Biodiesel from 

Waste/Recycled Greases and Animal Fats," October 2002, p. 2. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 21 May 5, 2004 

The supply and availability of waste grease is more difficult to quantify than for vegetable 

oils. Most yellow grease is produced by restaurant and food operations as they recycle 

cooking oils. Consequently, yellow grease output is directly tied to the number and type 

of restaurants in a locale (consider that the typical McDonald’s changes their cooking 

oils about once every two weeks), and output is generally expressed in terms of pounds 

per capita. As shown in Table 2.6, per capita and per restaurant estimates of yellow 

grease production vary widely ranging from a low of 5.78 pounds per person to a high of 

11.3 pounds per person.6

 The mid-point of this range suggests that New York State 

produces somewhere in the area of 180 million pounds of yellow grease annually. If all 

of this were directed to biodiesel production, this would provide for 24 million gallons of 

biodiesel production. 

It is estimated that a very high percentage (estimated at more than 90 percent) of used 

cooking/restaurant grease is capable of being collected from restaurant and food 

operations. This number would not, however, include fats and greases generated in 

households but only from commercial and institutional food service establishments. The 

percentage of available yellow grease collected from restaurants today is almost 

certainly lower than 90 percent. 

 

6

 In 2003, the Census Bureau started separating out estimates of production and consumption of yellow 

grease in their M311K Current Industrial Reports, “Fats and Oils: Production, Consumption and Stocks,” 

available at http://www.census.gov/cir/www/311/m311k.html 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 22 May 5, 2004 

Table 2.6 

Estimates of Yellow Grease Production, New York State

 Estimated NY State Estimated NY State

 Pounds/ 2002 Yellow Grease 

Source Person Population Production 

 (Millions) (Million pounds) 

Applewhite (1993)1 5.78 19.2 110.7 

Render Magazine (April 2002)2 11.32 19.2 216.9 

USDA Avg yellow grease production (1995-2000)3 9.40 19.2 180.1 

Wiltsee (1998) 8.74 19.2 167.4 

Wiltsee (1998) - weighted average 8.87 19.2 169.9 

 

 

 Estimated Estimated 

 Pounds/ NY State 2002 NY State Yellow 

Source Restaurant # of Restaurants4 Grease Production

 (million pounds) 

Wiltsee (1998) 6,256 29,202 182.7 

Wiltsee (1998) - weighted average 6,268 29,202 183.0 

 

# of restaurants per 1,000 people4 0.66 

 

Notes: 

1) Groschen (2002) derived this estimate by dividing Hunter and Applewhites' estimate of 1.5 billion pounds of yellow grease 

production in the U.S. in 1993 by the estimated U.S. population in 1993 (260 million). 

2) Groschen (2002) reports that this estimate is based on U.S. Census Bureau's estimate of U.S. production of 3.17 billion 

pounds of "grease" in 2001, divided by the 2000 U.S. Census population of 280 million. Groschen points out that it is 

unclear how much yellow grease is included in the total amount of "grease." Thus, this estimate may overestimate yellow

grease production. 

3) Groschen (2002) derived this estimate by dividing the USDA estimates of average yellow grease production between 

1995-2000 of 2.633 billion pounds by the 2000 U.S. Census population of 280 million. 

4) Total number of full-service restaurants and limited-service eating places (including limited-service restaurants, cafeterias, 

and snack and nonalcoholic beverage bars). Wiltsee reports that there is not much variability in the number of restaurants 

per 1,000. Estimates ranged between 1 and 2 for all 30 cities he studied. Thus, 0.66 for NY state may seem low, but the 

use of state figures, rather than a specific metropolitan statistical area may explain this. New York: 2001, County Business 

Patterns, April 2003. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 23 May 5, 2004 

A list of companies in the Region that process yellow grease as well as other rendered 

products is presented in Table 2.7. 

Table 2.7 

Yellow Grease Rendering Locations

Rendering Companies Location

Darling International, INC Newark NJ 

Harry Berkowitz Industries, INC Newark NJ 

American By-Products Morristown NJ 

J&R Rendering West New York NJ 

M&E Soap Co., Inc. Morris Plains NJ 

Wagman Company Leonia NJ 

Baker Commodities, INC Rochester NY 

BA Tofte Co., Inc. Center Moriches NY 

By-Products Group, INC Wyalusing PA 

Moyer Packing Company Souderton PA 

Valley Proteins, INC East Earl PA 

Valley Proteins, INC Pittsburgh PA 

Brown, or Trap, grease: Brown grease is collected from grease traps installed in 

commercial, industrial or municipal sewage facilities to separate grease and oil from 

wastewater.7

 Regulations in some states are moving toward requiring disposal of trap 

grease by rendering companies rather than wastewater treatment plants.8 The water 

content in trap grease is high, resulting in low yield per pound collected.9 

A major determinant in the usability of waste greases is their free fatty acid content 

(FFA). This is “the amount of fatty acids (in weight percent) in an oil that is not 

connected to triglyceride molecules.”10 Oils that are heated during food processing and 

preparation have relatively high FFA contents, since heating can cause fatty acids to 

disconnect from triglyceride molecules.11 Summer temperatures can also increase the 

FFA content of oils. C.T. Donovan Associates reported that the FFA content of rendered 

products processed from restaurant grease or spent cooking oil is between 10 and 20 

percent, as compared with anecdotal evidence that suggests the FFA content of tallow 

processed from animal or slaughter oils and grease is three percent or less.12 High FFA 

content may increase production costs for biodiesel.13 

According to Wiltsee, annual production of brown grease averages an estimated 13.37 

pounds per person. However, this type of grease typically is considered very low quality 

because it contains a significant amount of water and other materials. When this is 

 

7

 Groschen, p. 2. 

8

 Wiltsee, G., Appel Consultants, Inc. "Urban Waste Grease Resource Assessment." Report for National 

Renewable Energy Laboratory (NREL), NREL/SR-570-26141, November 1998, p. 5. 9

 Groschen, p. 2. 10 C.T. Donovan Associates, Inc. “The Availability of No- to Low-Cost Feedstocks for Biodiesel and Ethanol 

in Philadelphia,” Report submitted to Northeast Regional Biomass Program, July 1998, p. 2-6. 11 Ibid. p. 2-7. 12 Ibid. p. 2-12. 13 Ibid. p. 2-12. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 24 May 5, 2004 

accounted for, the usable grease content can be as low as five to 10 percent.14 In other 

words, the supply of brown grease in New York suitable for processing into biodiesel 

ranges from 13 to 25.7 million pounds annually. Currently, all work on converting brown 

grease to biodiesel is experimental. 

The relationship between fat quality and biodiesel yield 

Even though soybean oil is the most abundant feedstock available on a nation-wide 

basis, inedible tallow and yellow grease represent a more plentiful biodiesel feedstock in 

the New York state region. However as discussed above, the physical and fatty acid 

properties of these oil supplies relative to virgin oils and their corresponding impacts on 

the biodiesel production process and the biodiesel fuel may limit their uses in some 

areas. 

To assist in the definitions of specific animal fat and grease feedstock resources the 

following specifications are provided for the basic categories of fat/grease used as 

feeding fats. It must be sold on its specifications, just like any other grade of fat, which 

include: the minimum percentage of total fatty acids, the maximum percentage of 

unsaponifiable matter, the maximum percentage of insoluble impurities, the maximum 

percentage of free fatty acids and the amount of moisture. Most importantly, it must 

meet the Food and Drug Administration (FDA) established criteria for pesticides or other 

toxic chemicals. Definitions of some of the quality characteristics of fats and oils are 

included below. 

• Titer, is the solidification point of the fat in degrees Centigrade, and is a rough 

measure of the saturation level of the fat. The higher the titer the more saturated 

the fat. 

• FFA is the amount of free fatty acids contained in the product. Fats and oils are 

compounds containing three fatty acids each chemically connected to an oxygen 

on a glycerine molecule. Consequently, compounds with this structure are called 

triglycerides. Free fatty acids are those structures that are no longer connected 

to the glycerine. They are a degradation product and a measure of the quality of 

the fat. A high quality fat has a low FFA level. 

• MIU (moisture, insolubles, and unsaponifiables) is a measure of the remaining 

compounds in the fat that are not fatty acids or triglycerides. It is also a measure 

of quality, as is the color. The lower the MIU level the higher the quality of the 

fat. 

• Iodine value is a measure of the hardness or softness of fat and is defined as the 

grams of iodine absorbed by 100 grams of fat. Unsaturated fats have a higher 

iodine value than saturated fats. Consequently, the higher the iodine value the 

softer the fat. 

• AOM Stability is a measure of the peroxide value after 20 hours of bubbling air 

through the sample. This test is intended to determine the ability of the fat to 

resist oxidative rancidity in storage. 

 

14 Wiltsee, p. 6. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 25 May 5, 2004 

Table 2.8 

Common Values for Soybean Oil and Yellow Grease

Measurement 

Crude 

Soybean Oil Yellow Grease Tallow 

Choice White 

Grease 

Titer 20 – 22 36 – 42 40.5 36 

Free Fatty Acids 0.25 - 0.50 5 – 15 6 4 

MIU 1.0 - 1.8 2 – 4 2 2 

Iodine Value 120 – 140 58 – 79 48-58 58-68 

AOM stability, hrs 40 – 45 20 20 20 

The quality of yellow grease is different than soybean oil, as evidenced in the table 

above by the high level of free fatty acids and MIU and the low AOM stability. Soybean 

oil also has a higher degree of unsaturation compared to yellow grease. This explains 

the difference in iodine value (a measure of the amount of unsaturation) and the 

resulting titer (solidification point of the oil). A higher degree of unsaturation (double or 

triple bonds) gives a higher iodine value and a lower titer. The differences in quality 

characteristics between the fats and oils could produce some slight differences in the 

finished product of biodiesel. Saturated fats tend to produce biodiesel with cold flow 

properties that are slightly higher than unsaturated fats. Meanwhile, some tests have 

shown animal fats and vegetable oils to produce biodiesel with a slightly better 

emissions profile. 

End-Use 

The previous sections outlined the potential supply of animal fats and vegetable oils 

produced in the tri-state region. These fats and oils currently are utilized in the 

production of both edible and inedible products. Overall, edible uses consume most of 

the fats and oils produced. Of the edible uses, 92 percent of the fats and oils are used in 

baking and frying and salad and cooking oil applications. On the inedible side, 80 

percent of the fats and oils are used in the production of feed products and fatty acids 

that are used in the oleochemical market. In 2002, 74 percent of the inedible tallow and 

grease in the U.S. was used in animal feed.15 The remainder was used in fatty acids, 

lubricants, soap, and other inedible products.16 

Developing a biodiesel industry in New York State could create a shift in the current 

distribution paths for fats and oils away from some of the lower value uses of these 

products, such as feed, to biodiesel production. 

 

15 U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, Fats and 

Oils: Production, Consumption, and Stocks: 2002, Table 3b. 16 Ibid. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 26 May 5, 2004 

Table 2.9 summarizes the current availability of feedstocks in New York that could be 

used to produce biodiesel. 

Table 2.9 

New York Biodiesel Feedstock Availability Summary 

Feedstock 

Potential 

Supply 

Potential Biodiesel 

Produced 

 Mil Pounds Mil Gallons 

Soybean Oil (max capacity) 48.3 6.5 

Yellow Grease 180.5 24.1 

Animal Fats 14.1 2.0 

Total 242.9 32.6 

Feedstock Prices 

The market prices of various fats and oils are highly correlated. The price of soybean oil 

reflects the supply of soybeans and the demand for crushing which depends on the 

demand for soybean oil for food and industrial uses and the demand for soybean meal. 

As shown in Figure 2.3 the price of crude soybean oil at Decatur averaged 21.84 cents 

per pound over the past 25 years. Most recently, soybean oil prices fell to a post-WWII 

record season low of 14.15 cents per pound in 2000 reflecting record production. 

Subsequent lower soybean crops have drawn down stocks and pushed prices back up. 

The current USDA projection for soybean prices for the 2003 crop year is 28 to 30 cents 

per pound.17 The soybean oil and yellow grease prices used to estimate the agricultural 

and economic impacts in Sections 3.4 and 4.3 are 10-year averages of forecasts 

prepared by LECG using an annual model of the U.S. agricultural sector. This forecast 

was updated in December 2003 based on agricultural and policy conditions in effect at 

that time. 

 

17 USDA. World Agriculture Supply and Demand Estimates. WASDE-407. February 10, 2004.
Feasibility of a New York Biodiesel Industry 

LECG, LLC 27 May 5, 2004 

Figure 2.3

U.S. Soybean Crush and Decatur Crude Soybean Oil Prices

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1980

1982

1984

1986

19881990

1992

199419961998

20002002

Mil Bu

0

5

10

15

20

25

30

35

Cents/lb

Soybean Crush Decatur Soybean Oil

The prices of other fats closely track soybean oil prices. Groschen reports that yellow 

grease prices vary from eight cents to 15 cents per pound.18 C.T. Donovan Associates 

found in 1998 that prices paid for rendered oils and greases in the Philadelphia area 

ranges from 13 cents to 22 cent per pound, averaging about 17 cents per pound.19 The 

authors also stated that several renderers who were surveyed believed biodiesel 

producers would have to pay a premium to divert waste oils and greases from renderers 

and current end use markets.20

Figure 2.4 compares monthly average cash market prices for selected fats and oils that 

can be used to make biodiesel. Since January 2001, Midwest soybean oil prices 

averaged 18.20 cents per pound. Over this same period the price of yellow grease at 

New York was about half that of soybean oil, averaging 9.82 cents per pound; brown 

grease at Chicago averaged 5.55 cents per pound, and Delmarva poultry fat averaged 

10.81 cents per pound. Importantly, the price pattern of each waste grease and fat 

tracked soybean oil, although the increases have not been as large. 

 

18 Groschen, p. 9. 19 The authors noted that one reason prices did not appear to decrease as the FFA content increased may 

be that the largest market for rendered oils and greases in Philadelphia area are animal feed markets on the 

Delmarva Peninsula and specifications for animal feed allow the use of rendered oils and greases that have 

a relatively high FFA content. C.T. Donovan Associates, p. 2-12. 20 C.T. Donovan Associates, p. 2-13. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 28 May 5, 2004 

Figure 2.4

Cash Market Prices of Various Fats and Oils

0

5

10

15

20

25

30

Jan01Apr01Jul01Oct01Jan02Apr02Jul02Oct02Jan03Apr03Jul03

Cents/lb

Soybean Oil (Midwest) Yellow Grease (NY)

Brown Grease (Chicago) Poultry fat (DelMarVa)

Subtask 2.3: Co-Product Demand/Disposal Analysis 

Glycerin

“Glycerin is a byproduct of producing soaps, fatty acids, and fatty esters from the 

triglycerides in vegetable oils and animal fats. Primary sources of glycerin include 

tallow, palm kernel oil, and coconut oil. Dow Chemical is presently the only U.S. 

manufacturer producing synthetic glycerin from petrochemicals.”21 Synthetic glycerin is 

obtained from petrochemical building blocks via several processing steps.22

“Although the terms glycerin, glycerine, and glycerol often are used interchangeably, 

subtle differences in their definitions do exist. Glycerin is the commonly used 

commercial name in the United States for products whose principal component is 

glycerol. Glycerine refers to purified commercial products containing 95 percent or more 

glycerol. Glycerol is the chemical compound 1,2,3-propanetriol.”23

Most of the glycerin marketed today meets the requirements of the United States 

Pharmacopeia (“USP”) and the Food Chemicals Codex (“FCC”). However, technical 

grades that are not USP or FCC certified (“technical grades”) are also available. 

According to the Soap and Detergent Association there is currently a collaborative 

international program to harmonize the glycerin monographs in the USP and the 

European Pharmacopeia, which may later be expanded to include other nations.24 

Glycerin USP is regulated by the FDA, which requires all domestic owners or operators 

of establishments that manufacture or process glycerin USP to register and list with the 

 

21 USDA/ERS. Industrial Uses Of Agricultural Materials, August 28, 1996. 22 “Why Glycerin USP?” The Soap and Detergent Association, 2000. Available at 

http://www.sdahq.org/oleo/USPGlycerin.pdf 23 USDA/ERS. Industrial Uses Of Agricultural Materials, August 28, 1996. 24 Ibid.
Feasibility of a New York Biodiesel Industry 

LECG, LLC 29 May 5, 2004 

FDA. Manufacturers are defined as the original producer, as well as re-packagers 

and/or distributors. Glycerin FCC and USP are also subject to Good Manufacturing 

Practices prescribed by the FDA, while technical grade glycerin is not regulated. 

Substitute raw materials for glycerin include sorbitol and propylene glycol. 

According to the most recently available Economic Census for New York State, the total 

value of shipments of soap and other detergents (including glycerin) in NY was $187.3 

million, roughly one percent of total U.S. shipments of soap and other detergents.25 The 

total number of establishments engaged in manufacturing soaps and other detergents in 

New York State in 1997 was 36, (six of which had 20 or more employees). More recent 

data from the 2001 County Business Patterns report for New York indicates that there 

were 29 establishments in this industry, seven of which had 20 or more employees, 

however this report does not provide the value of shipments.26 

However, total shipments of glycerin in the U.S. totaled $265.9 million, accounting for 

less than two percent of the total value of product shipments of soap and other 

detergents.27 Given glycerin’s small share of total soap and other detergent shipments, 

statistics such as the number of establishments operating in this industry group in NY 

may not be very informative about the number of glycerin producers in New York State. 

Glycerin Supply

As a general rule, production of approximately 10 pounds of oleochemical product yields 

about one pound of glycerin material.28 Approximately 0.7 pounds of crude glycerin are 

produced for every gallon of biodiesel. Refining reduced the glycerine yield by half again. 

The USDA estimates that U.S. glycerin production capacity totaled 522.5 million pounds 

per year in 1995, 25 percent (or 130.6 million pounds) of which is synthetic glycerin.29 A 

private research firm, The Innovation Group, estimated production of 557 million pounds 

refined glycerin in December 2001.30

 

USDA reported that eight natural glycerin producers had 15 production plants in 

operation in the U.S. in 1996 and that Dow had one synthetic glycerin plant in the U.S.31 

According to The Innovation Group (“TIG”), domestic capacity for refined glycerin was 

557 million pounds as of December 2001. Estimates of the distribution of production 

capacity by major producer are provided in Table 2.10 below. As Table 2.10 illustrates, 

 

25 U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, “Soap and 

Other Detergent Manufacturing, 1997 Economic Census, Manufacturing Industry Series,” Issued November 

1999, available at http://www.census.gov/prod/ec97/97m3256a.pdf. Data represent the total value of 

shipments in the NAICS 325611, “Soap and Other Detergent Manufacturing.” which is comprised of 

“establishments primarily engaged in manufacturing and packaging soaps and other detergents, such as 

laundry detergents, dishwashing detergent; toothpaste gels, and tooth powders; and natural glycerin.” 26 U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, “New 

York: 2001, County Business Patterns,” April 2003. 

27 Ibid. 28 “Producers won’t be paying more to keep foods moist,” Purchasing Magazine, June 7, 2001. Available at 

http://www.manufacturing.net/pur/index.asp?layout=article&articleid=CA84442 29 USDA/ERS. Industrial Uses Of Agricultural Materials, August 28, 1996. 30 The Innovation Group, Chemical Profile - Glycerin. Revised 12/3/01. Available at http://www.theinnovation-group.com/ChemProfiles/Glycerin.htm. The Innovation Group (“TIG”) is a consulting company 

serving the manufacturing industry. TIG’s chemical profiles are reportedly published in the Chemical Market 

Reporter, a publication of the Schnell Publishing Company, a member of the Reed Elsevier group. 31 USDA/ERS. Industrial Uses Of Agricultural Materials, August 28, 1996. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 30 May 5, 2004 

the majority of glycerin production takes place in the Midwest, with no major producers 

located in New York State. 

Table 2.10 

Leading Glycerin Producers in the U.S. by Capacity, 2001 

(Million pounds per year)

PRODUCER CAPACITY 

Cognis, Cincinnati, Ohio 65 

Colgate-Palmolive, Jeffersonville, Ind. 20 

Crompton, Mapleton, Ill. 20 

Crompton, Memphis, Tenn. 30 

Dial, Montgomery, Ill. 30 

Dow, Freeport, Tex. 140 

Lever Brothers, Hammond, Ind. (part of Unilever) 25 

Lonza, Painesville, Ohio 20 

Marietta American, Olive Branch, Miss. 2 

Procter & Gamble, Ivorydale, Ohio 150 

Starchem, Fostoria, Tex. 20 

Uniqema, Chicago, Ill. (part of ICI) 35 

Total 557 

Source: The Innovation Group, Chemical Profile - Glycerin. Available at http://www.the-innovationgroup.com/ChemProfiles/Glycerin.htm

• Dow Chemical and Procter & Gamble are the two largest U.S. producers. Dow 

Chemical is the only producer of synthetic glycerin. Others obtain glycerin as a 

byproduct in soap and oleochemicals production using natural fats and oils as raw 

materials. 

• Crompton upgrades crude glycerin to refined glycerin at its plant in Illinois (acquired 

through the merger of Crompton & Knowles and Witco, eventually named Crompton 

Corp. in 2000). 

• Colgate refines glycerin at Jeffersonville using purchased crude. 

TIG reported that the following projects, which would have expanded domestic 

capacity, have been put on hold: 

• Plans by Archer Daniels Midland Company to build a 50-million-pound-per-yer 

glycerin plant at Cedar Rapids, Iowa was put on hold in 1999;32 and a plan by High 

Plains Corp., an ethanol from corn producer, to install a 10-million-pound-per-year 

glycerin recovery unit at its ethanol plant in Colwich, Kansas was put on hold in 

2001. 

 

• In October 2001, Proctor and Gamble Chemicals announced its plans for an 

additional 30,000 metric tons of glycerin capacity to be realized through a new 

 

32 The Innovation Group, Chemical Profile - Glycerin. Revised 12/3/01. Available at http://www.theinnovation-group.com/ChemProfiles/Glycerin.htm 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 31 May 5, 2004 

grassroots refinery.33 Sites in North America, Europe, and Malaysia were reportedly 

under consideration. 

• Crompton Corp. was reportedly looking to divest its refined products operations.34

While no reasons were cited for the cancellation plans, it is reasonable to assume that 

these producers were responding to a slowing U.S. economy as well as concerns over 

the potential impact of increased glycerin supply on prices and profitability from a 

emerging national biodiesel industry. 

Historically, the U.S. and Western Europe have accounted for the majority of glycerin 

production worldwide.35 Over the last 15 years, Southeast Asia has become a major 

supplier. Within Southeast Asia, Malaysia, Indonesia and the Philippines are major 

exporters. The U.S. currently produces about 15 percent of the world’s glycerin, 

approximately on par with Malaysia and Germany. By comparison, the U.S. and Europe 

each account for about one-third of worldwide glycerin consumption. Asia-Pacific 

countries account for another 16 percent, while Japan accounts for 9 percent of total 

global glycerin consumption. Several glycerin producers in Europe are members of the 

European Oleochemicals and Allied Products Group (“APAG”).36 A list of major global 

glycerin producers is also provided in the table of contents of a report by Global Industry 

Analysts.37

Glycerin Demand

Total demand for glycerin in the U.S. is estimated at 453 million pounds in 2002. TIG 

estimates represent average annual growth of 1.9 percent between 1996 and 2000. A 

Chemical Economics Handbook (“CEH”) Report estimated that U.S. consumption grew 

at an average annual rate of 2.4 percent between 1998 and 2001, with strong gains in 

demand for personal care products offsetting declines in demand for polyether polyols 

and alkyd resins.38

Several different estimates of U.S. glycerin consumption were available for 2000 through 

2002. The estimates differ somewhat, both in levels and in direction of growth. For 

example, Oleoline.com estimates that U.S. demand declined from 537.3 million pounds 

in 2000 to 490.5 million pounds in 2002. Conversely, Global Industry Analysts estimate 

that U.S. demand increased from 467.6 in 2000 to 490.1 million pounds in 2002 

(Interestingly, both sources provide the same estimate of demand for 2002). 

While projections of glycerin demand for the next five years also vary, the general 

consensus is that U.S. demand for glycerin is expected to grow between 2 and 3 percent 

per year through 2006. This projection is in line with historical growth in glycerin 

 

33 “Proctor and Gamble Chemicals Expands Glycerin Refining Capacity to Meet Increasing Market Needs,” 

October 1, 2001. Available at http://www.pgchemicals.com. Note, TIG appears to have mistakenly reported 

this increase as an additional 50,000 metric tons expansion. 34 The Innovation Group, Chemical Profile - Glycerin. Revised 12/3/01. Available at http://www.theinnovation-group.com/ChemProfiles/Glycerin.htm 35 Chemical Economics Handbook Report, Abstract, February 2003. 36 For a list of APAG members see Tab [7]. APAG Website. Available at http://www.apag.org/ 37 Global Industry Analysts, Glycerin, July 2002. 

http://www.the-infoshop.com/study/go9769_glycerin.toc.html 38 Chemical Economics Handbook Report, Abstract, February 2003. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 32 May 5, 2004 

demand. Over the last 100 years, demand for glycerin grew at an annual average rate 

of 2.75 percent in the U.S., and at 2.70 percent worldwide.39

Glycerin End Use Segments 

Food and beverage, personal care, and oral care products account for 60 percent or 

more of total glycerin usage in the U.S. TIG estimates that these three segments 

represent 64 percent of total usage in 2001, while Global Industry Analysts (“GIA”) 

estimates usage by these product groups at 60 percent of total usage in 2000.40 

Table 2.11 

U.S. Glycerin Market: Percentage Share Breakdown by End Use Segment

 Year 

End Use Projected 

20061

Estimated

20012

Estimated 

20001

Estimated 

19953

Food (and beverage) 19% 24% 18% 17% 

Personal care (incl. skin, hair, 

and soap products) 

23% 

19% 

Oral care (incl. toothpaste and 

mouthwash) 

17% 

Pharmaceuticals 

41% 

7% 

42% 

24% 

Tobacco 13% 11% 13% 14% 

Polyether polyols 11% 8% 11% 10% 

Alkyd resins 6% 3% 6% 6% 

Cellophane and explosives n.r. n.r. n.r. 2% 

Miscellaneous 10% 7% 10% 8% 

n.r. = not reported. 

Sources:

1. Global Industry Analysts, Inc. (“GIA”) Glycerin - Regional Markets, Rpt. #5506655, May 1, 2002, p. 12. 

The Innovation Group, Chemical Profile - Glycerin. Revised 12/3/01. Available at http://www.the-innovationgroup.com/ChemProfiles/Glycerin.htm

Forecasts of growth in domestic demand by end use sector were available from two 

sources: TIG41 and Global Industry Analysts, Inc. (“GIA”).42 GIA estimates compound 

annual growth in domestic use of glycerin of 3.1 percent from 2000 through 2006. The 

highest rates of growth are expected in food and beverage (four percent per year) and 

polyether polyols (3.4 percent per year). Use by pharmaceuticals and personal care 

products are expected to grow at 2.9 percent per year. Tobacco and alkyd resins are 

expected to grow at 2.7 and 2.6 percent per year, respectively. 

 

39 Oleoline.com, Ltd. Glycerin Market Report, September 2003, Issue No. 2, p. 9. 40 The Innovation Group, Chemical Profile - Glycerin. Revised 12/3/01. Available at http://www.theinnovation-group.com/ChemProfiles/Glycerin.htm 41 OpCit. 42 Global Industry Analysts, Inc. (“GIA”) Glycerin - Regional Markets, Rpt. #5506655, May 1, 2002, p. 12. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 33 May 5, 2004 

TIG estimates that the personal care sector is growing 3.5 percent per year, driven, in 

part, by increasing demand for skin creams from the aging baby boomer segment of the 

population.43 Growth in the oral care sector is estimated at 1.5 percent annually. 

Glycerin Imports and Exports

Glycerin imports into the U.S. have increased over the last five years and now account 

for over 40 percent of total U.S. consumption in 2002.44 The U.S. imports the majority of 

its glycerin from Malaysia. U.S. exports are primarily to Canada. 

Glycerin Prices

Glycerin prices vary widely depending on supply and demand conditions. According to 

TIG annual average kosher grade refined glycerine prices have declined steadily from 

$1.08 per pound in 1996 to $0.80 per pound in 2000. A comparison of monthly spot 

prices of Kosher refined glycerin in the U.S. and the EU is shown in Figure 2.5. 

Figure 2.5 

U.S. and European Spot Glycerin Prices 

(Kosher Grade 99.7%, delivered customer in bulk)

0

20

40

60

80

100

120

 Dec 95

 Sep 96

Jun-97

 Mar 98

Dec-98

Sep-99

Jun-00

Mar-01

Dec-03

Sep-03

Jun-03

Cents/lb

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

ECU/ton

U.S. (Left) EU (Right)

High prices in 1996 were reportedly due to a worldwide shortage of glycerin, estimated 

at roughly 100 million pounds.45 Strong economic conditions in the U.S. in 1999 and 

2000 reportedly spurred growth in glycerin consumption between 1998 and 2000.46 

Supplies were reportedly tight in 2000, but recessionary economic conditions in 2001and 

increased supply from biodiesel-related generation in Europe47 led to a softening in the 

market, with prices reportedly falling to 25-year lows by the beginning of 2002.48 CEH 

 

43 The Innovation Group, Chemical Profile - Glycerin. Revised 12/3/01. Available at http://www.theinnovation-group.com/ChemProfiles/Glycerin.htm 44 Oleoline.com, Ltd. Glycerin Market Report, September 2003, Issue No. 62, p. 9. 45 USDA/ERS. Industrial Uses of Agricultural Materials, August 28, 1996. 46 Chemical Economics Handbook Report, Abstract, February 2003. 47 The Innovation Group, Chemical Profile - Glycerin. Revised 12/3/01. Available at http://www.theinnovation-group.com/ChemProfiles/Glycerin.htm 48 Chemical Economics Handbook Report, Abstract, February 2003. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 34 May 5, 2004 

reported that the market was stabilizing in 2002, as supplies decreased due to low 

biodiesel capacity utilization (reportedly at only 30-40 percent of nameplate capacity).49 

Prices picked up slightly entering 2003, but have recently started to decline again. 

Oleoline.com Ltd. reports that between May and September 2003, the price of kosher 

quality refined glycerin declined in the U.S. 20 percent, from 69 cents/lb to 55 cents/lb.50

The decline was more dramatic in Europe, where the high price of mineral oil is 

increasing the profitability of biodiesel. Oleoline.com Ltd. estimates that kosher quality 

refined glycerin in Europe fell 45 percent over the same period (from EUR 1200 pmt to 

EUR 650 pmt). The situation in Europe is expected to put downward pressure on prices 

in the U.S. Biodiesel production will certainly determine the future market for glycerin. 

Recent discussions with European refined glycerin producers further emphasize the 

potential impact of biodiesel on the crude glycerin supply situation. At present there is 

an ample supply of “conventional” crude glycerin materials and as the biodiesel industry 

continues to develop in Europe, the negative affect on pricing may well continue. 

Obviously, refined glycerin producers have several alternatives to consider including 

expanded applications for glycerin, substitution markets, i.e. displacing other materials 

such as sorbitol, and use of the glycerin as an intermediate for the production of other 

chemicals. 

It is important to note that the conventional glycerin markets are well established and the 

supply of crude materials have, until recently, involved the so-called “fat splitter” and 

“salt-lye” crudes. Fat splitter (or “splitter”) crude is derived from the processing of 

vegetable oils (or animal fats) to produce fatty acids and other oleochemicals, such as 

fatty alcohols. This industry is well established and fundamental to the production of 

numerous consumed products, such as cosmetics and the like. 

In the production of soaps from animal fats or vegetables oils, there is also a by-product 

glycerol material produced. This co-product, referred to as “salt-lye crude” contains a 

higher level of impurities (and inorganic salts) than the crude produced in the fat-splitting 

process. Thus its inherent value in the marketplace is less. 

Biodiesel crude, as indicated, results from the conversion of the triglycerides contained 

in vegetable oils or animal fats, to a methyl ester (biodiesel). The glycerin produced in 

the biodiesel process will typically contain a higher level of impurities than that produced 

in the soap making process. Thus, from an overall standpoint, the crude glycerin from 

biodiesel processing is the least desirable of the “conventional” crude materials. For this 

reason, disposition of the crude produced in the biodiesel process must be a major 

consideration in the overall project evaluation. 

A New York 32.6 MGY biodiesel industry would produces 22 million pounds of crude 

glycerin or about 11 million pounds of refined glycerin annually. This would increase 

total U.S. glycerin supply by less than four percent and should have a negligible impact 

on glycerin prices. It is unclear whether this increased supply would be sufficient to 

attract a major glycerin user to build a new production facility in New York. Passage 

and enactment of a national Energy Bill is expected to increase biodiesel production 

significantly. Consequently, aggregate U.S. glycerin supply also will increase resulting in 

 

49 Chemical Economics Handbook Report, Abstract, February 2003. 50 Oleoline.com, Ltd. Glycerin Market Report, September 2003, Issue No.62, p. 5. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 35 May 5, 2004 

a decline in prices. It is unclear how large the glycerin price response to increased 

supply may be. 

Soybean Meal

Soybean meal is a co-product of soybean processing. Every bushel of soybeans 

crushed typically produces 23.5 pounds of soybean meal. Soybean meal is the solid 

matter that remains after the oil is extracted from the soybean. Soybean meal is a 

concentrated source of protein and energy and is lower in crude fiber than most other 

oilseed meals. The higher protein, energy and lower fiber content of soybean meal 

makes it ideal for high-energy rations such as broiler, turkey, and pig starter feeds. 

Soybean meal typically has a 48 – 50 percent protein level and is rich in amino acids. 

Approximately 85 percent of soybean meal is fed to non-ruminants such as swine and 

poultry. The available amino acid levels in soybean meal complements those of corn 

and other coarse grains in meeting the nutrient requirements of poultry and swine.51

Soybean meal is the standard to which all other protein sources are compared. 

Soybean meal also is an important component of dairy and fed cattle rations. Soybean 

meal is highly palatable and digestible for dairy animals, and it assists the dairyman in 

obtaining the highest milk yield possible from his herd. Soybean protein products also 

may be used in dairy calf milk replacers with acceptable results. 

Large quantities of soybean meal are used in the formulation of pet foods. Simple corn 

and soybean meal diets formulated for dogs perform equally to the complex diets using 

high levels of animal protein. In recent years, there has been a rapid expansion of 

soybean meal use in aquaculture. Soy protein has one of the best amino acid profiles of 

all of the oilseed proteins in meeting the essential amino acid requirement of fish. 

The dairy industry is vitally important to New York agriculture. New York has the 

nation’s third largest dairy herd (678,000 head) and produced 12.2 billion pounds of milk 

in 2002. Dairy products accounted for half of total New York farm cash receipts in 2002.

New York also is a grain and protein deficient state. That is, New York farmers use more 

corn and soybean meal than is produced in the state. Currently, the three soybean 

processors in New York have the capacity of producing 73,000 tons of soybean meal 

annually but produce only half that amount. A biodiesel industry that would create the 

demand for oil to be processed into biodiesel would raise the price of soybean oil by an 

estimated 7.3 percent and will provide a market incentive for these processors to 

produce at capacity and is expected to attract investment in another crush facility 

resulting in additional local soybean meal supply. The amount of soybean meal that 

would be produced as a result of a biodiesel industry is small relative to the total U.S. 

supply and is unlikely to have a noticeable impact on market prices. However, increased 

local supply will benefit New York dairymen and other livestock and poultry producers by 

reducing transportation costs and lowering the basis for soybean meal. 

 

51 Keith Smith and Associates. “Advances in Feeding Soybean Meal”. http://www.soymeal.org/ksmith.html 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 36 May 5, 2004 

TASK 3: PRODUCTION ANALYSIS – BIODIESEL AND BYPRODUCTS

Subtask 3.1: New York State Production Options 

The Biodiesel Plant Development Handbook© (The Handbook) published by the 

Independent Biodiesel Feasibility Group (IBFG) is an excellent resource to help 

determine the factors to be considered before investing in the biodiesel business and 

installing a production plant. While The Handbook was written with the individual in 

mind, it provides a useful starting place to make recommendations on the most 

appropriate plant size and biodiesel technology for New York. 

According to The Handbook, the items to be considered first when selecting a 

technology and building a plant are: 

• Demand for Biodiesel 

• Feedstock Availability 

• Existing Production Capacity/Competition 

The analysis performed for this section of the report assumes that sufficient demand for 

biodiesel already exists. The analysis focuses on which technologies would serve New 

York the best, given likely feedstock sources and feedstock quality available in New York 

from either indigenous feedstock production or through imports from other states. 

We have evaluated a number of biodiesel production technologies that are commercially 

offered and have been demonstrated in the marketplace via the installation of at least 

one commercial facility. The project team has an excellent and confidential relationship 

with most of the technology companies, and is able to utilize this knowledge to provide 

an independent assessment of these technologies based upon the factors most 

important to the company installing or evaluating the technology. There are a variety of 

factors that must be taken into account when evaluating a technology. These factors 

can vary substantially between the technologies and even more substantially between 

the companies offering the technologies. This is especially true when considering the 

capability to handle feedstocks of varying quality. A brief summary of these factors is 

found below. 

Factors In Technology Selection: 

• Production Capacity – what sizes are offered? 

• Capacity Expansion – is the technology easily expanded if volumes go up? 

• Feedstock Flexibility (percent FFA) – Can the technology handle various FFA 

levels? 

• Co-product Streams – Quantity and quality of glycerin and other process streams 

• Equipment and Operating Complexity – How complex is the plant and its 

controls? 

• Waste Streams – What is the quantity and quality of waste streams. 

• Process Safety Design – What is the safety record for plants using this 

technology? 

• Services Offered – Can you buy a turnkey plant, or just the engineering design? 

• Previous Experience – How many plants are in operation or coming on line 

soon? 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 37 May 5, 2004 

• Performance Warranty – Does the company offer performance warranties? 

• After Sale Support – Does the company offer technical support and for how long? 

• Project Delivery Time – How long will it take once the contract is signed? 

To complete the evaluation, the project team contacted the leading technology 

companies and requested information on their technology for the following scenarios: 

Soybean oil 0.5 % FFA 0.2 % MIU Titer average of 22 °C 

Yellow grease 10.0 % FFA 3.0 % MIU Titer average of 38 °C 

Animal fat 3.0 % FFA 1.5 % MIU Titer average of 45 °C 

These scenarios are based on the average quality of feedstocks available in New York. 

Due to the competitive nature of the business, many of the technology companies were 

reluctant to provide detailed information that could be included in this report. We were, 

however, able to obtain information with which to provide the recommendation and 

analysis provided below. The review is not intended to provide confidential information 

or go into extreme detail relative to the individual processes. Some of the technology 

companies were also much more willing to provide information in a timely manner. 

This section recommends technology options that appear to be the best at meeting the 

biodiesel needs of New York State. The evaluation is based largely upon confidential 

information provided by the technology companies and our evaluation of this information 

as it relates to the factors important for New York. 

It cannot be overemphasized that any one of these factors may lead an individual 

company or investor to select other technologies than those recommended by this 

report. That is why it is critical for each company to conduct a thorough investigation of 

the top several technologies in order to make a determination of the most appropriate 

technology for them. 

General Biodiesel Technology Overview:

In order to provide a basis for the individual process technologies review, a general 

overview of the “generic” biodiesel production technique is appropriate. The discussion 

below overviews the basic approach to biodiesel production from refined vegetable oils, 

e.g. soybean oil, and identifies the basic stages involved in the manufacture of this 

product. 

There are three basic avenues of commercial significance to the production of biodiesel 

(mono-alkyl esters) from naturally occurring vegetable oils and fats (also known as 

triglycerides (TG)).52 Mono-alkyl esters are also made for purposes other than biodiesel 

such as intermediates for industrial chemicals, consumer products and the like. Thus, 

there is a significant amount of know-how relative to these materials. Much of the 

current biodiesel technology is based on the “simplification” of the conventional ester 

production techniques so as to allow for the manufacture of a more ”commodity-like” 

material. The primary approaches to the manufacture of these materials include: 

• Reaction of the TG with an alcohol, using a base catalyst 

 

52 For the remainder of this section we will use the term TG as a generic term to represent any naturally 

occurring vegetable oil or animal fat. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 38 May 5, 2004 

• Reaction of the TG with an alcohol, using a strong acid catalyst 

• Conversion of the TG to its fatty acids, and a subsequent reaction of the fatty 

acids with an alcohol using a strong acid catalyst 

Almost all of the mono-alkyl esters of commercial significance (especially biodiesel) are 

produced using the base catalyzed reaction of the TG with methanol. Use of acid 

catalysis is typically limited to the conversion of the fatty acid fraction in high free fatty 

acid (FFA) feeds, or to treat intermediate high fatty acid/ester streams that can form in 

the acidification of the crude glycerin bottoms produced as a co-product of the 

transesterification reaction. Further discussion relative to the esterification concept will 

be presented later. 

For soybean oil feedstocks, or other virgin seed oils or animal fats low in FFA, the most 

cost effective avenue is the base catalyzed reaction of the TG for the following reasons: 

• It is a low temperature (150° F or less), low pressure chemical process 

• It yields high conversion (98 percent) with minimal side reactions 

• No exotic materials of construction are needed 

The chemical reaction is illustrated below. Stoichiometrically, 100 pounds of TG are 

reacted with 10 pounds of alcohol in the presence of a base catalyst to produce 10 

pounds of glycerin and 100 pounds of mono-alkyl esters or biodiesel. In practice, an 

excess of alcohol is used in the reaction to assist in quick and complete conversion of 

the TG to the esters, and the excess alcohol is later recovered for reuse. All reactants 

must be essentially free from water. The catalyst is usually sodium methoxide, sodium 

hydroxide, or potassium hydroxide that has already been mixed with the alcohol. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 39 May 5, 2004 

Figure 3.1 

Illustration of the Transesterification Chemical Reaction

Glycerine

H ⎯ C ⎯ OH

H

⏐

H ⎯ C ⎯ OH

H ⎯ C ⎯ OH

H

⏐

Biodiesel Methyl Esters

CH3 ⎯ O ⎯ C ⎯ (CH2)16CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

O

⏐⏐

Methyl Stearate (Saturated Ester)

Methyl Oleate (Mono-unsaturated Ester)

Methyl Linoleate (Di-unsaturated Ester)

+

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)16CH3

H O

⏐ ⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

H

O

⏐⏐

⏐

Typical Soybean Oil

Triglyceride Configuration

OHBase

Catalyst

+ 3 H ⎯ C ⎯ OH

Methanol

H

⏐

H

⏐

Glycerine

H ⎯ C ⎯ OH

H

⏐

H ⎯ C ⎯ OH

H ⎯ C ⎯ OH

H

⏐

Biodiesel Methyl Esters

CH3 ⎯ O ⎯ C ⎯ (CH2)16CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

O

⏐⏐

Methyl Stearate (Saturated Ester)

Methyl Oleate (Mono-unsaturated Ester)

Methyl Linoleate (Di-unsaturated Ester)

+

Glycerine

H ⎯ C ⎯ OH

H

⏐

H ⎯ C ⎯ OH

H ⎯ C ⎯ OH

H

⏐

Glycerine

H ⎯ C ⎯ OH

H

⏐

H ⎯ C ⎯ OH

H ⎯ C ⎯ OH

H

⏐

H ⎯ C ⎯ OH

H

⏐

H ⎯ C ⎯ OH

H

⏐

H ⎯ C ⎯ OH

H ⎯ C ⎯ OH

H

⏐

H ⎯ C ⎯ OH

H

⏐

Biodiesel Methyl Esters

CH3 ⎯ O ⎯ C ⎯ (CH2)16CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

O

⏐⏐

Methyl Stearate (Saturated Ester)

Methyl Oleate (Mono-unsaturated Ester)

Methyl Linoleate (Di-unsaturated Ester)

Biodiesel Methyl Esters

CH3 ⎯ O ⎯ C ⎯ (CH2)16CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

O

⏐⏐

Methyl Stearate (Saturated Ester)

Methyl Oleate (Mono-unsaturated Ester)

Methyl Linoleate (Di-unsaturated Ester)

CH3 ⎯ O ⎯ C ⎯ (CH2)16CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)16CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)16CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

O

⏐⏐

CH3 ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

O

⏐⏐

Methyl Stearate (Saturated Ester)

Methyl Oleate (Mono-unsaturated Ester)

Methyl Linoleate (Di-unsaturated Ester)

+

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)16CH3

H O

⏐ ⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

H

O

⏐⏐

⏐

Typical Soybean Oil

Triglyceride Configuration

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)16CH3

H O

⏐ ⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

H

O

⏐⏐

⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)16CH3

H O

⏐ ⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)16CH3

H O

⏐ ⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CH(CH2)7CH3

O

⏐⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

H

O

⏐⏐

⏐

H ⎯ C ⎯ O ⎯ C ⎯ (CH2)7 ⎯ CH=CHCH2 CH=CH(CH2)4CH3 

H

O

⏐⏐

⏐

Typical Soybean Oil

Triglyceride Configuration

OHBase

Catalyst

+ 3 H ⎯ C ⎯ OH

Methanol

H

⏐

H

⏐

3 H ⎯ C ⎯ OH

Methanol

H

⏐

H

⏐

While the ASTM specification for biodiesel permits the use of a variety of alcohols for the 

production of biodiesel, methanol is currently the main alcohol used commercially for the 

production of biodiesel. There have been discussions regarding the use of ethanol, but 

to date the use of this alcohol for biodiesel is insignificant. Major reasons why methanol 

is the current alcohol of choice include: 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 40 May 5, 2004 

• Methanol is less expensive than ethanol 

• Ethanol is a larger molecule than methanol and it is incrementally more difficult to 

get the reaction to go to completion, requiring longer reaction times or higher 

temperatures 

• It is more difficult to recycle the excess ethanol due to its azeotrope with water at 

the 95 percent concentration 

For these reasons, this general overview will focus primarily on the base catalyzed 

reaction of the TG with methanol. As indicated, there will be a brief review of the 

esterification application since this step would be required if higher fatty acid materials 

are to be treated. 

A simplified process concept for the production of biodiesel from soy oil and methanol, 

using transesterification only, is shown in Figure 3.2. 

The general process discussion that follows is not related to any particular supplier’s 

package, but rather outlines the various functions that must be accomplished in the 

overall production sequence. The overall approach to biodiesel production, for the 

general transesterification process concept, consists of several steps or process units. 

Mixing of Methanol and Catalyst: 

The catalysts typically used include sodium methoxide, sodium hydroxide or potassium 

hydroxide. The catalyst is dissolved in the methanol with a simple mixing process. With 

sodium or potassium hydroxide, care must be taken to ensure that the material does not 

absorb water in storage. This could cause the formation of large clumps, which are hard 

to dissolve, and water has an adverse impact on downstream processing. 

This mixing system must also be closed to the atmosphere to avoid release of methanol 

vapors, an important parameter for obtaining the proper permits for plant operation. In 

the case of sodium methoxide, the material is typically received as a concentrated 

solution (in methanol) and is low in water content due to the production process for the 

manufacture of this material. 

As a side note, the use of sodium methoxide as the catalyst is common in Europe, and is 

gradually gaining interest in the U.S. The primary impediment to more widespread use 

has been the cost of the material. Most of the methoxide is manufactured in Europe 

resulting in an inherent freight advantage in Europe verses the United States. The 

advantage of using sodium methoxide is that due to its inherent anhydrous nature 

various side reactions in the transesterification process related to the presence of water 

in the reactants are minimized. As biodiesel production increases, and the potential for 

larger volumes of methoxide consumption materialize, the price for the material may 

decrease. Thus, it is important for the biodiesel producer to maintain up-to-date 

knowledge of the catalyst-pricing situation. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 41 May 5, 2004 

Figure 3.2 

Illustration of Base Catalyzed Reaction of Triglycerides with Methanol

Methyl 

or

Ethyl 

Alcohol

Base

Catalyst

Vegetable or Animal 

Oil

Catalyst 

Mixing

Strong

Base

TransEsterification

Reactor #1

TransEsterification

Reactor #2

Vacuum

Oil Dryer

Phase 

Separation

Refining Mixer

To Vacuum

Pump

Mixer

Phase

Separator

Ester Washing

Alcohol Stripping

Glycerin

Acidulation

Strong

Acid

Ester Drying

Crude 

Glycerin Fatty 

Acids

Biodiesel

To Alcohol

Storage

Alcohol

Recovery

Methyl 

or

Ethyl 

Alcohol

Base

Catalyst

Vegetable or Animal 

Oil

Catalyst 

Mixing

Strong

Base

TransEsterification

Reactor #1

TransEsterification

Reactor #2

Vacuum

Oil Dryer

Phase 

Separation

Refining Mixer

To Vacuum

Pump

Mixer

Phase

Separator

Ester Washing

Alcohol Stripping

Glycerin

Acidulation

Strong

Acid

Ester Drying

Crude 

Glycerin Fatty 

Acids

Biodiesel

To Alcohol

Storage

Alcohol

Recovery
Feasibility of a New York Biodiesel Industry 

LECG, LLC 42 May 5, 2004 

Transesterification Reaction: 

The TG is then charged into a reactor, either continuously or in batches, and the 

methanol/catalyst mix is added. The reaction mix is kept at approximately 150 °F for 

between one and eight hours. Excess methanol is utilized to ensure that a high 

percentage (98.5 percent minimum for biodiesel) of conversion of the TG to methyl 

esters takes place. The catalyst will first react with any free fatty acids present in the oil 

to form sodium (or potassium) soaps. This reaction of a fatty acid with sodium or 

potassium hydroxide is called saponification. There must be enough additional catalyst 

in the reaction mixture to catalyze the reaction after the free fatty acids have been 

saponified. If the free fatty acid level is too high, (maximum FFA allowed varies between 

the process suppliers), or if any water is present, any soap formed can begin to form 

emulsions with the methanol and TG, slowing or preventing the reaction from occurring. 

Not only does this reduce the yield of the process, it has the adverse effect of creating a 

more dispersed mixture, which may be difficult to handle in later processing. 

In some cases, the emulsion can be so stable that it forms a cottage cheese looking 

product. In this case, the product must be physically removed from the system and 

disposed of in an environmentally safe manner. Short of this, since the biodiesel must 

eventually be water-washed, the presence of excessive emulsions can result in the loss 

of biodiesel to the wash water, thus creating a yield problem or, if the water is recycled, a 

higher biodiesel recycle rate which can be detrimental to the overall process economics. 

For these reasons, it is recommended that the incoming oil be pre-treated to minimize 

fatty acids, so as to maintain a level below the maximum allowable, as specified by the 

process provider, and that the water content in any of the feed streams also be kept to a 

minimum. 

Methanol Removal: 

In some system designs, the excess methanol is removed at this stage via a simple flash 

process or vacuum distillation. In other systems, the methanol is removed after the 

glycerin and esters have been separated. In either case, the methanol is recovered, 

dried and reused using conventional distillation equipment. Care must be taken to 

ensure no water accumulates in the recovered methanol stream. In addition, the design 

and control of this system must also allow for the recovery of the water stream, from the 

distillation system, that is essentially free of methanol. 

Separation: 

Once the reaction is complete, two major products exist; namely methyl esters 

(biodiesel) and glycerin. Due to the density difference between methyl esters, and 

glycerin, the two phases can be separated by gravity in conventional settling equipment 

and the glycerin drawn off the bottom of the settler. In some cases, a centrifuge is used 

to separate the two phases, depending on the specific process supplier. 

Depending on the particular process approach, any “rag” (i.e. soapy emulsions layer) 

between the two phases can be removed and reacted with a strong acid (e.g. 

hydrochloric, sulfuric, or phosphoric) to recover the fatty acids. The acid water resulting 

from this treatment step is recycled or neutralized and sent to sewage treatment. 

Control of this material varies between process providers. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 43 May 5, 2004 

Glycerin Neutralization: 

The glycerin phase contains the excess catalyst, fatty acid soaps, and some level of 

dissolved ester. In order to recover the contained fatty acids and esters the material can 

be acidulated with an acid, typically hydrochloric, sulfuric, or phosphoric, and sent to a 

settling tank where the mixture is allowed to separate by gravity. The fatty acids, along 

with any dissolved ester, will float to the top of the settler and can be pumped to a 

storage tank to be sold or used in another process. Alternatively the mixture can be 

returned to the biodiesel process for treatment in an acid catalyzed esterification system 

to convert the fatty acid fraction to esters or reintroduced into the transesterification 

system to maximize overall recovery. The choice as to the extent of glycerin processing 

is, to some extent, related to the overall plant size or specific plant site criteria and 

capabilities. 

The acidulated glycerin is then neutralized with a weak base to a pH of 7.0 to 7.5 and 

sent to storage as crude glycerin. In some cases the salt formed, e.g. potassium 

phosphate, sulfate, or chloride, (if using a potassium hydroxide catalyst) may be 

recovered for fertilizer, depending on local disposal regulations and salt volumes 

involved. If sodium hydroxide is used as the catalyst and hydrochloric acid as the 

acidulation source this results in the formation of sodium chloride as the end salt. This is 

usually left in the glycerin or, if removed, disposed of as a non-hazardous waste. The 

glycerin produced in the biodiesel process can range from 50 percent to 88 percent pure 

glycerin, depending on the extent of treatment after acidulation. 

It should be noted that the typical co-product glycerin contains sufficient catalyst 

(alkaline) material such that the addition of acid to neutralize the base can result in the 

precipitation of salts. Thus, the handling of the glycerin fraction is an important 

consideration in the overall process design approach. 

Allowing for the production of a low concentration glycerin (e.g. 50 percent) does enable 

the producer to keep the salts in solution and increase the water load in the final glycerin 

material exiting the plant. This, of course, lowers the inherent value of the glycerin to the 

potential refiner. 

Increasing the concentration of glycerin in the final crude will (in most cases) result in the 

crystallization of salts and the need for equipment to remove this solid material. The 

obvious advantage is that the inherent quality of the crude glycerin is improved, thus 

making it more attractive to potential refiners. 

Methyl Ester Wash: 

Once separated from the glycerin, the methyl esters are gently washed with warm, 

deionized water to remove any residual catalyst and soaps. The material is then dried 

and sent to storage. At this point the methyl esters (biodiesel) are typically 98.5 percent 

pure and ready to be sold as fuel. In some limited cases the esters are distilled under 

vacuum to achieve even higher purity. However, in the production of esters for biodiesel 

there is usually little need for distillation since this adds costs to the product with little (or 

no) additional marketing benefits as a fuel for diesel engines. 

As indicated earlier, the washing step can be greatly affected by the free fatty acid level 

of the feed, since all the free fatty acids form soaps in the reaction. If the soap content in 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 44 May 5, 2004 

the washing step is too high the water wash will entrain the esters and yields will be 

diminished, sometimes significantly. 

Fatty Acid Esterification: 

As indicated, in some cases an esterification step, using an acid catalyst, is incorporated 

into the biodiesel processing sequence in order to treat high fatty acid feedstocks or 

allow for the recycle of the fatty acid/methyl ester fraction recovered in the glycerin 

acidulation step. This stage involves mixing the high fatty acid material with a solution of 

methanol that contains an acid catalyst, typically sulfuric acid. The contained fatty acids 

are then converted to methyl ester via the following reaction: 

Figure 3.3 

Illustration of the Esterification Chemical Reaction 

 O O 

 | | | | 

R-C-O-H + CH3OH ------> R-C-O-CH3 + H2O 

 H2SO4 

Catalyst 

Fatty Acid Methanol Methyl Ester Water 

An excess of methanol/H2SO4 is employed to ensure conversion and after reaction 

completion this excess is separated from the ester phase. 

The conversion of the fatty acid to ester results in the formation of water, thus after the 

reaction there is water in the methanol/sulfuric acid mixture. Since this is an equilibrium 

reaction, the presence of excessive amounts of water will adversely affect the 

conversion of the fatty acid to ester. Thus, a portion (or all) of the methanol/sulfuric acid 

mix is purged from the system and treated to recover the methanol and reject the water. 

A typical approach involves using this purge material as the acidifying agent for treating 

the glycerin material, followed by recovery of the methanol. In this case, the water 

fraction will end up in the glycerin phase. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 45 May 5, 2004 

Figure 3.4 

Illustration of Acid Catalyzed Reaction of Triglycerides with Methanol

Methyl 

or

Ethyl 

Alcohol

Acid 

Catalyst

Vegetable or Animal 

Oil

Catalyst 

Mixing

Strong

Base

Esterification

Reactor

Mixer

Phase

Separator

Ester Washing

Alcohol Stripping

Glycerin

Neutralization

Ester Drying

Crude 

Glycerin

Biodiesel

To Alcohol

Storage

Alcohol

Recovery

Methyl 

or

Ethyl 

Alcohol

Acid 

Catalyst

Vegetable or Animal 

Oil

Catalyst 

Mixing

Strong

Base

Esterification

Reactor

Mixer

Phase

Separator

Ester Washing

Alcohol Stripping

Glycerin

Neutralization

Ester Drying

Crude 

Glycerin

Biodiesel

To Alcohol

Storage

Alcohol

Recovery

Individual Technology Overview:

Project team member IBFG has developed extensive information relative to various 

process companies that offer biodiesel production technology for processing virgin oils 

as well as used cooking oils and animal fats. This data consists of information prepared 

for marketing or general distribution by the technology company, as well as that obtained 

as a result of personal experience and confidential business interactions. Where 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 46 May 5, 2004 

information has been supplied directly by the process provider, it is used as-is. In some 

cases IBFG estimates may have been made for certain factors. 

For purposes of evaluation, the technologies were separated into those commercially 

available and those that are experimental. Commercially available technologies are 

defined as those offered for sale by a viable company and for which at least one 

commercial operation has been built. To preserve individual company confidentiality, 

the confidential information obtained from each company was combined to create an 

average technology for each of the three cases. This protects the confidential nature of 

the information supplied by the technology companies while still providing NYSERDA 

with reasonable cost estimates for each scenario. Only companies who chose to 

respond to the request for information were evaluated in this study. 

The complete list of companies queried in this study, and their responsiveness to the 

request for information to NYSERDA, can be found below: 

Companies who responded 

 Axens 

 Ballestra 

 BDI 

 Biodiesel Industries 

 CD Process Conneman 

 Cimbria Sket/Bratney 

 Ekoil 

 Energia 

 Lurgi PSI 

 Renewable Energy Group (Crown Iron Works/West Central Coop) 

A brief summary of the technology and some background information on each company 

that responded can be found in Appendix 1. Also included is a brief assessment of the 

quality and level of detail in the information provided, which varied substantially between 

the companies. In previous dealings with biodiesel technology companies, IBFG has 

found that the responsiveness of the technology company to the request for information 

and the quality and level of detail provided is an important barometer in selecting a 

technology company. In addition, the relative experience of each provider is discussed 

based primarily on the number and type of facilities constructed. Note that when making 

estimates IBFG has attempted to take a conservative view of each factor, such as cost, 

schedules, etc. It is quite possible that when dealing with the provider on the basis of a 

real project, factors such as cost and schedule can be different once the actual scope of 

the project has been defined and specific details known. 

Technology for soybean oil based biodiesel 

There are many readily available technologies for biodiesel produced from soybean oil 

with free fatty acid levels of 0.5 percent and lower. In all cases, the technology of choice 

for soybean oil low in free fatty acids is the typical transesterification technology with 

methanol. The companies offering technology and who responded to the request for 

information for this NYSERDA project are below. Since the basic technology involved is 

the same for all of these technologies, the estimated costs, both installed costs and 

operating costs, were fairly similar with any differences being primarily due to the 

confidence level of the estimate. At this level of detail, all estimates are approximately 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 47 May 5, 2004 

+/- 30 percent and all costs were well within that range. All companies stated their 

process would produce ASTM grade biodiesel. 

Commercially available technologies (at least one plant in operation): 

 Ballestra 

 Biodiesel Industries 

 Cimbra Sket/Bratney 

 CD Process Conneman (low FFA oil version) 

 Renewable Energy Group (Crown Iron Works/West Central Coop) 

 Ekoil 

 Energia 

 Lurgi PSI 

 BDI 

With similar costs and technology, the factors which set one technology apart from 

another are more related to the experience and responsiveness of the company, as well 

as the level of detail provided on the process so that a more informed decision can be 

made. Three companies were clearly superior to the others when taking these factors 

into account, especially in terms of responsiveness: Lurgi, Cimbia Sket/Bratney, and 

Renewable Energy Group. These companies represent the state of the art in vegetable 

oil based biodiesel technology, quality and service and are the recommended 

technologies resulting from the responses provided for this study. 

Recommended State of the Art Technologies for Soybean Oil Based Biodiesel: 

 Lurgi 

 Renewable Energy Group 

 Cimbra Sket/Bratney 

Biodiesel production costs were estimated using the Biomass Cost Estimation Guide, 

developed by Oak Ridge National Laboratory specifically for comparing and contrasting 

technologies. A detailed analysis of the production economics for each feedstock 

combination is presented in Appendix 2. 

A summary of the economics of the small (three million gallons per year) and large (12 

million gallons per year) biodiesel plants using soybean oil are found in Table 3.1. This 

estimation guide creates generic factors for plant financing and the sales and 

administration functions so that true differences in size and technology can be better 

separated and analyzed. Compared to actual plant operations data available to IBFG, 

the resulting product costs using this approach tend to be slightly higher (five to 10 

percent) than real operations. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 48 May 5, 2004 

Table 3.1 

Biodiesel Production Analysis for Soybean Oil 

(0.5 percent) Free Fatty Acid

Plant Size Capital Cost Biodiesel Cost 

(million gal/yr) (million) ($/gallon) 

3 $3.3 $2.38 

12 $12.0 $2.12 

Note: Soybean Oil Price of $.21/lb 

Technology for Yellow Grease Based Biodiesel 

The technology for production of yellow grease based biodiesel, while readily available, 

is much less plentiful than that of soybean oil. As discussed earlier, the presence of free 

fatty acids at too high a level causes problems with the traditional transesterification 

reaction. In general, the technologies available for handling higher levels of free fatty 

acids utilize an acid catalyzed esterification process, or a combination of a free fatty acid 

removal with acid catalyzed process followed by a traditional base catalyzed 

transesterification of the FFA free oil. The methods are much more varied than with low 

free fatty acid materials, and are considered highly proprietary by the technology 

producers. While there are commercially available technologies, there are very few 

operational plants with which to base solid cost estimates on. 

Commercially available technologies for Yellow Grease Biodiesel: 

 Biodiesel Industries 

 Energia 

 BDI 

 Lurgi PSI 

With such few plants in operation, and the proprietary nature of the technology, it is 

much more difficult to make a fact based recommendation on the best technology for 

yellow grease based biodiesel for New York. The data provided by Lurgi was by far the 

most complete. That, in combination with the many years of experience in the 

oleochemical field, perhaps puts Lurgi at the top of the list. However, Biodiesel 

Industries has constructed two plants and while the data provided by Biodiesel Industries 

was not as thorough as that of Lurgi they have just as much experience as Lurgi, if not 

more, in producing biodiesel from yellow grease. While BDI responded quickly to the 

NYSERDA request, they provided no useful information with which to evaluate their 

technology. Based on this data and other factors, the recommended yellow grease 

technologies are Lurgi PSI and Biodiesel Industries. 

The economics of a small and large-scale facility can be found in Table 3.2. All yellow 

grease technologies claimed to convert all the free fatty acids in the incoming feed to 

biodiesel and this was used as the basis for the economic calculations. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 49 May 5, 2004 

Recommended State of the Art Technologies for Yellow Grease Biodiesel: 

 Lurgi 

 Biodiesel Industries 

Table 3.2 

Biodiesel Production Analysis for Yellow Grease 

(10 percent) Free Fatty Acid

Plant Size Capital Cost Biodiesel Cost 

(million gal/yr) (million) ($/gallon) 

3 $4.0 $1.53 

12 $14.5 $1.36 

Note: Yellow Grease Price of $.11/lb 

Technology for Animal Fat Based Biodiesel 

The technology for production of animal fat based biodiesel, with FFA levels at three 

percent, is the same as that for yellow grease. The maximum free fatty acid level of all 

the soybean oil based technologies was one percent. If the FFA level got higher than 

one percent the same technology options as that for yellow grease are employed for 

animal fat (i.e. acid esterification, or FFA removal with a combination of acid 

esterification and base transesterification). The main difference is whether the removed 

FFA rich stream is actually processed via acid esterification to make biodiesel, or just 

sold as a by-product. For the purposes of this analysis, the option of selling the high 

FFA stream as a by-product was chosen rather than continuing with the esterification 

step. This presents a good mid range between the yellow grease and soy technologies 

in terms of both operating and capital costs. 

While only four companies responding to the survey claimed to be able to process 

animal fats, it should be noted that it is possible to purchase the FFA removal technology 

separately. Therefore, if someone wanted to use one of the low FFA biodiesel 

technologies applicable to soybean oil for the higher FFA animal fats, they may be able 

to do so if they choose to purchase the FFA removal technology from another vendor. It 

is more difficult to manage the transition between the two processes if two separate 

vendors are chosen, however, so for the purposes of this analysis only companies who 

claimed to do both are listed below. 

Commercially Available Technologies For Animal Fat Biodiesel: 

 Biodiesel Industries 

 Energia 

 BDI 

 Lurgi PSI 

For technology recommendations between these companies, the considerations are 

similar to those discussed in the yellow grease section. The recommended technology 

here, however, is Lurgi because Biodiesel Industries employs an acid esterification step 

with no FFA removal and therefore does not offer an option to remove and sell a high 

FFA stream. The economics of the animal fat based biodiesel production can be found 

in Table 3.3. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 50 May 5, 2004 

Recommended State of the Art Technologies for Animal Fat Based Biodiesel: 

 Lurgi 

Table 3.3 

Biodiesel Production Analysis for Animal Fat 

(3 percent) Free Fatty Acid

Plant Size Capital Cost Biodiesel Cost 

(million gal/yr) (million) ($/gallon) 

3 $3.5 $1.92 

12 $13.0 $1.76 

Note: Animal Fat Price of $.16/lb 

It has been the experience of IBFG that most companies who wish to process animal 

fats are also interested in yellow grease. While animal fats are called out separately in 

this report, in most cases commercial entities will either choose a technology capable of 

processing yellow grease, which can also process animal fats and soybean oils, or they 

will choose one that will only handle low FFA soybean oil type feedstocks. 

Technology for Mixed Feedstock Biodiesel Production in New York 

Based on the available feedstocks in New York, as well as likely imports of feedstocks 

from surrounding states, the most likely feedstock mix for a plant in New York is 70 

percent yellow grease and 30 percent soybean oil and the most likely size is 10 to 15 

MM gallons per year. Even though a biodiesel plant using a 70/30 blend of yellow grease 

and soybean oil may not be practical in all areas of New York due to feedstock cost, 

availability and quality issues, it is meant to serve as an illustration of the macro 

feedstock situation in New York State. Economics and average price for this feedstock 

mix for a 12 mm gallon per year plant can be found in Table 3.4. In this case, the capital 

costs were assumed to be that for the full size yellow grease plant, since 70 percent of 

the time the plant would be operating on yellow grease. The operating costs and yields 

vary whether using yellow grease or soybean oil. 

Table 3.4 

Biodiesel Production Analysis for 70 percent Yellow Grease/30 percent Soybean 

Oil

Plant Size Capital Cost Biodiesel Cost 

(million gal/yr) (million) ($/gallon) 

12 $14.5 $1.59 

Note: Yellow Grease Price of $.11/lb and Soybean Oil Price of $.21/lb 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 51 May 5, 2004 

Subtask 3.2: Feedstock Supply Channels 

Virgin Vegetable Oils (Soybean Oil)

When soybeans are processed, two primary products result: soybean meal and soybean 

oil. The crude oil produced has most of the gums or sediment removed, but must be 

further processed or refined to prepare it for edible uses. Refining, bleaching and 

deodorizing the oil to remove the impurities present in the oil are the steps used by the 

oilseed processing industry to make the oil available for edible uses. This oil is often 

referred to as RBD oil. Not all oilseed processing locations have RBD processing 

equipment available. According to the 2002 Soyatech Bluebook, approximately 50 

percent of oilseed processors in the country have refining capabilities. Only one of the 

three-oilseed processors in the state of New York has refining capacity on site. 

Limited local demand for crude soybean oil may exist for some processors; however, 

most processors either transport their crude oil to a company owned location for refining, 

bleaching and deodorizing or they sell it to oilseed refining operations. For New York 

processors, this means either selling their oil to AgPro Limited or loading it onto rail cars 

for destinations in the Midwest. 

Crude soybean oil may have levels of fatty acids and phosphorus that are higher than 

desired for biodiesel applications. There is now an ASTM specification limit on the 

amount of phosphorus (P) contained in the biodiesel product (10 ppm max). A 

conventional treatment method, used in oil processing for fatty acid reduction, is caustic 

refining, wherein the oil is contacted with an alkaline solution and the FFA is neutralized 

then removed from the oil as “soap water”. This method also has the effect of removing 

P-containing compounds and values of less than 10 ppm P are routinely achieved. An 

alternative method, referred to as “super-degumming” has also demonstrated the 

capability of reducing P levels, and has little effect on the FFA content. There have been 

some questions as to the consistency of P reduction with the super-degumming 

approach, so for purposes of this analysis it is recommended that caustic refining be 

considered as the treatment technique for P removal. Consequently, the FFA level of 

the treated oil will be low, and all of the processes considered will be able to handle the 

feed without further FFA considerations. If further investigation reveals that consistent P 

reductions can be obtained with super-degumming, then the processes that can handle 

higher FFA feeds will obviously have some level of increased attractiveness. 

Rendered Fats and Oil (Animal Fats and Yellow Grease)

Animal Fats 

Animal fats are derived from the rendering process using animal tissues as the raw 

material. The raw material is a byproduct of the slaughter and processing of meat 

animals and poultry. The amount of fat produced is directly related to the species of 

animal slaughtered and processed and the degree of further processing that is 

associated with the marketing/distribution of the meat product. 

Though there are several specific systems for rendering, the process is a 

time/temperature treatment of sterilization, moisture removal and fat/grease extraction. 

As a general rule animal byproduct raw material is comprised of approximately 50 

percent moisture, which upon removal results in approximately 25 percent for fat 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 52 May 5, 2004 

extraction and 25 percent for protein meal. The yields of both the fat/grease and protein 

portions are highly dependent upon species and tissues comprising the byproduct 

material. This is illustrated in the following table. 

Table 3.5 

Live Animal Yield53

Species Edible Inedible Gastro-Intestinal 

Contents 

Cattle 34% 50% 16% 

Swine 52% 42% 6% 

Chicken 70% 28% 2% 

Turkey 73% 24% 3% 

Lamb 37% 51% 12% 

Cod Fish 36% 64% N/A 

Many of the larger packinghouses and processing plants have rendering equipment at 

those facilities. In other cases the raw material is transported to an independent 

renderer that collects and assembles raw material from a number of such accounts as 

well as other meat processing establishments that may not slaughter but further 

process/package such as supermarkets, custom slaughter/locker plants and table ready 

provision companies. The trend for further processing of “table ready” meat products is 

increasing. This has the effect of recovering more of the non-consumable tissue for 

rendering in contrast to having the consumer remove fat, bone etc., during kitchen 

preparation and disposed of as kitchen waste. 

Most independent renderers have developed proprietary contracts for raw material 

sources. Most contracts contain formulas for determining the price of the raw material 

based on the yield of lipid and protein and the transportation distances involved. 

The number of animals slaughtered in a given year establishes the production of fats 

and greases in a given location since animal lipids are not traded with defined state 

boundaries, the potential source of fats and greases could also be derived from 

surrounding states. List of processing and rendering facilities in New York State and 

surrounding states are presented in Tables 2.5 and 2.7. 

Yellow Grease 

Recycled cooking and restaurant greases are collected and processed primarily by the 

independent rendering sector since it is generally not a practice for packer or processing 

facilities to process yellow grease. It has been the independent rendering industries 

investment for storage containers, transportation, specialized processing and analytical 

equipment that has made them primary to this recyclable resource. 

There are several sources and processing steps associated with yellow grease. The 

primary sources of the raw material lipids are any food preparation site. These can be 

restaurants with any number of star ratings, major food preparation facilities such as 

military bases, hospitals, nursing home facilities, college dormitories and numerous other 

 

53 Derived from: Goldstrand, R.E. 1992. An overview of inedible meat, poultry and fishery byproducts. In: Inedible Meat By-Products. (A.M. Peirson and T.R. Dutson, Ed.) Elsevier, NY. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 53 May 5, 2004 

sources. Thus the primary resource is derived from frying oil exchanges but the grease 

derived from cooking of meat (griddle grease) becomes a component of recycled 

cooking and restaurant grease that when processed is most commonly traded as yellow 

grease and to a minor extent animal/vegetable blends. 

As with the contracting by renderers for raw material sources, the acquisition of yellow 

grease raw material is very similar. Contracts are written to provide the service of 

collecting the raw material on a scheduled basis depending on the volume generated. 

Contracts are varied and again proprietary but often include multiple services such as 

providing and cleaning the storage containers. In some cases, the storage provisions 

have been incorporated into the original facility’s building plans and located inside the 

facility with pump out provisions. In other facilities it may be a 55-gallon barrel that is 

protected in the back corner of the property. In any situation storage and collection 

becomes the first step. Material is collected and transported to a processing facility. It 

can be a temporary collection facility in which the primary process would be partial water 

removal. Decanting or centrifugation can accomplish this. The water content varies 

considerably from each facility collection point. A general 65 percent yield is commonly 

referenced. In most situations the raw material is transported direct to a central 

processing facility with water removing capability, filtration, analytical laboratories, 

storage and shipping capabilities. 

The primary markets have been the use of yellow grease as feed ingredients for 

livestock, poultry, companion animals and aquaculture. This usage dictates strict quality 

control procedures that include a menu of analytical testing. 

Subtask 3.3: Existing Biodiesel Production Facilities, Capacities and Trends 

Biodiesel is not a new fuel to North America. Production can be traced back to the late 

1970s and early 1980s. As a result of the OPEC crises in the 1970s, various universities 

and government agencies conducted significant research aimed at adapting lipids as a 

source of fuel. The general conclusion at that time was that biodiesel was a technically 

acceptable substitute, replacement, or blending stock for conventional petroleum diesel, 

but that costs were prohibitive compared to petroleum based diesel fuel. 

It was not until 1992 and 1993 that the interest in biodiesel was renewed. Desires by 

both the vegetable oil and yellow grease industries to find additional uses for their 

respective products led both groups to fund biodiesel development projects and market 

evaluation studies. While both of these efforts occurred simultaneously, they were 

unknown to each other. Eventually, these two groups came together and the industry 

organization’s name was changed from the National SoyDiesel Development Board to 

the National Biodiesel Board. 

Over the last 10 years, there have been several other significant events that have helped 

shape the industry or will have a significant impact in the future. 

• The Energy Conservation Reauthorization Act of 1998 is passed in 1998. This 

act allows fleets to use biodiesel in their medium- and heavy-duty vehicles as a 

compliance tool for Energy Policy Act of 1992 requirements. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 54 May 5, 2004 

• During Fall 2000, the Commodity Credit Corporation (CCC) creates the 

Bioenergy Program to stimulate and increase the production of biodiesel and 

ethanol. 

• In December 2000, the U.S. EPA issued a final rulemaking on heavy-duty engine 

and vehicle standards and highway diesel fuel sulfur control requirements. The 

rule reduces the sulfur level in on-highway diesel fuel to less than 15 ppm. 

Biodiesel’s lubricity enhancing characteristics could make it an important 

lubricity-enhancing component to Ultra Low Sulfur Diesel fuel when the sulfur 

levels change in 2006. 

• In 2002, Minnesota passed a law that will require all diesel fuel sold in the state 

to contain a two percent blend of biodiesel beginning on July 1, 2005. 

• On May 7, 2003, the Commodity Credit Corporation issued a final rulemaking on 

the structure of the Bioenergy Program. The restructuring allowed additional fats 

and oils to become eligible feedstocks under the program. The CCC also 

attempted to create parity in the subsidy payment calculations among 

feedstocks. 

• The State of Illinois enacted a sales tax exemption for biodiesel blends greater 

than 10 percent and a partial sales tax exemption for biodiesel blends between 

one percent and 10 percent through the passage of HB46 in July 2003. 

Industry Participants and Capacity 

In 1993, there was only one commercial biodiesel company, Interchem in Overland Park, 

Kansas. By 1998, only a limited number of commercial entities were involved in 

significant commercial production of biodiesel. These companies included Ag 

Environmental Products, Griffin Industries, West Central Soy (d.b.a. Interwest L.C.), 

Pacific Biodiesel and Columbus Foods. Over the last four years, additional companies 

have installed production capacity and public announcements have been made for 

several more. The following tables and figures identify current biodiesel production 

plants and production facilities that have recently been proposed. 

It is estimated that the current dedicated production capacity is estimated to be 

approximately 75-85 million gallons per year. This capacity ranges in plant sizes from 

less than one million gallons per year to over 12 million gallons per year. Moreover, a 

number of companies have reported plans to construct dedicated biodiesel plants to 

become operational during calendar year 2004 and 2005. These intentions are 

dependent upon regional demand prospects and, if fully implemented, could create an 

additional 115 million gallons of biodiesel capacity. 

Construction of production plants in the biodiesel industry has been sporadic. The first 

small-scale commercial biodiesel plant was built by Interchem in 1993 and had a 

capacity of less than 300,000 gallons per year. Since that time, 17 other plants have 

come on-line with a wide range of production capabilities. Current plant capacities range 

from 100,000 gallons per year to 12 million gallons per year with the average plant size 

being approximately six million gallons per year. As the demand for biodiesel continues 

to grow, it is estimated that the size of dedicated biodiesel production facilities will 

continue to expand as firms strive to lower production costs and increase market share. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 55 May 5, 2004 

Several other companies, such as Cognis and ICI/Unichem, produce esters for internal 

needs, but are not actively involved in the production or marketing of biodiesel in the 

U.S. These companies are primarily involved in the manufacturing of oleochemicals, but 

have been involved in ester production for many years utilizing technology that has been 

developed internally. Although few estimates are available to document this surplus 

capacity, it has been reported that up to 200 million gallons of production capacity are 

available through existing long-term production agreements with biodiesel marketing 

firms. Even though they may be able to produce methyl esters for the biodiesel market, 

fuel production does not fit well with the production and marketing strategies of most of 

these companies, therefore this capacity cannot be guaranteed in the event that 

dedicated biodiesel producers do not have sufficient capacity to meet market demand for 

biodiesel. 

The oleochemical industry also has a significant investment in methyl ester production 

assets; however, the primary distribution channel of the ester production from these 

facilities at this time continues to be to the chemical manufacturing market, rather than 

the fuel market. 

Figure 3.5 

Current and Proposed Biodiesel Production Plants54

 

54 Source: National Biodiesel Board website, www.biodiesel.org 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 56 May 5, 2004 

Table 3.6 

Current and Proposed Biodiesel Production Plants

Company Location Status

Ag Environmental Products Sergeant Bluff IA Active 

Biodiesel Industries Las Vegas NV Active 

Bio-Energy Systems, LLC Vallejo CA Active 

Columbus Foods Chicago IL Active 

Corsicana Technologies, Inc. Corsicana TX Active 

Griffin Industries Cold Spring KY Active 

Huish Detergents Pasadena TX Active 

Imperial Western Products Coachella CA Active 

Ocean Air Environmental Lakeland FL Active 

Pacific Biodiesel Honolulu HI Active 

Pacific Biodiesel Kahului HI Active 

Peter Cremer (TRI-NI) Cincinnati OH Active 

Procter and Gamble Sacramento CA Active 

Soy Solutions Milford IA Active 

Stepan Company Millsdale IL Active 

Texoga Technologies Spring TX Active 

West Central Soy Ralston IA Active 

American Bio-Fuels LLC Bakersfield CA Proposed 

Biodiesel of Mississippi, Inc. Marks MS Proposed 

Biodiesel of Mississippi, Inc. Nettleton MS Proposed 

Biomass Energy Services Tifton GA Proposed 

Blue Sun Biodiesel Commerce City CO Proposed 

Farmers Union Marketing & Processing Assn Redwood Falls MN Proposed 

Filter Specialty Bioenergy LLC Autryville NC Proposed 

Grain Growers Cooperative Selma NC Proposed 

Mid America Biofuels Jefferson City MO Proposed 

Mid-Atlantic Biodiesel Delaware City DE Proposed 

Minnesota Soybean Processors Brewster MN Proposed 

Montana Biodiesel Missoula MT Proposed 

Otto Feeds Bunceton MO Proposed 

Texoga Technologies Pasadena TX Proposed 

Biodiesel Demand 

While the biodiesel industry was initially started to take excess oils and fats off the 

market, growth in the industry has been sustained by this country’s desire to become 

less dependent upon foreign sources of oil and to clean up the environment. There are 

currently hundreds of major fleets that have implemented biodiesel programs across the 

country including federal fleets such as the Postal Service, U.S. Marine Corps, 

Department of Interior, and state fleets such as Ohio, Iowa, Virginia, Delaware, North 

Carolina and New Jersey Departments of Transportation. Major public utility fleets such 

as Commonwealth Edison, Duke Energy, Alabama Power and others use biodiesel as 

well. 

The biodiesel industry is an expanding industry that has experienced tremendous growth 

since 1999. The National Biodiesel Board reports that sales have increased from about 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 57 May 5, 2004 

500,000 gallons in 1999 to more than 12 million gallons in 2002. It is estimated that the 

biodiesel demand grew to over 20 million gallons in 2003. In a study conducted by the 

USDA’s Office of the Chief Economist evaluating the effects of the Renewable Fuels 

Standard (RFS) as proposed in the Energy Policy Act of 2002 (H.R. 4) on commodity 

markets, farm income and employment, biodiesel demand was projected through 2012. 

Biodiesel demand was projected to grow from 22 million gallons in 2003 to 124 million 

gallons in 2012. 

Figure 3.6

Current and Projected Biodiesel Sales

0

20

40

60

80

100

120

140

19992000

20012002

2003

2004

2005

200620072008

20092010

2011

2012

Mil Gal

This study only considered demand impacts associated with the passage of the RFS 

and did not consider the legislative impacts of a partial excise tax exemption on biodiesel 

demand. Industry experts believe that if an RFS were combined with a partial excise tax 

exemption (such as provided in the Energy Bill currently before Congress) biodiesel 

demand could grow at a rate two to three times greater than the demand projections 

associated with the passage of an RFS only. 

Several important points should be taken into consideration when interpreting this 

growth. The most important is the impact of the USDA’s Bioenergy Program on 

biodiesel companies that had already installed facilities before the initiation of the 

program. While the Bioenergy Program is intended generally to act as a source of 

capital to encourage new plant construction, many biodiesel companies have used it as 

a subsidy for biodiesel. There have been several instances over the past year where 

these companies have used their USDA funds to artificially lower the price of biodiesel 

— sometimes to the same level as conventional diesel fuel. 

A comparison of anticipated growth in biodiesel demand and the number of biodiesel 

producers indicates that current biodiesel production capacity exceeds biodiesel 

demand. However, a number of events could quickly utilize the available production in 

the market. As discussed previously, passage of the partial excise tax exemption and 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 58 May 5, 2004 

renewable fuel standard would rapidly generate significant demand for biodiesel-blended 

fuel. 

Feedstock Selection 

Soybean oil is the primary feedstock used in the production of biodiesel in the U.S. with 

approximately 90-95 percent of the commercially produced biodiesel made from 

soybean oil. The remaining percentage of biodiesel is made from yellow grease and 

used cooking oils. According to the Commodity Credit Corporation, the USDA agency 

that administers the Bioenergy Program, of the 8,861,232 million gallons of new 

biodiesel production in FY2002, 8,768,555 gallons were made soybean oil, 91,636 

gallons were made from yellow grease and only 1,041 gallons were made from mustard 

seed oil. 

Soybean oil’s place as the feedstock of choice has come into being for several reasons. 

• Soybean oil is the most abundant feedstock in the U.S. 

• Due to excess production capacity, soybean oil surpluses, and declining prices, 

the soy industry has been a major driving force behind biodiesel 

commercialization. 

• Federal and some state biodiesel purchasing programs favor vegetable oil based 

biodiesel. 

• The USDA’s Bioenergy Program, which provides a production incentive for new 

biodiesel production, initially excluded yellow grease as an eligible feedstock 

under the program. 

It is anticipated that a growing percentage of biodiesel will be made from yellow grease 

and used cooking oils as: a) additional rendering companies invest in biodiesel 

production assets, b) the USDA’s Bioenergy Program has been restructured to provide 

equality between biodiesel feedstocks by linking production payments from other 

feedstocks to soybean oil price, and c) as biodiesel users become feedstock neutral in 

their purchasing decisions. 

New York Biodiesel Availability 

The biodiesel industry in New York is relatively small but growing. At the time of this 

report, no commercial scale biodiesel plants are operating in New York or the 

surrounding states. There are, however, a handful of biodiesel distributors and retail 

locations for biodiesel blended fuels. They are included in the table and figure below. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 59 May 5, 2004 

Table 3.7 

Biodiesel and Biodiesel Blends Distributors and Retail Outlets Located in New 

York and the Surrounding States.55

Company Location Type

Burke Oil Chelsea MA R 

Allegheny Bio-Solutions, LP Pittsburg PA D 

Export Fuel Company, Inc Export PA B 

Schildwachter & Sons Oil Bronx NY R,D 

Tech Transfer Mattituck NY R,D 

NOCO Energy Corp Tonawanda NY D 

UMR Energy Systems Staten Island NY D 

Global E Industries, Ltd Cavendish VT B 

Note: R=Retailer, D=Distributor, B=Both Distributor and Retailer 

Figure 3.7 

Location of Biodiesel and Biodiesel Blends Distributors and Retail 

 

55 Source: National Biodiesel Board website, www.biodiesel.org 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 60 May 5, 2004 

Subtask 3.4: Agricultural Impacts 

Currently the major oilseed produced in New York is soybeans. Oilseed crops have 

never been grown extensively in New York State. Growers in Seneca County began 

producing soybeans in the early 1970s and by the early 1980s New York growers 

planted about 20,000 acres of soybeans annually. Soybean acreage did not expand 

greatly in the 1980s because of limited markets and processing facilities in New York. In 

the late 1980s and 1990s, however, oil processing plants were built in Oneonta (Oneida 

Co.), Homer (Cortland Co.), Phelps, (Ontario Co.), and Ogdensburg (St. Lawrence Co.), 

and some dairy farmers purchased soybean roasters for on-farm roasting and feeding to 

dairy cows. Soybean acreage increased to 40,000 acres in the 1990-1991 growing 

seasons, 100,000 acres in 1997-1998, and about 150,000 acres in 2001-2002. In 2003, 

New York growers produced soybeans on about 144,000 acres at a projected yield of 35 

bu/acre for a total production of 5.3 million bushels. 

Commercial farmers have successfully produced winter canola and sunflowers on 

limited acreage in New York in the 1980s and 1990s. We believe that both of these 

oilseed crops could be successfully produced in New York if there were lucrative 

markets. Winter canola would be produced in limited regions of northern New York 

(close to the lakes) because of over wintering problems and in eastern New York 

because of the limited number of cash crop producers in that region. Winter canola 

could expect to average about 3,000 lbs/acre in central and western New York because 

of its excellent adaptation to the wheat-growing regions of New York. Consequently, 

winter canola would compete mostly with winter wheat, soybean, dry bean, and some 

vegetable acreage in central and western New York if the price were attractive enough. 

Conceivably, winter canola could compete with some dry-shelled corn acreage, which 

could expand the growing region, but growers may be more reluctant to give up the 

steady and reliable corn market. If there were a strong demand, New York growers 

could probably produce winter canola on 100,000 to 200,000 acres for a total annual 

production of 150,000 to 300,000 tons. Winter canola production in New York, however, 

would reduce soybean acreage and production, especially at the higher estimate. 

Sunflower is another oilseed crop that is agronomically well adapted to New York 

growing conditions. Sunflower has better drought tolerance compared with soybean so 

sunflower can tolerate the frequently dry August growing conditions, which routinely 

reduce soybean yields in New York. Sunflowers, however, are susceptible to numerous 

diseases that are prevalent in New York, including sclerototinia, verticilium, and rust. 

Furthermore, sunflowers are very vulnerable to severe bird damage just before harvest, 

which would necessitate timely harvest in New York. Sunflowers, however, must be 

dried down to about 10 percent before harvest, which could result in an extended-dry 

down period under NY environmental conditions and severe bird damage. 

Sunflower yields averaged as high as 3,000 lbs/acre in Cornell Research trials in the late 

1970s (Knapp, 1979) so average yields of 2,000-2,500 lbs/acre could be expected under 

NY growing conditions (compared with about 1,400 lbs/acre in South Dakota, the leading 

sunflower producing state in the U.S.). Sunflower would compete directly with soybean 

and dry bean acreage and indirectly with winter wheat acreage. Sunflowers could also 

be grown on oat acreage, which could expand the sunflower growing region to northern 

and eastern NY and the Southern Tier. Also, if the price were high enough, sunflowers 

could be produced on dry-shelled corn acreage but as mentioned previously that is 

unlikely. Consequently, potential sunflower acreage in New York is also about 100,000-
Feasibility of a New York Biodiesel Industry 

LECG, LLC 61 May 5, 2004 

200,000. Total annual production of sunflower could thus potentially average 100,000 to 

250,000 tons. 

Clearly, if there is a demand for oilseeds in New York, New York growers will respond to 

the demand and adjust their acreage accordingly. 

The major field crops produced in New York are hay (mainly alfalfa), corn, winter wheat, 

and soybeans. Taken together these crops were planted to nearly 2.9 million acres in 

2003. Over the past twenty-five years the number of acres planted to these crops has 

declined nearly 27 percent. As is the case in other Northeastern states most of this land 

was lost to development, however some acreage shifted to higher value crops such as 

fruit and vegetables, or was taken out of production. According to the Census of 

Agriculture, an estimated 244,000 acres of cropland have been idled in New York. 

The demand for vegetable oil to produce biodiesel is significant enough to provide an 

incentive for New York farmers to shift acreage from hay and to a limited extent, corn to 

soybeans, and bring idled land back into production. As indicated earlier, winter wheat 

acreage could be shifted to other oilseeds such as winter canola and sunflower. 

We expect that between 2003 and 2012 New York soybean acreage will continue to 

expand reaching 165,000 acres by 2007 with additional land coming from idled acreage 

and other crops. The additional demand for soybean oil to supply a New York biodiesel 

industry is expected to increase soybean acreage by an additional 100,000 acres by 

2012. The largest amount of this acreage (26,000) is expected to come from hay, 

20,000 from corn, 10,000 from wheat, and the remaining 44,000 from idled land and 

other crops including vegetables. 

Other oilseed crops such as winter canola and sunflower are potentially feasible 

alternative feedstocks for biodiesel production. However, the absence of processing 

facilities for these crops and the requirement for farmers to invest in new equipment is 

expected to prevent a significant shift of acres to these crops. 

The majority of these acre shifts are likely to occur in the major soybean producing 

counties of north-central New York (Ontario, Livingston, Monroe, Onondaga, Niagara, 

Genesee, Oswego, and Oneida). 

These acreage shifts can accommodate the production of an additional 11 million 

bushels of soybeans by 2012 without jeopardizing the amount of hay or corn silage 

needed to supply New York’s declining dairy herds. 

The increase in soybean production is expected to add an additional $85.5 million of 

cash receipts to New York farmer’s income statement between 2007 and 2012. To the 

extent that land is shifted from hay and corn, cash receipts from hay are expected to 

decline by $18.1 million and corn receipts by $20.8 million resulting in a net gain for New 

York farmers of $46.6 million in higher cash receipts over the 2007 to 2012 period, or 

$6.7 million per year. 

Since the acreage shifts are relatively modest; little or no additional equipment or 

services should be required; and both soybeans and alfalfa fit into existing crop rotations 

with corn, most of the increase in cash receipts should fall to farmer’s bottom line and 

increase net cash income. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 62 May 5, 2004 

Task 4: Market Assessment 

Subtask 4.1: Current New York Market Segmentation 

While the market segments outlined in this report cover a broad based group of 

applications, there is, however, a common thread that holds each together, that is that 

they can and do currently use generic fungible ASTM D 975 or ASTM D 396 petroleum 

products for both mobile and stationary engines. Engine size, horsepower, filter sizes 

and applications vary but the fuel used is “generic” in nature. Because one product fits 

such a variety of market applications and the buyers of that generic product have been 

conditioned to procure their motor fuels based on economics it becomes challenging to 

introduce clean burning fuels like biodiesel even with all its positive attributes. Buyers’ 

purchasing attitudes and core business philosophies all play a pivotal role in consumers’ 

fuel purchasing habits relating to diesel fuel and related energy products. 

Knowing that some diesel fuel users will pay the added costs of buying premium diesel 

fuel (diesel fuel enriched with a multi-functional fuel additive) retailers will use a 

“historical marketing practice” to add a little profit for their business to attain a return on 

investment (ROI) for upgraded infrastructure costs (injection systems to inject the 

additive). There appears to be differences in a consumer’s perception of buying a fuel 

based on quality characteristics versus price. Gasoline buyers appear willing to pay 

premium gasoline’s higher cost, rather than regular unleaded gasoline’s lower costs, in 

order to obtain maximum performance for their automobile. In contrast diesel fuel 

buyers that manage large centrally fueled fleets often view premium diesel as a waste of 

money. 

This attitude is changing, however, with the advent of EPA regulations on sulfur 

reduction, emission reduction demands, lubricity issues and the continued quest to 

modify diesel for optimum cold weather operability. The oil industry is conditioned to sell 

all their products based on a price per gallon basis and this conditioning has driven 

petroleum products in general to be bought and sold as a commodity. The past decade 

has seen the emergence of more premium based fuels where the marketer is taking time 

to differentiate fuel quality while attempting to overcome the incremental costs 

associated with upgrading the fuel which ranges anywhere from $.0045 per gallon in the 

summer and $.0135 per gallon per treated gallon in the winter. 

Operational Demands of Various Market Segments 

Each of these six transportation segments and one space-heating segment are linked 

together relating to fuel use. Each depends on a diesel fuel or heating oil based on 

ASTM D 975 or ASTM D 396 standards. Both the transportation and heating oil sectors 

are deprived of quality parameters much needed to ensure optimum operability levels. 

Users are subjected to a fungible No. 2 diesel fuel with only one broad guaranteed 

specification, sulfur. That sulfur level in on-road diesel fuel is federally mandated today 

at 500 ppm but will soon decrease to less than 15 ppm based on the U.S. EPA’s ruling 

for 200656. It is clear that once the 15 ppm diesel fuel becomes the standard, diesel 

 

56 “Diesel Fuel Sulfur Control Requirements; Final Rule” that, “beginning June 1, 2006, refiners 

must begin producing highway diesel fuel that meets a maximum sulfur standard of 15 parts per 

million (ppm).” Federal Register. Vol. 66 No 12 Thursday, January 18, 2001, Rules and 

Regulations records on P5006. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 63 May 5, 2004 

powered trucks, buses and cars will emit less SOx as well other unhealthy emissions. 

The diesel oxidation catalysts (DOC) that will become standard fare will also enjoy 

longer life as the ultra low sulfur fuel makes it way downstream.57 Tier 4 off road 

emission reduction implementation is proposed to follow the on road reductions later this 

decade. 

However, the transition to ultra low sulfur diesel will do absolutely nothing for the other 

critical diesel fuel quality parameters such as cetane improvement, lubricity, and 

solvency impact on keeping injectors and nozzles clean. Table 4.1 depicts key diesel 

powered market segments versus the benefits that multi-functional additives or a blend 

of biodiesel would offer. The columns of this table represent different fuel quality 

parameters broken down by biodiesel blend. A check indicates that a biodiesel blend at 

the specified level would positively impact the quality parameter for a particular market 

segment. For example, all market segments would benefit from a 20 percent blend if 

emission reductions were the core benefit being sought. 

Table 4.1 

Market Segmentation and Possible Benefits Derived with B2, B5 and B20

Emissions 

Market Reduction Cetane Lubricity Solvency 

Segment B2 B5 B20 B2 B5 B20 B2 B5 B20 B2 B5 B20

LD Truck 9 9 9 9 9 9

LD Vehicles 9 9 9 9 9 9

HD/MD Truck 9 9 9 9 9 9

Off-Road 9 9 9 9 9 9

Marine 9 9 9 9 9 9

Rail 9 9 9 9 9 9

Heating Oil 9 9 9 9 9 9

Diesel Emissions

Technology, innovation, investment, regulation, and legislation are turning the diesel 

world upside down. While some parts of the world still suffer with dirty diesel smoke and 

noise caused by obsolete engine technology, poor maintenance, and high sulfur fuels, 

the future remains clear that ultra low or near zero sulfur distillate fuels like biodiesel will 

be in demand. 

Diesel engine and vehicle makers are accelerating their technology development, aiming 

to slash particulate matter (PM) and nitrogen oxide (NOx) emissions. Their solution: pair 

up sulfur sensitive exhaust catalysts and advanced engine controls with ULSD fuel for 

ultra clean emissions. The result: engines and vehicles that can match or beat any 

alternative technology at costs lower than alternative fuels while using the existing 

petroleum distribution infrastructure. 

Worldwide demand to slash greenhouse gas emissions might open doors for future CO2

emissions credit trading which potentially provides a future source of funds for clean 

 

57 Diesel Oxidation Catalyst (DOC) promoting oxidation processes in diesel exhaust. Usually 

designed to reduce emissions of the organic fraction of diesel particulates, gas-phase 

hydrocarbons, and carbon monoxide. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 64 May 5, 2004 

diesel refining and clean diesel vehicles. As regulatory demands for cleaner burning 

engines continue to evolve, industry decision makers are now taking the initiative to 

install diesel particulate traps on equipment to further cut back regulated emissions. 

Refiners, engine manufacturers and hardware manufacturers are beginning to use 

alternative emission reduction strategies, so fuels like biodiesel may become an 

advanced option to achieve these emission reductions. 

Unlike Europe, U.S. federal environmental regulators are not pushing for new limits on 

cetane, aromatics, density, or distillation. The difference in thinking is due to the 

relatively huge growth of the light duty diesel market in Europe and the relative absence 

of light duty diesel vehicles in North America. Any specification reducing density 

likewise could have a power and fuel economy penalty, which is a larger issue in North 

America where the average engine horsepower range is higher than Europe. On-road 

trucking (the major diesel market in the U.S.) is less sensitive to cetane and much more 

sensitive to price. Centrally fueled fleets are more likely to accept biodiesel blends than 

owner operated fleets due to the limited availability of biodiesel distribution infrastructure 

throughout the nation at this time. Petroleum terminals and diesel distribution sites are 

continuing to expand nationwide as they learn about biodiesel. It is the acceptance of 

those that own and operate those assets that will determine if capital equipment 

investments are warranted based on the market demand for biodiesel and related 

blends. Pending the passage of the energy bill, along with proposed independent state 

initiatives, petroleum asset owners will begin seriously considering infrastructure 

upgrades to accommodate biodiesel distribution. 

Lubricity

A fuel with adequate lubricity is critical to satisfactory operation of diesel engines, which 

rely on the fuel to lubricate the moving parts within injection equipment. The use of fuels 

with poor lubricity can increase fuel pump and injector wear and, at the extreme, cause 

catastrophic failure. Thus, ULSD will lack satisfactory lubricity and require the use of 

biodiesel blends or a petro-based lubricity additive. A two percent or five percent blend 

of biodiesel would deliver enhanced fuel lubricity. It has been documented that a two 

percent blend of biodiesel could impart up to a 65 percent improvement in a fuel’s 

lubricity values. Like a diesel engine, heating oil systems all depend on a fuel pump to 

deliver the fuel from the storage tank to combustion. These pumps would certainly 

benefit from a fuel possessing a high lubricity value. 

Inadequate lubricity is not the only cause of wear in diesel engine fuel systems. Diesel 

fuel can cause abrasive wear of the fuel system and the piston rings if it is contaminated 

with abrasive inorganic particles. Fuel injectors and rotary distributor fuel pumps are 

particularly susceptible to wear because the high liquid pressures they generate require 

extremely close tolerances between parts moving relative to each other. Since New 

York receives inbound diesel fuel and heating oil via waterborne vessels, it is dependent 

on a fungible storage and distribution system that impacts fuel quality to a greater 

degree than pipeline shipments in other parts of the country. As sulfur is reduced in 

diesel fuel, coupled with New York’s predictable fungible distribution system challenges, 

fuel quality concerns will become elevated. Biodiesel offers generic distillates the clear 

advantage of lubricity enhancement, which is one area that will need to be addressed 

with the anticipated 2006 reduction in sulfur levels. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 65 May 5, 2004 

Although biodiesel at blends of two percent add $.03-$.05 per blended gallon compared 

to the $.0005 per gallon (500 ppm fuel) and $.0050-$.0075 per blended gallon (<15 ppm 

sulfur) associated with petroleum based lubricity additives, the results are well 

documented that low levels of biodiesel can significantly enhance the lubricity of diesel 

fuel. One of the main advantages of using biodiesel as a fuel lubricity agent is that the 

blender will not encounter any negative side effects of over blending which has been an 

issue for several years with users of acidic-based lubricity additives worldwide. The 

industry has begun to transition to a safer more reliable lubricity additive based on nonacidic formulas which have been documented to cause soapy emulsions in crank case 

oil when diesel fuel comes in contact with it. With the emergence of <15 ppm diesel fuel 

it has been stated that additive suppliers will be increasing the dosage of existing 

technologies to successfully replenish the much needed lubricity and at a higher cost. 

Although this may not meet the biodiesel blend number at one and two percent, it is 

certainly deemed to be higher than current values associated with non-acidic lubricity 

additives. Reasons blenders may view biodiesel as an attractive alternative to additives 

include: 

• No concern of overdosing or negative repercussions that a petroleum based 

additive can cause if misused. Some of the existing technologies in many multifunctional diesel fuel additives have components within them that cause negative 

interactions with the detergents found in motor oil detergent packages. When the 

chemical compound in the diesel fuel lubricity additive encounters the lube oil 

detergent a soapy emulsion can develop causing premature filter plugging. 

Additive suppliers, however, are responding and began introducing non-acidic 

lubricity agents requiring increased treatment dosage as well as higher costs but 

not valued near the $.04 up charge that biodiesel blends currently generate at 

today’s economics. 

• Foreign oil displacement. Although two percent appears to be a low 

displacement value it reduces petroleum dependency in relationship to the blend. 

EIA documents a distillate fuel consumption of 8.8 million gallons per day in New 

York, which places New York in the number three position nationally. A two 

percent displacement of 8.8 million gallons per day reduces petroleum 

consumption by 160,000 gallons per day, a level not to be understated. 

• Biodiesel blends of two percent can be blended into bulk storage tanks of diesel 

fuel and heating oil upon entry into a respective tank farm, potentially eliminating 

or reducing the costs associated with terminal storage and distribution associated 

with conventional fuel additives. 

Cold Flow Improvers

Although biodiesel offers no cold flow technology improvements with the generic fuels it 

is mixed with, it is important to understand that once blended with generic fuels in blends 

up to 20 percent minimal cold flow impact would be recognized. The introduction of low 

sulfur diesel in 1993 was a major shock to low temperature operations in cold weather 

markets throughout the United States. Normal paraffins can comprise up to 30 percent 

of a typical diesel fuel and range from 10 to 36 carbon numbers, depending on the 

distillation range of the finished fuel. When sulfur is removed from a diesel fuel by 

hydrodesulphurization, the unsaturated hydrocarbons become saturated and the fuel 

becomes even more paraffinic. This increase in wax content produces a loss of low 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 66 May 5, 2004 

temperature handling criteria guaranteeing downstream downtime for the diesel user. 

The inclusion of five percent to 20 percent biodiesel blends will impact the finished fuel 

temperature of all areas of concern, pour point, cloud point and cold filter plugging point 

by two to five degrees Fahrenheit based upon lab round robins evaluations and field 

testing conducted nationwide over the past decade. It is the storage prior to blending 

the fuels that present the most challenging scenario. However, nationwide terminals 

have already begun investigating and in some cases preparing their infrastructure for 

biodiesel and the variable blends demanded by the various market segments seeking 

specific benefits from each blend ratio. 

Low temperature operability was an industry issue even before biodiesel was introduced 

to generic diesel fuel. Middle distillate fuels can be equally challenging to store and 

blend because they contain straight and branched chain hydrocarbons (paraffin waxes) 

that become solid at ambient wintertime temperatures in colder geographic areas. 

When this happens, the wax may plug the fuel filter or it may completely gel the fuel, 

making it impossible for the fuel system to deliver fuel to the engine. Moisture in fuel 

remains a diesel fuel’s number one contaminant. A combination of a moisture displacer 

additive and tank management housekeeping standards will help contain the negative 

consequences that develop when left unattended. 

Engine design changes to address this problem include locating the fuel pump and filter 

where they will receive the most heat from the engine. The practice of pumping more 

fuel to the injectors than the engine requires is also beneficial, since the warmed excess 

fuel is circulated back to the tank. While the primary purpose of this recycle loop is to 

cool the injectors, it also heats the fuel in the fuel tank, which can cause diesel fuel to 

rapidly degrade thermally. Heating fuel is good if it prevents gelling, but bad if it 

degrades the fuel. As you can see many diesel fuels quality characteristics are codependent on one another. Fuels that have too high a cetane could have poor thermal 

stability. Fuels that are light gravity and better in cold weather routinely possess poor 

lubricity qualities. It is important when controlling cold weather aspects of fuel to 

remember that other critical qualities may be impacted in other ways that may be equally 

harmful to engine performance. 

In a refinery, there are a number of approaches to improve a fuel's low temperature 

operability. After the fuel is in the distribution system, dilution with kerosene is the most 

practical way to lower cloud point. Additives and pour point depressants are used to 

improve the cold filter plugging point (CFPP)58 and to lower pour point.59 When they 

work, additives have several advantages over dilution: they are available in all areas of 

the country, the treatment cost is less, and treatment does not lower fuel density and, 

thus, heating value and fuel economy. The cold filter plugging point is another issue 

during winter operation. Currently, the cold filter plugging point can be controlled with a 

combination of wax crystal modifiers and kerosene. In addition, there are a few 

organizations that market biodiesel cold flow chemistry that claim to reduce the cold filter 

 

58 One dynamic test that has been widely accepted in Europe is the Cold Filter Plugging Point of Distillate 

Fuels (CFPP). In this test, the sample is cooled by immersion in a constant temperature bath. Thus the 

cooling rate is non-linear, but fairly rapid – about 40°C/hour. The CFPP is the temperature of the sample 

when 20 ml of the fuel first fails to pass through a wire mesh in less than 60 seconds. CFPP appears to over 

estimate the benefit obtained from the use of certain additives, especially for North American vehicles. 59 ASTM D97 – Pour Point of Petroleum Products. A clean sample is first warmed and then cooled at a 

specified rate and observed at intervals of 5°F (3°C). The lowest temperature at which sample movement is 

observed when the sample container is tilted is the pour point. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 67 May 5, 2004 

plugging point to a safe level of winter operation, but, unfortunately, at an unreasonable 

cost. 

A national chemical manufacturer has developed a pour point depressant that reduces 

the pour point of middle distillates up to 30 degrees Fahrenheit. However, the pricing to 

achieve this reduction may outweigh the additive option. Prevailing values for this 

technology would increase the cost of a biodiesel treated gallon between 15 - 27 cents. 

Although a heavy cost penalty is associated with this additive it still must be considered 

an additive because of its function to control cold weather performance values of the 

fuel. 

More technological development is required on behalf of the additive industry to strike a 

balance between performance and costs. This leaves the hardware option as the only 

true method to control biodiesel’s cold weather parameters which includes dilution with 

kerosene or adding heat to both the storage vessel and piping which carries the 

biodiesel into the generic fuel stream heading to the rack where trucks load for 

immediate distribution. 

Stability 

The hydro treatment process required to reduce sulfur levels in diesel fuels also acts to 

reduce the level of olefins present in the fuel. This results in diesel which appears to 

have excellent stability characteristics as measured by the current techniques such as F21 or ASTM D6864, F-31, ASTM D4625, etc. However, the refinery desulphurization 

process also removes the naturally occurring antioxidants. The removal of these radical 

traps allows the formation of organic peroxides, which, in addition to aiding free radical 

polymerization, have a significant effect upon the elastomers present in vehicle fuel 

systems. 

Another area of concern to new users of biodiesel is its shelf life, termed stability. It is 

true that all fuels, including middle distillate currently in use throughout New York, have 

storage limits. While stability is a reported concern with biodiesel, in-use results with 

B20 have not indicated any stability related performance problems in the field. These 

positive results are due, in part, to the generally accepted industry practice of using the 

fuel with in six months. 

If longer storage life is desired, as with conventional diesel fuel a fuel stabilizer should be 

used or the fuel monitored to insure it stays within specification. A fuel stabilizer known 

to be very effective for biodiesel is TBHQ/Citric Acid combination, trade name Tenox 21, 

manufactured by Eastman Chemical Company. Developed as a food grade antioxidant, 

TBHQ at 200 ppm will make biodiesel virtually inert. It can be obtained by contacting 

Chempoint.com who is currently the only distributor of this product. Other companies 

are preparing to release biodiesel-specific type stabilizers that carry a treatment cost 

close to $.05 per gallon of B100. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 68 May 5, 2004 

Cetane Number

A diesel fuel’s cetane number is a measure of its ignition quality. It is widely recognized 

that high cetane number diesel fuels offer a number of benefits important both for engine 

performance and the environment. 

When sulfur is removed from the diesel fuel through hydrodesulphurization, the 

unsaturated hydrocarbons become saturated, making the fuel more paraffinic. This 

increase in paraffin content and the associated decrease in olefin content are beneficial 

to the natural cetane number of the stream but create a fuel more challenging to treat for 

cold weather operability. As discussed above, higher paraffin is detrimental to cold flow. 

In practice, this increase is limited to, at most, a few cetane numbers and the potential 

benefits are reduced as the natural cetane of the feedstock increases. Although 

advantageous, this refining trend will not provide sufficient natural cetane to meet 

ASTM’s progressively increasing minimum cetane specifications demanded by industry 

leadership groups like the Engine Manufacturers Association and The Motor Council. 

Using biodiesel blends in the 20 percent range could help maintain the type of cetane 

values this group of diesel powered vehicles desires. A less expensive alternative to 

using a biodiesel blend to enhance cetane is the use of a well-known cetane improver 

available through national chemical manufacturers and distributors. 

2-Ethylhexyl nitrate (EHN) is the most widely used cetane number improver. It is 

sometimes also called octyl nitrate. EHN is thermally unstable and decomposes rapidly 

at the high temperatures in the combustion chamber. The products of decomposition 

help initiate fuel combustion and, thus, shorten the ignition delay period from that of the 

fuel without the additive. EHN is one additive that is not easily handled by the novice. 

Attention to safety and handling is a prerequisite for successful and safe use. 

The increase in cetane number from a given concentration of EHN varies from one fuel 

to another. It is greater for a fuel whose natural cetane number is already relatively high. 

The incremental increase gets smaller as more EHN is added, so there is little benefit to 

exceeding a certain concentration. EHN typically is used in the concentration range of 

0.05 percent mass to 0.4 percent mass and may yield a 3 to 8 cetane number benefit. 

A disadvantage of EHN is that it decreases the thermal stability of some fuels. The 

effect of the other cetane number improvers on thermal stability is unknown, but it seems 

likely that they will be similarly disadvantaged. Several laboratories are investigating this 

issue. 

Although biodiesel is a higher cost option than cetane improvers ($.0025-$.0050), it is 

considered a much safer and more reliable way to enhance cetane. 

Performance

Neat biodiesel has slightly less energy (seven to nine percent) and a higher cetane 

number than the average New York fungible diesel fuel. However, in over 30 million 

miles of field demonstrations, biodiesel blends showed similar fuel consumption, 

horsepower, torque and haulage rates as conventional diesel. When biodiesel is 

blended with conventional diesel in proportions of 20 percent or less, a difference in 

engine performance is nearly imperceptible. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 69 May 5, 2004 

Biodiesel Economics

The main challenge to the increase use of biodiesel is its cost. At the time this report 

was being prepared, neat biodiesel FOB, Allston, Massachusetts was approximately 

$2.00 per gallon while distillate fuels were to be found at $.9385 for generic and $.9420 

for premium, FOB Revere, Massachusetts. Until the cost of biodiesel blends comes 

down, its use will probably be limited to situations where it is subsidized or where the 

potential environmental benefits offset the additional cost. For example, biodiesel is 

more widely used in Europe where environmental regulations and tax subsidies make it 

practical. Also, amendments to the Energy Policy Act (EPAct) allow federal and state 

fleets to capitalize on this liquid fuel technology by earning vehicle credits for its use. 

Opportunities and Barriers by Specific Market Segments 

The market barriers and opportunities below were prepared assuming the current state 

of legislation and market dynamics as a mechanism to help understand how any 

proposed policy change or other legislation might impact the various market segments. 

Light Duty (LD) Vehicles <8500 Gross Vehicle Weight (GVW) 

• This sector may not be a large market opportunity for the biodiesel industry short 

term but may provide substantial opportunity in out years. Lack of product 

availability at commercial fueling stations and cost are the largest barriers to 

biodiesel use in light duty vehicles. In addition, there are relatively few light duty 

vehicles in the US with diesel engines at present but there is an increasing effort 

to move to light duty diesels in the US due to fuel economy constraints upon the 

automakers. 

• Some light duty vehicle owners using biodiesel such as Volkswagen TDI owners 

tend to purchase biodiesel for its intrinsic benefits, mainly environmental 

friendliness and energy security and appear to be willing to pay higher prices for 

these perceived benefits. 

Light Duty Truck >8500 GVW Commercial Light Trucks

• This sector could be a prime candidate for biodiesel use because it falls under 

fleet GVWs that are normally owned and operated by larger fleets, which depend 

on centrally fueled sites. These vehicles are normally fueled at a privately owned 

fuel depot, where quality and inventory are managed internally, or arrange to 

have their vehicles refueled by a supplier at a central location each day. 

Centrally fuel fleets also normally procure fuel and can control accessing it. 

• From a public relations standpoint, most of these vehicles could benefit from 

clean burn campaigns in communities where they operate such as waste haulers 

and roadwork teams like DPW’s. 

Heavy Duty/Medium Duty (HD/MD) Trucks >8500 GVW

• Unless this market segment group falls under EPAct or other government 

regulations, owner/operators or private fleets under no government regulations 

are an unlikely market for the biodiesel industry. This sector scrutinizes price 
Feasibility of a New York Biodiesel Industry 

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first, quality second. Until blender credits or user credits encompass this sector, 

the HD/MD vehicle market will rely on conventional diesel technologies. 

• Particulate matter emissions are of concern. Fleets are coming under 

environmental pressures, so companies must start looking at technologies like 

biodiesel to offset this attack. 

Off-Road (e.g. construction and agricultural)

• Because off-road markets are normally supplied with higher sulfur fuels with even 

less quality assurance than on-road fuels, the construction sector will likely be 

the last market to transfer to a biodiesel blend. However, emission regulations 

currently being discussed for Tier 4 may prompt this sector to take a closer look 

at biodiesel or at the very least encourage them to purchase lower sulfur fuel 

such as 500 ppm. Depending on the availability of 500 ppm fuel, this sector may 

resort to the on-road value of <15 ppm in 2006. 

• This market is normally one where fuel sits for longer periods of time and 

requires higher cetane. Power is critical for this market, but because of the 

nature of the heating oil pool, acceptable cetane values between 40 and 45 are 

typical. Biodiesel blends at least two percent may be a good start with the 

emphasis placed on fuel lubricity. 

• The agricultural subset of this market has demonstrated a willingness to buy 

biodiesel blends of B2 to B10, and in some cases higher blends. Farmers are 

motivated to use biodiesel blends because of its lubricity benefits and as a way to 

increase returns to their operations through increased demand for soybean oil. 

Marine (Commercial or Pleasure Boats)

• Biodiesel is an obvious candidate for use in marine applications. Independent 

tests have found that pure biodiesel is non-toxic, readily biodegradable and 

essentially free of sulfur and aromatics. 

• Biodiesel offers more environmental benefits. For research vessels and 

consumers using commercial vessels, biodiesel offers a more environmentally 

friendly alternative to regular diesel. Because it is non-toxic and biodegradable, 

consumers and researchers may pressure owners for biodiesel, especially in 

sensitive or protected waterway areas although biodiesel spills are still 

responded to like a conventional distillate spill. 

• Biodiesel can work in several marine factions. Because biodiesel can replace or 

be blended with petroleum diesel with little or no engine modifications, it is a 

viable alternative to several categories of the marine industry, including: 

recreational boats, inland commercial and ocean-going commercial ships, 

research vessels, and the U.S. Coast Guard Fleet. Today, much of the emphasis 

is on recreational boats, which consume about 95 million gallons of diesel fuel 

annually. 
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• Biodiesel has a higher flash point - a minimum of 260 degrees versus about 125 

degrees Fahrenheit for regular No. 2 diesels. Biodiesel also offers low-pressure 

storage at ambient temperatures and is safer to transport. 

• The marine industry is moving towards dual fuel tanks (CA) and towards 

requiring low particulate fuel for cruise, commercial and pleasure crafts. 

• The marine market is historically a price driven market but also one of “proud” 

owners. This could be categorized as an emotional purchase marketplace where 

those possessing diesel powered vessels may like to tell others they burn a 

specialty/boutique type fuel like biodiesel or biodiesel blends. 

Rail

• The industry currently pays large premiums for ember fire protection insurance, 

which is insurance against damages causes by carbon spark right-of-way fires. 

A reduction in rail diesel fuel use could allow the rail industry to approach the 

insurance industry to reduce insurance values. 

• Final rule establishing emission standards were on promulgated April 17, 1998, 

(63FR18977).60 These standards are geared primarily toward NOx reductions, 

which may reduce biodiesel’s role in meeting these emissions standards. 

Heating Oil 

• Heating oil industry is in need of clean burning technology to compete with 

natural gas. The National Oil Heat Research Alliance (NORA) program that 

seeks clean burning technologies inclusive of hardware innovations has begun to 

consider the addition of a biodiesel blend to further advance the positive net 

results of competition with the natural gas industry.

• Biodiesel has demonstrated through laboratory and field testing that it exceeds 

emission reducing expectations as well as enhances many operational 

categories important to upgrading fuel quality and oil heating systems overall 

performance.

• NORA, NYSERDA, Brookhaven, Warwick Public School Project, Abbott & Mills, 

NOCO and many more studies have motivated industry leadership to begin 

seriously thinking about low-percentage blends of biodiesel with 500-ppm sulfur 

fuels. Low-percentage blends soften the overall cost to the homeowner. The 

industry must strike the price increase balance not to exceed $0.05 per gallon. 

This includes the cost of moving from 3,000-ppm sulfur heating oil to 500-ppm. A 

two percent blend of biodiesel depending on procurement values, would add 

$.0350 to $.0400 per gallon while the lower sulfur diesel fuel could add between 

$.01 and $.0150 per gallon. 

 

60

www.epa.gov/oms/locomotv.htm
Feasibility of a New York Biodiesel Industry 

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Subtask 4.2: Distribution Channels 

The State has no petroleum refineries but relies partly on nearby refineries in New 

Jersey for its petroleum supply needs. Several pipelines carry petroleum products from 

refineries and ports located along the Delaware River near Philadelphia, Pennsylvania, 

to population centers in the northern portion of the State near Syracuse, New York. In 

addition, a major liquefied petroleum gas pipeline traverses the State and terminates at 

Selkirk, New York. The Energy Information Administration indicates that natural gas is 

the dominant home heating fuel with a market share of nearly 52 percent, followed by 

fuel oil with a 33 percent share. 

Upstream

Although New York primarily receives supply from waterborne vessels, ships and 

barges, much of the petroleum is moved by pipeline throughout the United States. 

Pipelines are considered the most cost-effective means of transferring crude oil from the 

port facilities to the tankers. Although cheaper, pipeline operators still incur operating 

and labor costs, as well as various maintenance fees. If a pipeline should break, the 

cost of gasoline and diesel can be significantly affected. 

Transportation costs can vary depending on the distance from place to place. 

Obviously, it costs more to ship oil from the Middle East to the U.S. than it does from 

other locations in the Western Hemisphere. There are also added costs if a tanker is too 

large to dock and must be unloaded at an offshore facility. 

Another factor that can affect the cost of transporting fuel is war. For example, fighting 

in the Middle East or even the threat of war can cause insurance rates to dramatically 

increase due to the higher likelihood that oil shipments could be interrupted. Higher 

rates equate to higher oil prices. War can also affect gasoline and diesel prices in 

situations where a large-scale military operation is underway, and there is a high 

demand for jet fuel. A high demand for fuel relative to its availability causes prices to 

increase. 

Once the petroleum has been transported, it is ready to be produced into gasoline, 

diesel and heating oil as well numerous other products drawn off the basic refinery 

process. There are many hydrocarbons in petroleum, but only the ones that can 

evaporate under engine conditions can be used in gasoline and diesel. Because crude 

petroleum consists of hydrocarbons that are both more and less volatile than gasoline, 

gasoline must be separated from petroleum through a process called distillation. 

Distillation, however, provides an amount and quality of gasoline that is considered 

insufficient. Therefore, gasoline production must be supplemented with more 

sophisticated refinery processes. 

These processes take the less volatile and more volatile petroleum hydrocarbons and 

turn them into hydrocarbons that have the correct volatility. The refinery process also 

adds specialty chemicals to the blend to enhance the performance of the hydrocarbons. 

Through this, gasoline can be created to have the desirable characteristics necessary for 

good engine performance. The downside of this process causes the middle distillate 

fuel, which becomes diesel fuel, kerosene and home heating oil, to be of lower quality. 
Feasibility of a New York Biodiesel Industry 

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Historically, refiners have focused their attention on gasoline production while ignoring 

the middle distillate cut of the barrel which has caused diesel fuel users and home 

heating users to be subjected to fuels that are much more unstable and poorer 

performing in their respective combustion process. For the heating oil dealer, the net 

result has been increased activity in replacing nozzles, strainers and filters while the 

diesel user suffers poor fuel economy, more pollutants, less power and challenging cold 

flow characteristics as well low lubricity values. These are all deficiencies that cost fleets 

hundreds of thousands of dollars a year in increased operational costs. 

Basic refining costs can run anywhere from 50 cents to $3.00 per barrel. The EPA has 

mandated that by 2005 the nation’s largest oil refineries must reduce the sulfur content 

of gasoline by 90 percent, and calls for an equally large reduction in diesel fuel’s sulfur 

levels by mid-2006 to <15 ppm from the current level of 500 ppm. The estimated cost of 

the process to remove sulfur from motor fuel is estimated to be anywhere from one to 

five cents per gallon. 

Regulatory changes may spell the beginning of a new trend in refinery changes to meet 

the rising demand for lower sulfur fuels. Biodiesel creates an opportunity for petroleum 

organizations to utilize biodiesel as a blend stock to help reduce sulfur with out-ofspecification fuels as well as to help meet the regional demand for low sulfur fuels that 

refineries may not be able to keep pace with. As biodiesel is being considered as a 

method to reduce sulfur levels, it would simultaneously address the rising lubricity 

concerns associated with low sulfur fuels. 

Downstream

After the diesel fuel or gasoline is produced, it is ready to be distributed to retailers. 

Again, transportation is needed for this to be accomplished. Ironically, the cost of 

transporting these liquids through fuel trucks depends a lot on the cost of the diesel and 

gasoline itself. If gasoline and diesel prices increase, the cost of transporting the 

respective fuels to fuel depots and gasoline stations rises commensurate with the cost of 

fuel itself. Again, the cheapest way to transport distillates in the United Sates is through 

dozens of pipelines that cross the country. The 5,359-mile Colonial pipeline system 

between New York and Houston carries approximately 80 million gallons of petroleum 

products a day. Because of biodiesel’s low national and regional demand, pipeline 

movements are currently not a consideration as a transportation mode. 

Once at the retailer or private fleet fuel site, even more costs are added to the price of 

fuel. There are several factors that contribute to these added costs. The first is for the 

general upkeep of running a fuel distribution terminal, and end-user fueling site. This 

would include costs for maintenance, employee salaries, insurance, property taxes, as 

well as profit margins. The amount of this added cost varies from retailer to retailer as 

well as from fuel wholesale marketer/terminal operator to fuel wholesale 

marketer/terminal operator. 

Another factor that contributes to the differences in the cost of diesel and gasoline 

products is the grade of fuel being offered and sold. With respect to diesel, there is 

generic diesel and premium diesel fuel. According to the recent changes agreed upon 

by the National Conference on Weights and Measures Premium Diesel Fuel Task Force, 

a diesel fuel merchant must adhere to meeting or exceeding basic criteria beyond 

generic diesel which includes documented lubricity value, thermal stability, cetane 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 74 May 5, 2004 

number and low temperature operability. This ruling was modified at a NCWM meeting 

on July 16, 2003. These changes can be found in the 2004 NIST Handbook 130. It is 

clear that the inclusion of biodiesel can help meet the criteria outlined in the rule. 

Infrastructure Considerations

For the most economical and operationally sound distribution of biodiesel in the State of 

New York, existing petroleum infrastructure must be utilized. Fuel wholesalers and 

terminal operations currently active in the receipt, storage, blending and distribution of all 

types of petroleum and gas liquid products are supplying all the markets listed earlier in 

this outline. 

ASI Engineering of Tulsa, OK and AFS has undertaken a study of the infrastructure 

requirements that would be necessary to enable a petroleum distributor to handle neat 

biodiesel cost effectively. These include splash blending, preset rack blending; wild 

stream rack blending and header supply wild stream blending. Additional infrastructure 

options beyond terminal upgrades included truck stops and small bulk plants that are resupplied from pipeline and deep water storage terminals. 

Figure 4.1 

Terminals Distributing Low Sulfur Diesel Fuel in New York
Feasibility of a New York Biodiesel Industry 

LECG, LLC 75 May 5, 2004 

Figure 4.1 depicts the existing fuel distribution terminals strategically positioned 

throughout the State of New York. Not shown are the hundreds of small inland bulk 

terminals owned and operated by numerous private companies. Once distillate fuels are 

brought into the New York Harbor they are stored in deep water storage facilities and 

then transported throughout the vast New York region to more localized storage 

facilities. With mounting regulatory demands on spill containment and insurance 

increases, many of these smaller bulk terminal operators are reconsidering the value of 

keeping these assets active. For example, a Long Island terminal proprietor has 

decided to cease operations after this year and sell his property to a large national 

discount store chain for the value of the real estate. 

To accommodate biodiesel blends it will be necessary for each terminal operator to 

determine the level of distribution that they will encounter with biodiesel. Blends of two 

percent to five percent or 20 percent may be accommodated through implementation of 

many strategies. All terminals, unless willing to take another product out of service to 

utilize existing storage tanks, will need to invest in storage tanks, normally above ground 

(due to liability issues), to accommodate the B100 which will be delivered into each 

location by rail (if accessible) or transport (45,000 lbs, or 6,000 gallons). Once supplied 

it will be necessary for the storage proprietor to keep the biodiesel safe from cold 

weather gelling. This challenge is easily handled by heating the storage vessel 

containing the biodiesel as well as the lines that carry the biodiesel into the distillate fuel 

(diesel or heating oil) being blended. The costs associated with the tank and heating will 

vary on the actual size of storage capacity being considered. 

The costs associated with the array of infrastructure options is estimated at $250,000 to 

$2 million depending on the size of the terminal and the utilization of heat and how far 

the heat is carried throughout the system. For purposes of this study, an average value 

of $750,000 per terminal was assumed. The real costs for each terminal could vary 

dramatically from this number. Once the biodiesel blend is finished, conventional 

transports can then carry the B2, B5 or B20 directly to the truck fleet, bus fleet, rail 

application or homeowner with no operational headaches. 

The number one market obstacle for successful biodiesel integration in any state is the 

economics of biodiesel fuel. A second obstacle is the infrastructure costs to transition 

each and every bulk plant to take receipt, store, blend and distribute a finished biodiesel 

blended fuel to the consumer market (any market sector being addressed above). The 

cost of product may be resolved by the successful passage of the blender’s tax credit 

currently under review with in the Comprehensive Energy Bill. A blender’s tax credit 

helps petroleum industry parties interested in biodiesel cover the costs associated with 

infrastructure modifications as well begin building a market demand for biodiesel. Fuel 

wholesalers or terminal operators need to pay back the equipment investment by moving 

gallons through their respective terminals. Any current petroleum product being 

purchased at any level has included in it a line item dedicated to throughput costs, 

normally .0075 points per treated gallon. 

While all these strategies are developing, it will be very important to establish a 

comprehensive educational program to advise the petroleum industry of this unique 

liquid alternative fuel that may improve the quality of the existing distillate base stocks 

with the simultaneous benefit of impacting foreign oil displacement on an 

environmentally friendly note. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 76 May 5, 2004 

Subtask 4.3: Economic Sensitivity Analysis of Regional versus National Scenarios 

New York can create a significant market for biodiesel by enacting a mandate. The 

market for diesel fuel in New York is substantial. Total distillate fuel use in New York is 

estimated at 3.2 billion gallons in 2002 and is projected to increase at an annual rate of 

about 1.2 percent over the next decade. A B2 mandate covering all end uses would 

create a market of 64.1 million gallons that would increase to 73.7 million gallons by 

2012. 

A B2 mandate covering on-highway diesel uses beginning in 2007 and expanding to 

include residential, commercial, industrial, and utility uses would create a market of 23.3 

million gallons in 2007 increasing to 70.6 million gallons by 2012. 

The maximum capacity of New York to produce biodiesel is currently estimated at about 

30 million gallons. This is projected to increase to 40 million gallons by 2012. This 

assumes that all of the soybeans grown in New York are crushed using current 

technology (mechanical extraction that yields 7.8 pounds of oil per bushel) and all of the 

oil produced along with all of the yellow fat produced in the state is used to produce 

biodiesel. Consequently, New York could theoretically meet all of the demand for a B2 

mandate covering on-highway transportation fuel by 2007 and about 48 percent of the 

demand created by a full B2 mandate by 2012. 

The challenge for New York is to design policy options that require or hold the highest 

probability that the largest possible amount of biodiesel used in New York is produced in 

manufacturing facilities build and operated in New York, ideally using locally produced 

feedstocks. This would maximize the economic development impact for New York. 

Otherwise, biodiesel produced in other states would be shipped into New York to be 

blended for distribution, or soybean oil and other feedstocks produced in other states 

would be shipped it to be converted to biodiesel in state. 

Successful passage of the Energy Bill now in the Senate is an obvious key to the future 

development of the biodiesel industry. However, development of biodiesel capacity can 

be expected in the major soybean producing states where the majority of the oilseed 

processing capacity exists (notably Illinois and Iowa). Within the Region, Pennsylvania 

is actively investigating the feasibility of building a biodiesel industry. This would limit the 

availability of a New York industry to attract feedstocks from this major Mid-Atlantic 

soybean producer. 

Consequently, the relative (to other states) financial attractiveness of investment in 

biodiesel capacity in New York can be significantly affected by State-provided incentives. 

The most obvious -- and perhaps most cost effective --way to ensure that economic 

development and the benefits arising from a viable biodiesel industry accrue to New 

York is to link the incentive (or mandate) to New York biodiesel capacity or to biodiesel 

produced in New York. 
Feasibility of a New York Biodiesel Industry 

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TASK 5: PUBLIC POLICY OPTIONS 

Subtask 5.1: Existing Federal Energy and Environmental Programs 

The National Energy Policy Act of 1992 (EPAct)—Phase I

Eleven years ago, Congress enacted the Comprehensive Energy Policy Act of 1992. 

The intent of this statute was to strengthen the nation's energy security by displacing 

imported petroleum through the promotion of alternative fuels and alternative fueled 

vehicles. EPACT requires state fleet authorities, certain federal fleets and the fleets of 

alternative energy providers such as utilities, to purchase vehicles capable of running on 

alternative fuels. The U.S. Department of Energy (DOE) implemented these regulations 

with the strategy that, once purchased, the alternative fueled vehicles (AFV) would then 

use alternative fuels. The resulting alternative fuel usage would then meet the EPAct 

goals of replacing 10 percent of U.S. petroleum usage with alternative fuels by the year 

2000 and 30 percent by the year 2010. 

EPAct requirements affect fleets located in large metropolitan statistical areas (MSA). 

State fleets, federal fleets, and alternative fuel providers (primarily utilities) that operate 

within these metropolitan areas are required to purchase alternative fuel vehicles if they 

operate, lease or control 50 or more light duty vehicles within the United States. In the 

fall of 1998, Congress passed a provision that allows fleet managers to utilize biodiesel 

as a means to comply with their EPAct requirements. Under this biodiesel fuel use 

credits provision, fleets may choose to operate existing diesel vehicles that weigh more 

than 8,500 lbs. on blends of biodiesel in lieu of purchasing a new alternative fuel vehicle. 

The fleet may only count the biodiesel portion of that blend towards their annual vehicle 

purchase requirement. For each 450 gallons of pure biodiesel purchased and 

consumed, an alternative fuel vehicle credit is awarded. No credit is given for the nonbiodiesel (petroleum) portion of the fuel blend. No credit is given for the actual vehicles 

operating on the biodiesel-blended fuel. Only the actual purchase of biodiesel may be 

substituted for a fleet vehicle purchase requirement. 

New York’s state fleets and federal fleets operating in New York may find that utilizing 

B20 blends is the most economical method to comply with Phase I EPAct requirements. 

EPAct Phase II

EPAct authorizes DOE to pursue a rulemaking concerning AFV acquisition requirements 

for private and local government fleets if replacement goals are not being met. The 

transportation sector currently accounts for approximately two-thirds of all U.S. 

petroleum use and roughly one-fourth of total U.S. energy consumption. 

 

On March 4, 2003, the Department of Energy proposed to determine that a regulatory 

requirement for private and local government fleets to acquire alternative fueled vehicles 

was not “necessary”, and thus should not be promulgated. The Department felt that 

such a program would result in no appreciable increase in the percentage of alternative 

fuel and replacement fuel used by motor vehicles in the U.S. Two primary reasons were 

cited. First, the number of fleets that would be covered by a private and local 

government fleet mandate and the number of AFV acquisitions that would occur are too 

small to cause an appreciable increase in the percentage of replacement fuel that is 

used as motor fuel. 
Feasibility of a New York Biodiesel Industry 

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Second, even if a private and local government fleet acquisition mandate were adopted 

and substantial numbers of AFVs were acquired as a result, there is no assurance that 

the AFVs acquired by covered fleets would actually use replacement fuel. EPAct gives 

DOE no authority to require that vehicles acquired by private and local government fleets 

use any particular fuel. Therefore, Phase II of EPAct will not be a market driver for 

biodiesel demand. 

Proposed Amendments to the Energy Policy Act

Current law allows fleets to meet up to 50 percent of their AFV acquisition requirements 

through the use of biodiesel in vehicles weighing in excess of 8,500 lbs. gross vehicle 

weight. Current law does not allow credits to be banked or traded. Biodiesel users that 

must comply with EPAct initiated an effort to remove the limitation on biodiesel usage to 

generate EPAct credits. Section 514 of the proposed Energy Bill which is being 

discussed by conferees would allow any covered person subject to section 501 and any 

State subject to section 507(o) of the Energy Policy Act of 1992 to petition the Secretary 

of Energy for a waiver upon demonstrating a reduction in annual petroleum fuel 

consumption equal to the reduction in consumption that would result from compliance 

with section 501 or 507(o). Fleets must also be in compliance with all applicable vehicle 

emissions standards established under the Clean Air Act. 

This section of the Energy Bill, if passed, could provide a demand boost for immediate 

biodiesel sales if it is determined that fleets can meet 100 percent of their petroleum 

reduction requirements using biodiesel. However, the provisions will also alter the 

competitive position of biodiesel versus other alternative fuel technologies. Fleets would 

then be able to utilize any alternative fuel and receive credit for actual fuel usage. Fleets 

would also have the opportunity to utilize other measures such as fleet reduction or 

improved vehicle fuel efficiency. Therefore fleets would have several new options to 

consider for EPAct compliance.

Executive Order 13149

The executive order entitled Greening the Government Through Federal Fleet and 

Transportation Efficiency was signed on April 21, 2000. This executive order was signed 

to ensure that the Federal Government exercises leadership in the reduction of 

petroleum consumption through improvements in fleet fuel efficiency and the use of 

alternative fuel vehicles and alternative fuels. 

Each agency operating 20 or more vehicles within the United States is required to 

reduce its entire fleet's annual petroleum consumption by at least 20 percent by the end 

of FY2005 (compared to their FY1999 consumption levels). In addition, each agency 

shall use alternative fuels to meet a majority of the fuel requirements of those motor 

vehicles by the end of FY2005. Executive Order 13149 applies to all on-road vehicles 

including light, medium and heavy duty. 
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Agencies covered under this Executive Order include the: 

• Department of Agriculture • Department of State 

• Department of Commerce • Department of Transportation 

• Department of Defense • Department of Treasury 

• Department of Energy • Department of Veterans Affairs 

• Department of Health and Human 

Services 

• Environmental Protection Agency 

• Department of Housing and Urban 

Development 

• National Aeronautics and Space 

Administration 

• Department of Interior • General Services Administration 

• Department of Justice • United States Postal Service 

• Department of Labor 

This executive order may prove to be a nice complement to requirements of the Energy 

Policy Act. Federal fleet managers will now be required to use alternative fuels in 

addition to purchasing alternative fuel vehicles. In a recent Department of Defense 

Alternative Fuels Workshop all branches of the military indicated that biodiesel use 

would become a key element in their Executive Order 13149 compliance strategy. 

Ultra Low Sulfur Diesel Fuel In The U.S.

In December 2000, the EPA finalized regulations to reduce the sulfur content of highway 

diesel fuel by 97 percent from its current level of 500 ppm to 15 ppm. Previous research 

mentioned above has documented the lubricity benefits of biodiesel at very low 

percentages. Biodiesel could be included as a low level blending component in diesel 

fuel as a means to improve fuel lubricity while providing environmental, economic, and 

energy security benefits to diesel users and the U.S. public at the same time. 

Additional Points: 

• The proposed sulfur reduction rule is designed to help engine manufacturers 

install exhaust after treatment devices to meet the proposed 2007 emissions 

standards. 

• A reduction of sulfur levels in diesel fuel to 15 ppm using conventional methods 

to remove the sulfur would require refiners to include lubricity additives to 

maintain fuel quality and engine performance. 

• Biodiesel in blends of two percent can solve the lubricity problems of future diesel 

fuel 

• Biodiesel itself has less than 15 ppm sulfur. 

• Biodiesel blends can be used with existing petroleum infrastructure. 

• Diesel fuel injection equipment companies such as Stanadyne prefer the 

biodiesel solution above other additives. 

On May 23, 2003, the EPA proposed new emission standards for non-road diesel 

engines and sulfur reductions in non-road diesel fuel that will dramatically reduce 

emissions attributed to non-road diesel engines. This comprehensive national program 

will regulate non-road diesel engines and diesel fuel as a system. New engine 

standards will begin to take effect in the 2008 model year. This proposal represents the 

first time non-road diesel fuel will be regulated. 
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EPA proposed to reduce sulfur levels in non-road diesel fuel by more than 99 percent to 

15 parts per million (ppm). Taken together, controls included in this proposed regulation 

would result in large public health and welfare benefits. Diesel fuel used in non-road, 

locomotive, and marine applications would meet a 500 ppm cap starting in June 2007, a 

reduction of approximately 90 percent. In 2010, sulfur levels in non-road diesel fuel 

(though not locomotive or marine diesel fuel) would meet a 15 ppm cap, for a total 

reduction of over 99 percent. 

This provides an even stronger case for inclusion of biodiesel at the two 

percent level in all diesel fuel sold in the U.S. in 2006. 

Volumetric Biodiesel Excise Tax Credit Provisions

Senator Grassley (R-IA) introduced Senate Bill 1548 (S1548) which repeals the reduced 

tax rate on sales of fuel for blending with alcohol and gasohol and imposes the full rate 

of excise tax on alcohol blended fuels (18.3 cents per gallon on gasoline blends and 

24.3 cents per gallon of diesel blended fuel). In place of the reduced rates, the proposal 

provides per-gallon excise tax credits for alcohol and biodiesel fuel mixtures and 

provides for outlay payments (as an alternative to tax credits) to producers of alcohol 

and biodiesel fuel mixtures and users of 100 percent alcohol and biodiesel fuel mixtures 

and users of 100 percent alcohol and 100 percent biodiesel fuels. These provisions are 

being considered as part of the 2003 Energy Bill. 

According to the Joint Committee on Taxation, Description of the Chairman’s Mark 

Regarding the Extension of Highway Trust Fund Provisions and the “Volumetric Ethanol 

Excise Tax Credit Act of 2003” (JCX-75-03), dated September 15, 2003, the Highway 

Trust Fund is funded with amounts equivalent to revenues from certain excise taxes on 

motor fuels and on heavy trucks and tires. Under present law, six separate excise taxes 

are imposed to finance the Federal Highway Trust Fund program. Three of these taxes 

are imposed on highway motor fuels. The remaining three are a retail sales tax on heavy 

highway vehicles, a manufacturers’ excise tax on heavy vehicle tires, and an annual use 

tax on heavy vehicles. 

The Highway Trust Fund motor fuels tax rates are as follows: 

Gasoline 18.3 cents per gallon 

Diesel fuel and kerosene 24.3 cents per gallon 

Special motor fuels 18.3 cents per gallon 

(generally) 

Many exemptions are realized through refunds. Exempt uses and fuels include: 

1) Use in State and local government and nonprofit educational organization 

highway vehicles 

2) Use in buses engaged in transporting students and employees of schools 

3) Use in local mass transit buses having a seating capacity of at least 20 adults 

(not including the driver) when the buses operate under contract with (or are 

subsidized by) a State or local governmental unit to furnish the transportation; 

and 
Feasibility of a New York Biodiesel Industry 

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4) Use in intercity buses serving the general public along scheduled routes. (Such 

use is totally exempt from the gasoline excise tax and is exempt from 17 cents 

per gallon of the diesel fuel tax.) 

Fuels used in off-highway business use or on a farm for farming purposes generally are 

exempt from these motor fuels taxes as well. 

The proposed policy creates two new excise tax credits: the alcohol fuel mixture credit 

and the biodiesel mixture credit. The sum of these credits may be taken against the tax 

imposed on taxable fuels (by section 4081). A person must first apply the excise tax 

credit against excise tax liability, if any, before making any claim for payment. 

The proposal provides an excise tax credit for biodiesel mixtures of 50 cents for each 

gallon of biodiesel used by the taxpayer in producing a qualified biodiesel mixture. A 

qualified biodiesel mixture is a mixture of biodiesel and diesel fuel that is (1) sold for use 

or used by the taxpayer producing such mixture as a fuel, or (2) removed from the 

refinery by a person producing the mixture. In the case of agri-biodiesel, the amount of 

the credit is $1.00 per gallon and applies only if the taxpayer obtains a certification from 

the registered producer of the agri-biodiesel that identifies the product produced. Agribiodiesel is biodiesel derived solely from virgin oils, including esters derived from corn, 

soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, 

flaxseeds, rice bran, mustard seeds or animal fats. Recycled biodiesel, on the other 

hand, is biodiesel derived from non-virgin vegetable oils or non-virgin animal fats. 

This excise tax credit is coordinated with income tax credit for biodiesel such that credit 

for the same biodiesel cannot be claimed for both income and excise tax purposes. 

Under the proposal, the Secretary may require registration of every person that 

produces biodiesel or alcohol. 

If 100 percent biodiesel is used by any person as a fuel in a trade or business or sold by 

any person at retail to another person and placed in the fuel tank of such person’s 

vehicle, the Secretary is to pay such person an amount equal to the alcohol credit or the 

biodiesel credit with respect to such fuel. 

The provision also provides a new income tax credit for qualified biodiesel and biodiesel 

mixtures, the biodiesel fuels credit. The biodiesel fuels credit is the sum of the biodiesel 

mixture credit plus the biodiesel credit and is treated as a general business credit. The 

amount of the biodiesel fuels credit is includable in gross income. The biodiesel fuels 

credit is coordinated to take into account benefits from the biodiesel excise tax credit and 

payment provisions. The biodiesel income tax proposal is effective for fuel sold after 

December 31, 2003. Provisions expire on December 31, 2005. 

This bill represents the MOST significant piece of legislation that could 

positively impact biodiesel demand. Given the lubricity characteristics of 

biodiesel, passage of this bill would create a significant incentive for 

refiners and blenders to incorporate low levels of biodiesel as a lubricity 

additive into the diesel fuel supply. 
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Renewable Fuels Standard

Provisions of House Resolution 6 (HR6), currently under consideration by House and 

Senate Energy Bill conferees, would create a renewable fuel program. Known as the 

renewable fuel standard (RFS), this program would ensure that gasoline sold or 

dispensed to consumers in the United States, on an annual average basis, contains an 

applicable volume of renewable fuel as specified in Table 5.1. The program would apply 

to refiners, blenders, and importers. For the purposes of this program, the term 

‘renewable fuel’ means motor vehicle fuel that is produced from grain, starch, oilseeds, 

or other biomass including cellulosic biomass ethanol and biodiesel as defined in section 

312 (f) of the Energy Policy Act of 1992. 

Table 5.1 

Applicable Volume of Renewable Fuel. 

Calendar 

Year 

Fuel 

(in billions of gallons)

2005 2.7 

2006 2.7 

2007 2.9 

2008 2.9 

2009 3.4 

2010 3.4 

2011 3.4 

2012 4.2 

2013 4.2 

2014 4.2 

2015 5.0 

After 2015, applicable volumes for each calendar year shall be equal to the product 

obtained by multiplying the number of gallons of gasoline that the EPA Administrator 

estimates will be sold or introduced into commerce in the calendar year and the ratio that 

5.0 billion gallons of renewable fuels bears to the number of gallons of gasoline sold or 

introduced into commerce in calendar year 2015. 

Cellulosic biomass ethanol shall be considered to be the equivalent of 1.5 gallon of 

renewable fuel for the program and the Administrator shall provide for the generation of 

an appropriate amount of credits for biodiesel fuel. 

Entities that refine, blend, or import gasoline that contains a quantity of renewable fuel 

that is greater than the quantity required shall generate credits. Entities may use the 

credits or transfer all or a portion of the credits to another person. Credits may be 

carried forward two consecutive calendar years. 

This section of the Energy Bill, if it becomes law in conjunction with 

biodiesel tax provisions, could result in dramatically increased usage and 

completely change the structure of the biodiesel industry; paving the way 

for large scale plants. 
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Amendments to the Congestion, Mitigation, and Air Quality Bill

The Biofuels Air Quality Act (HR318), introduced by Congressman Shimkus (R-IL), 

would allow the cost of biodiesel and other renewable fuels to be eligible for Congestion 

Mitigation Air Quality Program (CMAQ) funding. Currently, the CMAQ program funds 

transportation projects that will reduce congestion and improve air quality. However, in 

general, the cost of purchasing fuel does not qualify for funding. Since the only 

expenditure to using some renewable fuels is the cost of purchasing the fuel, cities 

wishing to use fuels like biodiesel in their bus fleets can be turned down for CMAQ 

funding. The legislation would also allow the use of CMAQ funds for the installation of 

capital equipment necessary for the conversion of storage and distribution facilities to 

carry renewable fuels or renewable fuel blends. Senator Bond has introduced a similar 

bill in the Senate. 

 

This legislation would provide cities, specifically urban transits, school 

buses, and Clean Cities Programs, with the opportunity to receive federal 

grants to offset the incremental costs of B20. 

IRS Reporting and Dyeing Requirements

The Internal Revenue Service of the U.S. Government requires that all companies 

selling fuel commercially in the U.S. report the amount of fuel sold and pay the 

appropriate Federal Excise Tax (commonly referred to as Road Tax) to the U.S. 

Treasury. The amount of this tax, and associated state tax varies depending on whether 

the fuel is to be used for non-exempt purposes or exempt purposes. IRS regulations 

require that all off-road fuel be dyed red and substantial penalties have been levied for 

those who use red dyed fuel for on-road use. The IRS issued a revenue ruling on 

November 18, 2002 that clarifies the scope of taxation for biodiesel. The IRS declared 

that biodiesel is an excluded liquid under section 48.4081-1(c)(2) because it contains 

less than four percent paraffins. Therefore, biodiesel is not taxable under section 

4081(a)(1). Tax is imposed, however, under section 4081(b)(1) if biodiesel is used in the 

production of blended taxable fuel. The tax is imposed on the removal or sale of the 

blended taxable fuel. Furthermore, subject to the exemptions in section 4041, if 

biodiesel is sold for use or used as a fuel in a diesel-powered highway vehicle or a 

diesel-powered train, tax is imposed by section 4041(a)(1). Most of the biodiesel 

companies are selling their biodiesel to a petroleum distributor who then takes care of 

collecting the appropriate taxes as well as dyeing requirements. In this case, the 

biodiesel company does not have to collect taxes and report to the IRS. 

Federal Agricultural Programs 

CCC Bioenergy Programs 

Background 

The Bioenergy Program was conceptualized to expand industrial consumption of 

agricultural commodities by promoting their use in production of biodiesel and ethanol. 

CCC makes incentive cash payments to bioenergy producers who increase their 

purchase of eligible agricultural commodities, as compared to the corresponding period 

in the prior fiscal year, and convert that commodity into increased bioenergy production. 
Feasibility of a New York Biodiesel Industry 

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New program provisions also allow incentive payments to be made for existing biodiesel 

production. 

Legislative Authority 

Section 9010 of the Farm Security and Rural Investment Act of 2002 (Section 9010) is 

the authority for making payments on increased bioenergy production. The Commodity 

Credit Corporation (CCC) is using its authority under Section 5(e) of CCC's Charter Act 

to make program payments on biodiesel production that is not eligible under provisions 

of the 2002 Act. The program is funded using CCC's borrowing authority. 

Program Summary 

Biodiesel is defined as a mono alkyl ester manufactured in the United States and its 

territories that meets the requirements of an appropriate ASTM standard. Eligible 

commodities include barley, corn, grain sorghum, oats, rice, wheat, soybeans, cotton 

seed, sunflower seed, canola, crambe, rapeseed, safflower, sesame seed, flaxseed, 

mustard seed, cellulosic crops such as switchgrass and hybrid poplars, fats, oils, and 

greases (including recycled fats, oils and greases) derived from an agricultural product, 

and any animal byproduct (in addition to oils, fats, and greases) that may be used to 

produce bioenergy, as CCC determines, that is produced in the U.S. and its territories. 

Biodiesel producers apply to the CCC during a sign-up period, which begins August 1st

of the Fiscal Year before the Fiscal Year of applicable enrollment and ends 30 days 

later, and are assigned an agreement number. Those firms that are eligible producers 

must provide CCC with evidence of biodiesel production and purchases and utilization of 

agricultural commodities for the Fiscal Year quarter and Fiscal Year to date compared to 

the same time period in the prior Fiscal Year. 

Production incentives are made on the base levels of production for FY03 – FY05, and 

then on increased production only in FY06 and beyond. The payment structure works 

as follows: Payments for increased production are paid out as before with the revised 

rate. Additionally, base production will receive staggered subsidies until 2006 at the 

following levels: 

 

FY03 = full payment on incremental gallons and 50 percent payment on remaining 

gallons 

FY04 = full payment on incremental gallons and 30 percent payment on remaining 

gallons 

FY05 = full payment on incremental gallons and 15 percent payment on remaining 

gallons 

FY06 = full payment on incremental gallons only 

 

Annual payments to each entity are capped at five percent of the available funds for the 

program. The annual allocation for the program is $150 million (if appropriated), which 

equates to $7.5 million for a producer in a year. 

The CCC bases biodiesel payments on a soybean conversion and price, adjusted further 

by comparing the applicable oil or grease (animal fats and oils) price to the soy oil price. 

An example of how CCC incentive payments are calculated is found in Appendix 2. 
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Implications for a New York Biodiesel Industry:

The Bioenergy Program, as implemented, has several implications for a biodiesel 

industry in New York State. First, there are a number of eligible feedstocks including 

recycled fats, oils, and greases that would be important to a New York industry. 

However, the incentive payments are significantly less for recycled oils compared to 

vegetable oils. Second, the legislative authority for the program will sunset with the 

overall Farm Bill in 2007. In addition, payments are dependent upon both the number of 

applicants and appropriations. Therefore, strong participation by other firms in either the 

biodiesel or ethanol industry and/or budget pressures could reduce the level of program 

incentives. Finally, although the program was designed to help offset the cost of capital 

for increasing production capacity, many firms have utilized CCC payments to help offset 

the premium price of the biodiesel they are currently producing. 

Federal Sources

Several opportunities also exist for assistance from non-traditional funding sources on 

the federal level. The USDA is a primary source for grants and loans because of its 

desire to promote a dynamic business environment in rural America. Several of these 

programs are outlined in Appendix 2. 
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Subtask 5.2: State Biodiesel Initiatives 

The previous three state legislative sessions have yielded a plethora of proposed bills 

specific to the biodiesel industry as well as numerous policies that have been signed into 

law. New laws have ranged from state policy to adequately define biodiesel to 

reductions in state excise or sales tax for biodiesel blends to a mandate for the use of B2 

blends in all diesel fuel consumed in the state. State policy has also helped to 

encourage the production of biodiesel through legislation that creates incentive funds for 

manufacturing facilities or income tax credits on plants and equipment. Figure 5.1 

demonstrates the breadth of state policy across the nation. Table 5.2, developed in 

conjunction with the National Biodiesel Board, provides a list of known biodiesel state 

policies that are depicted in the figure below. Every attempt has been made to ensure 

that the information presented is comprehensive in nature, however, biodiesel related 

policy may exist which is not included in this table. 

Figure 5.1 

States That Have Enacted Biodiesel Policies
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Table 5.2 

Biodiesel Policies by State 

Several state laws that are significant to the biodiesel industry and represent examples 

of biodiesel policy that could be initiated in other states are summarized below. 

Arkansas 

SB 363 provides a five percent income tax credit for plant and equipment for biodiesel 

fuel suppliers. In addition, the legislation provides a 10-cent per gallon grant to qualified 

producers. The grants are limited to the first five million gallons of biodiesel produced 

annually, not to exceed five years. This legislation is specifically designed to encourage 

plant development and infrastructure development. 

This legislation was passed in the 2003 session and its ability to attract 

investment cannot be effectively evaluated. 

StateID Bill Number Subtitle

Arizona HB 2123 Restriction removal on use of biodiesel for public vehicle fleets

AFV Grant Program Commerce provides grants to alternative fuel implementations

Arkansas SB 363 Biodiesel distributor tax credit

HB 1287 Income tax credits for biodiesel facilities and equipment

California Health Risk Red. Plan Inclusion of biodiesel as an option for Health Risk Reduction Plan

Connecticut HB 6402 CARB implementation

SB 733 RPS and netmetering

Florida SB 1176 Biodiesel manufacturers must be licensed by Revenue Dept

Hawaii HB 1345 Alternative Fuel tax 

Illinois HB 46 Adds biodiesel to ethanol use tax exemption

SB 1075 Economic development bill providing bonds/loans for certain businesses

SB 46 Adds biodiesel to ethanol use tax exemption

Indiana HB 1001 Biodiesel tax credits for producer/blender/retailer (starting at $1 pg)

HR 88 Interim study committee for renewables

Iowa HB 677 See HB 620

HB 681 Tax credits for cooperatives producing value-added agricultural products

HB 683 Modifying the value-added agricultural products and processes financial assistance program

Kansas HB 2018 Creates the Renewable Energy Generation Cooperative

HB 2036 Improper biodiesel marketing.

SCR 1604 Biodiesel and ethanol support resolution

Maine SB 160 Biodiesel definition

Michigan HB 4010 Tax Abatements

Minnesota HB 1597 Omnibus tax bill - includes agricultural processing facility zones

HB 775 Biomass projects; status review

SF 1495 Low Blend Mandate

SF 2675 Requirement Mandate on state agencies

Mississippi HB 928 Adds biodiesel to cash payment law for ethanol, wet alcohol and others.

Missouri HB 257 Investment Tax Credits; Growers' Districts

HB 289 Tax increment financing for renewable fuel plants.

HB 868 Reimbursement to school districts for incremental cost

SB 244 Self-Sustaining Biodiesel Revolving Fund

Montana SB 644 Biodiesel Tax incentives

Nevada AB 237 Provides economic incentives for the development and noncommercial use of alternative energy.

Law AFV Fleet Requirements

New Mexico SB 193 Incentives for Alt. Fuel Vehicles

New York AB 237 Provisions for diesel fueled school bus retrofit equipment projects

North Dakota HB 1309 B2 mandate, biodiesel related income tax credit

Ohio HB 87 Creates the Biofuel and Renewable Energy Task Force

Oklahoma HB 1705 Requires alt fuel usage

Oregon Law Business Energy Tax Credit

South Dakota HB 1279 Biodiesel definition

Texas HB 2458 Moves excise tax collection to terminal rack level.

SB 273 Grant program for biodiesel production

Utah HB 1005 Income tax credit for biomass system

Washington HB 1241 Biodiesel Distribution/Retail Sales Tax Incentive

HB 1242 State Fleet use of biodiesel

HB 1243 Biodiesel Pilot Project
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Illinois 

The State of Illinois enacted a sales tax exemption for biodiesel blends greater than 10 

percent and a partial sales tax exemption for biodiesel blends between one percent and 

10 percent through the passage of HB46 in July 2003. Diesel fuel users typically pay 

federal excise tax, state sales tax (at a rate of 6.25 percent), and state excise tax. State 

sales tax is calculated after federal excise tax has been added and prior to state excise 

tax. This legislation would reduce the levels of sales tax paid on biodiesel blends 

greater than one percent. Specifically, sales tax on blends between B1 and B10 are 

reduced by 20 percent and the sales tax is eliminated on blends greater than B10. 

Biodiesel is defined as a renewable diesel fuel derived from biomass that is intended for 

use in diesel engines. Biodiesel blends are blends of biodiesel with petroleum-based 

diesel fuel that the resultant product contains no less than one percent and no more than 

99 percent biodiesel. 

The legislation went into effect in July of 2003 and has already 

demonstrated market acceptance. Distributors report increased sales of 

both B1 and B11 blends to diesel consumers. 

Indiana 

HB1001 (2003), effective January 1, 2004, creates incentives for biodiesel producers, 

blenders, and retailers. An Indiana biodiesel producer is entitled to a state tax liability 

credit equal to one dollar for every gallon of biodiesel produced during the taxable year. 

The total amount of credits for the program is capped at $1 million. In addition, a 

producer must reduce the amount of tax credit they are eligible for by any credit or 

subsidy that the group receives from the federal government for the production of 

biodiesel. Indiana fuel blenders are entitled to a tax credit equal to two cents per gallon 

for every gallon of blended biodiesel. This credit is also capped at $1 million and an 

eligible entity must reduce the amount of tax credit they are eligible for by any credit or 

subsidy that the group receives from the federal government. Finally, retailers are also 

eligible for state tax credits. Service station operators are entitled to a one cent per 

gallon credit for the total number of gallons of blended biodiesel sold and dispensed 

through all of their metered pumps. Biodiesel blends are defined as B2 or greater (but 

not B100). Biodiesel is defined as fuel meeting the ASTM D 6751 specification. 

This legislation was passed in the 2003 session and its ability to attract 

investment cannot be effectively evaluated. Biodiesel demand in Indiana 

has increased and may be, in part, due to the incentives offered to blenders 

and retailers. 

Iowa 

SB 465 Established a “Biodiesel Revolving Fund,” which pays the cost of the biodiesel 

fuel used by the Iowa Department of Transportation. The Biodiesel Revolving Fund is 

self-sustaining and is funded through the sale of banked EPAct credits. Firms that have 

not purchased sufficient AFVs to comply with EPAct are able to purchase credits on the 

open market. 
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EPAct credits have been sold and the proceeds utilized to purchase 

biodiesel for the Iowa Department of Transportation. The program worked 

as envisioned. 

Kansas 

The State of Kansas enacted legislation in 2003 that would make it a violation of the Act 

to represent that diesel fuel is or contains biodiesel fuel or otherwise to represent that 

diesel fuel is made from renewable resources, unless not less than two percent of the 

diesel fuel mixture is mono-alkyl esters derived from vegetable oil, recycled cooking oil, 

or animal fats (according to the supplemental note on substitute for House Bill No. 

2036). In addition, biodiesel is defined as biodiesel meeting ASTM D 6751. Finally, 

state-owned diesel powered vehicles and equipment are required to utilize B2 blends or 

higher as long as the biodiesel blend is not greater than 10 cents more per gallon than 

the price of diesel fuel. 

Minnesota 

SF 1495 (2002) requires that two percent biodiesel must be blended in all diesel sold in 

Minnesota. The mandate is effective on and after the date that the conditions in clauses 

(1) and (2), or in clauses (1) and (3), have been met: 

(1) Thirty or more days have been passed since the commissioner of agriculture 

publishes notice in the State Register that annual capacity in Minnesota for the 

production of biodiesel fuel oil exceed 8,000,000 gallons; 

(2) Eighteen months have passed since the commissioner of agriculture publishes 

notice in the State Register that a federal action on taxes imposed, tax credits, or 

otherwise, creates a reduction in the price of two cents or more per gallon on 

taxable fuel that contains at least two percent biodiesel fuel oil and is sold in this 

state; 

(3) The date June 30, 2005, has passed. 

Language requiring biodiesel production capacity within the state 

boundaries was added to this legislation to help ensure that economic 

benefits would accrue to the state. The policy has been successful at 

attracting investment in a biodiesel plant even though biodiesel 

manufacturing facilities are currently in production in Iowa. Therefore, the 

policy will be successful at both stimulating demand and creating 

economic development opportunities. 

Missouri 

Missouri state agencies currently follow guidelines established by the Fuel Conservation 

for State Vehicles Program, which was passed into law by the Missouri Legislature in 

1991 and amended in 1998. This law, RSMo 414.400 - 414.417, charges the 

Department of Natural Resources with development and implementation of a program to 

reduce fuel consumption, improve fleet management, and promote the use of alternative 

fuels. Similar to EPAct, this legislation requires the acquisition of alternative fueled 

vehicles. The statute also requires that at least 30 percent of all motor fuel purchased 

annually for use in AFVs, calculated in gasoline gallon equivalents, be an alternative fuel 
Feasibility of a New York Biodiesel Industry 

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by July 1, 2001 provided that suppliers or state agencies have or can reasonably be 

expected to have established alternative fuel refueling stations as needed. 

The impact of this statute was enhanced in 2002, when the Missouri legislature passed 

RSMo 414.365. This law requires the Missouri Department of Transportation (MoDOT) 

to develop a program that provides for the opportunity to use fuel with at least the 

biodiesel content of B20 in its vehicle fleet and heavy equipment that use diesel fuel. 

The following MoDOT AFV requirements were summarized in Missouri legislation and 

will be implemented: 

• On or before July 1, 2004, at least 50 percent of the department’s vehicle fleet 

and heavy equipment that use diesel fuel shall use fuel with at least the content 

of B20, if such fuel is commercially available; 

• On or before July 1, 2005, at least 75 percent of the department’s vehicle fleet 

and heavy equipment that use diesel fuel shall use fuel with at least the content 

of B20, if such fuel is commercially available. 

The Missouri Department of Transportation began incorporating biodiesel 

into their districts prior to passage of legislation in 2002 requiring its use. 

The legislation, has however, prompted an evaluation statewide of fueling 

infrastructure and the possibility of using biodiesel in all MoDOT districts. 

In addition, SB 244 established a Self-Sustaining Biodiesel Revolving Fund in 2001. 

The fund is administered by the Department of Natural Resources (DNR) and is 

available to all state fleets. The fund pays the incremental cost of biodiesel. 

Two additional pieces of legislation have been passed in Missouri that 

impact the biodiesel industry. HB 868, passed in the 2001 session, 

authorizes the incremental costs of B20 to be a reimbursable expense for 

Missouri school districts. 

Funds would need to be appropriated in a subsequent session for this program to 

be initiated. 

HB1348 creates the Missouri Qualified Biodiesel Producers Incentive Fund, which 

provides an incentive to producers of biodiesel of 30 cents per gallon for up to 15 million 

gallons of biodiesel produced per year for five years. The incentive is to be received on 

an estimated monthly production basis paid by the Department of Agriculture. 

Additionally, HB 1348 defines biodiesel in statute as the ASTM D 6751 specification. 

Funds would need to be appropriated in a subsequent session for this program to 

be initiated. 

North Dakota 

SB 2454 mandates that the state excise tax of 21 cents per gallon is reduced by one and 

five hundredths cents per gallon on the sale or delivery of diesel fuel that contains at 

least two percent biodiesel. It imposes a “special excise tax” of two percent on all sales 

of diesel fuel containing B2 by weight. The effective date is conditional upon the 

construction and operation of a biodiesel refining facility in the state with a production 

capacity of at least 10 million gallons per year. This legislation was extended in the 2003 
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session through HB1309. HB1309 created a 10 percent tax credit for producers/blenders 

on equipment. The legislation also includes a $1.05 excise reduction on B2 after at least 

an eight million gallon capacity plant is built in the state. 

This policy has been unsuccessful at attracting biodiesel investment most likely 

due to the incentive level compared to fuel pricing. 

Washington State 

HB1240 provides tax incentives for biodiesel and alcohol fuel production—

sales/use/property tax “deferral” (wiped clean after seven years). HB1241 provides a tax 

incentive for investments associated with distribution and retail sale of biodiesel. No 

taxes on equipment and ingredients until 2009 (if equipment is used for at least 75 

percent biodiesel distribution). Finally, HB1242 encourages state agencies to use B20. 

In addition, state agencies are required to use B2 as a lubricity agent beginning in 2006. 

HB1243 creates a biodiesel-ultra low sulfur diesel pilot project for school transportation. 

These pieces of legislation were passed in the 2003 session and their 

effectiveness in stimulating demand or attracting investment cannot be 

evaluated. 

Subtask 5.3: New York Policy 

Current Policy Supporting Alternative Fuels

The State of New York has implemented aggressive alternative fuel vehicle programs to 

support environmental and energy security goals. However these programs were not 

designed specifically to support biodiesel and generally speaking do not support the 

development of the market for biodiesel compared to other alternative fuel technologies. 

Major existing New York initiatives include: 

• Alternative fuel vehicle tax credits 

• The Clean Water/Clean Air Bond Act 

• Executive Order No. 111 

Alternative Fuel Vehicle Tax Credits 

Alternative fuel vehicle tax credits have been available for clean-fueled AFVs (60 percent 

of the incremental cost up to $5,000 for light-duty vehicles and up to $10,000 for heavy 

duty vehicles), electric vehicles (50 percent of incremental cost up to $5,000), and 

alternative fuel infrastructure (50 percent of installed cost). 

The Clean Water/Clean Air Bond Act 

Governor George Pataki signed the $1.75 billion Clean Water/Clean Air Bond Act in 

1996. The Act, which includes $230 million for air quality improvement projects, 

provides incentives to reduce the incremental cost of AFV purchases. More than $55 

million was made available through this Act for the clean-fueled bus program and the 

state fleet program. 
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The Clean-Fueled Bus Program is designed to provide grants for 100 percent of the 

incremental cost of new natural gas, electric, or hybrid-electric buses. The State Fleet 

Program helps to pay for the incremental costs of AFVs and alternative fuel 

infrastructure. 

Executive Order No. 111 

In June 2001, New York furthered its commitment to alternative fuels by signing 

Executive Order 111, which directs every state agency, regardless of fleet size or 

location, to increase its annual light-duty AFV acquisitions to 100 percent by 2010. This 

executive order goes beyond the requirements of the Federal EPAct program discussed 

in the previous section of this report. In addition to requirements for light-duty vehicle 

fleets, the executive order also requires vehicle fleets that operate medium- and heavyduty vehicles to take steps to reduce petroleum consumption and emissions. 

City initiatives exist, such as Local Law 6 in New York City that mandates that 80 

percent of the new light-duty vehicles and 20 percent of new bus purchases must be 

powered by alternative fuels. Other city agencies such as the New York City 

Department of Transportation, the Metropolitan Transportation Authority (MTA), and the 

New York City taxicab fleet have begun programs to convert to AFVs. 

Statewide, appropriations have been made available for diesel fueled school bus retrofit 

equipment projects. Retrofit equipment includes: particulate traps or filters and catalytic 

converters that reduce emissions of particulate matter, hydrocarbons, and oxides of 

nitrogen, carbon monoxide, or toxic air pollutants. Biodiesel is included as a power 

source for buses defined as a “clean-fueled bus” under this program. 

Implications for the Biodiesel Industry 

Biodiesel blends can be used in existing diesel powered vehicles and existing petroleum 

fueling infrastructure. Therefore, more of the current New York programs, designed to 

promote alternative fueled vehicles and fueling infrastructure, do not significantly aid the 

market development of biodiesel. Executive Order No. 111 does require steps to be 

taken to reduce the emissions and petroleum consumption of medium- and heavy-duty 

vehicles. Thus, vehicle fleets may look toward biodiesel blends to help comply with the 

Executive Order. 

Proposed Policy Supporting Alternative Fuels 

State bills have been proposed that could support the development of the biodiesel 

industry. S.4069, and its companion bill A.1538, require alternative fuels to be available 

for public use along the New York state thruway after November 1, 2004 and to provide 

each recommended alternative fuel at least one refueling site every one hundred twenty 

miles on both sides of the thruway. The definition of alternative fuel does not specifically 

name biodiesel and it would need to be incorporated into the bill to ensure that the 

proposed legislation could be advantageous to biodiesel. 

Another bill, A.909, was proposed to determine the process and time frame by which the 

Metropolitan Transportation Authority (MTA) plans to convert their existing diesel bus 

fleet to an alternative fuel vehicle fleet by requiring the development of a long-range 

strategic plan for such purposes. Again, biodiesel is not specifically mentioned and 
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therefore it is unclear whether biodiesel would be included as an alternative fuel in this 

legislation. 

Other proposed legislation, such as S.4523 and A.1350 would create tax credits or 

exemptions on sales tax for alternative fueled vehicles. As proposed, these bills would 

not encourage the use of biodiesel fuel since they specifically address the incremental 

costs of AFVs. 

Greenhouse Gas Task Force and Northeastern Governors Carbon Dioxide Trading 

Working Group 

Governor Pataki announced in June 2001 the formation of a Greenhouse Gas (GHG) 

Task Force comprised of representatives from industry, environmental organizations, 

community leaders and state government. 

Some of the major GHG Task Force recommendations include: 

• Establishment of a State GHG emissions target at five percent below 1990 levels 

by 2010, and ten percent below 1990 levels by 2020—more aggressive than the 

New England Governor’s/Eastern Canadian Premieres Agreement. 

• Creation of a program to limit emissions from the electricity generation sector to 

levels 25 percent below 1990 by 2010. 

• Adoption of GHG emissions standards for passenger vehicles, upon 

implementation in California for model year 2009, and creation of a New York 

biofuel program that would create new markets for farmers through: a two 

percent biodiesel requirement for all diesel sold, a 20 percent biodiesel goal for 

all State diesel vehicles, and incentives for growers and producers of biofuels. 

• A comprehensive statewide inventory of GHG emissions, along with a mandatory 

reporting system for major industries and sectors, and a voluntary emissions 

registry to support companies and institutions that reduce emissions. 

To date, New York has announced plans to implement a number of the 

recommendations including: 

• On June 11, 2002 the New York State Energy Planning Board adopted the 

recommendation that the State establish a target to reduce GHG emissions to 

five percent below 1990 levels by 2010, and ten percent below 1990 levels by 

2020. 

• In his State of the State address in January 2003, Governor Pataki called for the 

creation of a renewable portfolio standard (RPS) for electric power generation 

that will guarantee that within the next ten years at least 25 percent of the 

electricity bought in New York will come from renewable energy sources like 

solar power, wind power, or fuel cells; and adoption of greenhouse gas 

emissions standards for passenger vehicles, upon implementation in California, 

for model year 2009. 

• On April 25, Governor Pataki sent a letter to ten northeastern governors offering 

to create a regional power sector carbon dioxide emissions trading program. On 

July 24, 2003, Governor Pataki announced that he has received commitments 

from the Governors of nine northeast states to join New York State in a regional 
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strategy to reduce carbon dioxide emissions from power plants. The initiative 

proposed by the Governor would involve developing a flexible market-based 

emissions trading system to require power generators to reduce emissions. 

Since life-cycle studies of biodiesel show a 78 percent reduction in CO2 relative to 

petroleum diesel, biodiesel blends could play a significant role in a market-based 

cap and trade program. 

TASK 6: ANALYSIS OF NEW YORK STATE PUBLIC POLICY OPTIONS AND 

ASSOCIATED COSTS AND BENEFITS 

The impact of a biodiesel policy on the economy of New York will depend on the 

particular parameters of the policy option implemented. Further, whether a biodiesel 

incentive or policy should be phased in depends on the form of incentive. In any event, 

any policy should be linked to New York capacity in order to ensure that economic 

development takes place in New York. Typically, policy options (e.g. incentives) fall 

under one of two categories: fuel based and production oriented. Each has unique 

impacts on economic activity, job creation, agricultural output, fuel use, and tax and 

revenue implications. 

The analysis of policy impacts in this report does not include environmental impacts. For 

a comprehensive review of impacts from biodiesel exhaust emissions, see the EPA 

report, "A Comprehensive Analysis of Biodiesel Impacts on Exhaust Emissions," 

EPA420-P-02-001, October, 2002. 

Each policy option designed to promote the use and production of biodiesel is expected 

to attract direct investment to New York State. The investment will consist of capital 

expenditures to increase soybean crush capacity and build new crush capacity, build 

new biodiesel production capacity, and improve distribution infrastructure for each of the 

terminals in the State. These capital expenditures, along with the annual operating 

expenses associated with producing biodiesel represent the purchase of output from 

other industries. These dollars will be spent and re-spent throughout all sectors of the 

New York economy thereby creating additional new demand and output, creating new 

jobs in all sectors of the economy, and generating additional income for New York 

households. 

The basic assumption underlying this analysis is that each policy option would be 

introduced and signed into law in 2004 to take effect on April 1, 2005. 

The spending associated with increasing investment in biodiesel production and higher 

agricultural output from increased soybean production will stimulate aggregate demand, 

create new jobs, and generate additional household income. The gross output, 

household income, and job impacts were estimated by applying the most appropriate 

final demand multipliers calculated by the U.S. Bureau of Economic Analysis (BEA) for 

output, earnings, and employment to the estimates of new capital spending and 

additional agricultural final demand.61 The multipliers for the agriculture sector were 

used to estimate the impact from increased real agricultural final demand resulting from 

biodiesel production. The production of biodiesel from agricultural commodities 

 

61 The multipliers used in this analysis are the current two-digit industry RIMS II multipliers estimated by the 

Bureau of Economic Analysis, U.S. Department of Commerce. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 95 May 5, 2004 

represents output of the industrial inorganic and organic compounds industry; while the 

most appropriate multipliers for new plant construction are those for the construction 

sector. 

The estimates summarized below result from a static analysis of the impact of increasing 

biodiesel production and demand on the New York economy. That is, they reflect the 

combination of a series of snapshots of the economy rather than a dynamic flow 

analysis. The macroeconomic and budgetary impacts and cost implications for highway 

users, residential consumers, and business and industry for each specific policy option 

are presented in Table 6.1 for the absence of an Energy Bill and Table 6.2 which 

assumes the passage of the Energy Bill now in Congress. 

Subtask 6.1: Fuel-based Incentives, Policies and Impacts 

Fuel-based policy incentives are those that mandate or provide some economic 

incentive to replace petroleum-based diesel fuel with biodiesel or incorporate biodiesel 

with traditional diesel fuel in alternative blend combinations for the transportation, 

residential, commercial, and industrial sectors. 

B2 Mandate (Policy Option 1)

The first option analyzed is a statewide mandate that would require any highway 

distillate to contain at least two percent biodiesel by 2007. The mandate would be 

expanded to all other distillate end uses in 2009. The mandate would be linked to 

production capacity. That is, the mandate would not take effect until at least 10 million 

gallons of biodiesel capacity was built in New York State. The mandate would affect 1.2 

billion gallons of distillate use in 2007, increasing to 3.7 billion gallons by 2012. The 

mandate would result in a market for biodiesel in New York of 23.3 million gallons in 

2007, increasing to 73.7 million gallons by 2012. 

In our opinion the market created by a B2 mandate would create a market of significant 

size to provide an incentive for producers to invest in biodiesel production capacity in 

New York and for distributors to invest in infrastructure. A B20 policy for a narrow enduse segment such as State vehicle fleets would create a demand base of nearly one 

million gallons per year, but should not be needed to stimulate investment. 

We expect that a mandate would stimulate investment in 30 million gallons of biodiesel 

capacity that would come on line in 2007 and 2008 and would provide a market based 

incentive for New York farmers to increase acres planted and production of soybeans. 

The biodiesel would be produced from blend of feedstocks comprising 70 percent yellow 

grease and 30 percent soybean oil. New York has adequate supplies of both feedstocks 

to meet this level of demand. 

In addition, a mandate would require fuel distributors to expand and improve terminal 

facilities to store and handle biodiesel and biodiesel blends required to meet the level of 

demand created by the mandate. As indicated in Section 4.2 above, these costs are 

expected to range from $250,000 to $2 million per terminal. In an attempt to be 

conservative for purposes of this analysis we applied the low-end estimate to each of the 

existing 85 terminals in New York to arrive at an aggregate cost of $64 million for 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 96 May 5, 2004 

infrastructure improvement. Further, we assumed that this investment would take place 

over a five year period. 

As can be seen in Tables 6.1 and 6.2, a mandate would increase biodiesel demand but 

would have relatively little net revenue impact for the New York State Treasury. The 

primary cost would involve the increased cost associated with using a B2 blend in State 

fleets. This is estimated at $622,000 over the 2007-2012 period without the tax 

incentives provided in the Energy Bill now in Congress. It should be noted that this 

estimate does not reflect any savings of avoided purchase of alternative fuel vehicles 

and infrastructure under EPACT. If the Energy Bill and associated tax provisions are 

passed, the net cost of the mandate to the State Treasury is less than $100,000. 

However, a mandate will result in increased fuel costs to individual businesses and 

consumers. Without an Energy Bill, highway users of biodiesel blended fuel would face 

increased costs of nearly $103 million between 2007 and 2012. Businesses would face 

additional costs for non-highway fuel use of $40 million while the costs to residential 

consumers for home heating oil would amount to $76.1 million and would likely fall 

hardest on low-income families. If the Energy Bill passes into law, these costs would fall 

to $5.2 million ($3.2 million for highway fuel, $1.3 million for residential consumers and 

$656,000 for businesses). The reason for the large disparity in costs caused by the 

Energy Bill lies in the Federal excise tax incentives provided by the Energy Bill. The 

Energy Bill provides an exemption from Federal Excise Taxes on diesel fuel (for both 

transportation and home heating) of $1.00 per gallon for biodiesel made from soybean 

oil and $0.50 per gallon for biodiesel made from yellow grease. This means that the 

70/30 blend contemplated for New York would enjoy a $0.65 per gallon exemption. We 

assume that most of this would be passed directly along to consumers. 

A B2 mandate would result in new investment and spending on biodiesel production and 

infrastructure investment. When the impacts of the capital and annual operating 

expenditures are considered, a mandate that results in a 30 MGY biodiesel industry 

would add $402.6 million (1996$) to the New York economy by 2012, generate an 

additional $189.3 million in real household income by 2012, and create as many as 

1,171 new jobs throughout the New York economy. Failure to pass the Energy Bill 

would reduce the economic impacts slightly. 

Increased income and spending will generate additional tax revenue for the State 

Treasury. The increased economic activity is expected to generate an additional $22.5 

million in State sales, personal income, and business income taxes by 2012. When the 

costs to the State are netted out against the additional revenues, a mandate would 

provide a significant net positive budgetary impact. 

A mandate that would require that diesel use for one or more end use segments contain 

a certain percentage of biodiesel (e.g. two percent, or B2) should be phased in to allow 

adequate time for the necessary capital investment for production and infrastructure to 

be made and should be tied to New York biodiesel capacity. For example, a mandate 

would not become effective until at least 10 MGY of biodiesel capacity is in place. 

Consider that it take about 18 months from decision to production for a new biodiesel 

plant. This means that legislation passed in 2004 that becomes effective in April 2005 

would result in the first gallon of biodiesel delivered in late 2006 or early 2007. 

Therefore, a reasonable B2 mandate for on-highway use could take effect in 2007 and 

be expanded to residential and other uses in 2009. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 97 May 5, 2004 

Table 6.1 

Economic Costs and Benefits of Alternative New York State 

Biodiesel Policy Options: No National Energy Bill 

(Cumulative 2007-2012) 

 

 OPTION 1 OPTION 2 OPTION 3 OPTION 4 OPTION 5 

 Stand Alone 

 B2 Mandate Combined Supply Combined 

 B2 Mandate Plus B2 Mandate Incentive Supply & 

 

Highway fuel 

2007 Infrastructure Plus $0.10/gal $0.10/gal Demand 

 Other Use 2009 Incentive 

Supply 

Incentive 

up to 10 

MGY Incentive 

Capacity created 30 MGY 30 MGY 40 MGY 10 MGY 30 MGY 

 

Macroeconomic Impacts 

 Gross Output (Mil 96$) $766.186 $766.186 $879.543 $137.459 $605.868 

 GSP (Mil 96$) $377.989 $377.989 $405.990 $59.021 $272.172 

 Household Income (Mil 

96$) $176.594 $176.594 $193.992 $35.269 $131.181 

 Max new jobs 1,135 1,135 1,274 200 941 

 

NY Treasury Impact: 

 Direct Cost (Mil $) $0.622 $31.872 $9.019 $4.500 $85.571 

 Revenue (Mil $) $19.053 $20.975 $21.269 $4.261 $16.258 

 NY State Sales Tax $9.863 $11.764 $11.388 $2.531 $9.515 

 NY Personal Income 

Tax $7.399 $7.548 $8.030 $1.514 $5.620 

 NY Corporate Tax $1.791 $1.663 $1.850 $0.216 $1.124 

Net Treasury Impact (Mil $) $18.431 ($10.897) $12.250 ($0.239) ($69.313)

 

Other Costs: 

Highway users ($102.639) ($102.639) ($102.639) ($33.370) ($96.521)

Residential consumers ($76.118) ($76.118) ($76.118) NA NA 

Business & Industry ($40.484) ($40.484) ($40.484) NA ($8.931)

Total Other Costs ($219.241) ($219.241) ($219.241) ($33.370) ($105.451)

Note: Each Policy Option includes infrastructure investment of $64 million. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 98 May 5, 2004 

Table 6.2 

Economic Costs and Benefits of Alternative New York State 

Biodiesel Policy Options: National Energy Bill 

(Cumulative 2007-2012) 

 OPTION 1 OPTION 2 OPTION 3 OPTION 4 OPTION 5 

 Stand Alone 

 Stand Alone B2 Mandate Combined Supply Combined 

 B2 Mandate Plus B2 Mandate Incentive Supply & 

 

Highway fuel 

2007 Infrastructure Plus $0.10/gal $0.10/gal Demand 

 Other Use 2009 Incentive 

Supply 

Incentive 

up to 10 

MGY Incentive 

Capacity created 30 MGY 30 MGY 40 MGY 10 MGY 30 MGY 

 

Macroeconomic Impacts 

 Gross Output (Mil 96$) $770.998 $770.998 $889.924 $160.889 $610.680 

 GSP (Mil 96$) $379.497 $379.497 $409.426 $74.051 $273.680 

 Household Income (Mil 

96$) $177.460 $177.460 $195.896 $35.269 $132.047 

 Max new jobs 1,145 1,145 1,292 200 950 

 

NY Treasury Impact: 

 Direct Cost (Mil $) $0.019 $31.269 $9.019 $4.500 $85.970 

 Revenue (Mil $) $21.470 $21.470 $24.320 $4.261 $16.382 

 NY State Sales Tax $12.084 $12.084 $14.021 $2.531 $9.590 

 NY Personal Income 

Tax $7.585 $7.585 $8.419 $1.514 $5.657 

 NY Corporate Tax $1.801 $1.801 $1.880 $0.216 $1.136 

Net Treasury Impact (Mil $) $21.451 ($9.799) $15.301 ($0.239) ($69.588)

 

Other Costs: 

Highway users ($3.171) ($3.171) ($3.171) ($0.870) ($1.379)

Residential consumers ($1.256) ($1.256) ($1.256) NA NA 

Business & Industry ($0.656) ($0.656) ($0.656) NA ($0.073)

Total Other Costs ($5.084) ($5.084) ($5.084) ($0.870) ($1.451)

Note: Each Policy Option includes infrastructure investment of $64 million. 

• Mandate combined with an incentive for infrastructure (Policy Option 2)

Another fuel-based policy option involves combining an incentive for expanding 

and improving terminal facilities to store and handle biodiesel and biodiesel 

blends to the mandate option. This incentive would offset some of the 

infrastructure costs that distributors would have to incur to meet mandated 

biodiesel demand. We expect that the cost to improve the existing 85 terminals 

in New York will cost about $64 million. To facilitate this transformation and ease 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 99 May 5, 2004 

the financial burden on blenders and distributors, we considered an incentive of 

$0.25 per gallon for a total cost of nearly $32 million to the State Treasury 

between 2007 and 2012. 

Since this policy option has no additional impact on attracting biodiesel 

production capacity and annual production, the economic costs and benefits are 

essentially the same as for a stand-alone mandate. The exception to this is in 

the cost to the State Treasury. The additional costs associated with providing the 

infrastructure incentive are estimated at about $31 million. When the additional 

revenue provided by the increased economic activity is considered, this policy 

option will result in an estimated net loss of revenue to New York State of about 

$10.0 million between 2007 and 2012. 

Subtask 6.2: Production-based Incentives, Policies and Impacts 

Production based incentives are those that encourage development of an industry 

through policies that subsidize activities. A wide range of production-based incentives 

can be designed to stimulate a biodiesel industry. We evaluated three potential policy 

scenarios: A supply incentive combined with a mandate; a stand-alone supply incentive; 

and a combined supply and demand incentive. 

It is important to point out that production-based incentives are cost-effective from a 

Treasury perspective only when combined with a mandate, or when the incentives 

provided by the Energy Bill improve the price competitiveness of biodiesel blended fuels. 

• Biodiesel supply incentive combined with a B2 mandate (Policy Option 3)

An alternative policy option for consideration involves combining a mandate for 

biodiesel use with a supply incentive for the production of biodiesel. This 

incentive would provide a grant of $0.10 per gallon of biodiesel produced in New 

York State up to a maximum of 10 million gallons capped at five years. 

Since this combination creates a base of demand through the mandate and 

provides an incentive for producers, it is expected to stimulate investment of 40 

MGY of biodiesel capacity and production in New York State. Reflecting the 

larger investment and annual biodiesel production provided by this option, the 

combination of a mandate and supply incentive produces the largest economic 

benefits to New York State. Under a national energy policy, this policy option 

would add almost $410 million to the New York economy 2012; an additional 

$195.9 million would be added to the income of New York households; and 

nearly 1,300 new jobs would be created in all sectors of the New York economy. 

If the Energy Bill is not passed we expect that the mandate and supply incentive 

will still attract investment, but the total economic impact would be slightly 

smaller. 

As is the case with a stand-alone mandate, this policy option shifts the costs 

associated with using a more expensive fuel blend from the State to individual 

businesses and consumers. As can be seen in Tables 6.1 and 6.2, without a 

National Energy Bill, the total cost to businesses and consumers is estimated at 

$220 million between 2007 and 2012. The cost to residential home heating oil 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 100 May 5, 2004 

consumers would amount to $76.1 million. The cost to business and industry is 

estimated at $40 5 million over this same period. If the Energy Bill passes into 

law, these costs would fall to $5.1 million, $1.3 million, and $656,000, 

respectively. 

The costs to the State Treasury of this option are larger than with a stand-alone 

mandate and are estimated at $9 million. However, increased income and 

spending will generate additional tax revenue for the State Treasury. The 

increased economic activity is expected to generate an additional $24.3 million in 

State sales, personal income, and business income taxes by 2012 if the Energy 

Bill passes and $21.3 million in the absence of an energy policy. When the costs 

to the State are netted out against the additional revenues, a mandate would 

provide a net positive budgetary impact on the State Treasury of $12.3 million 

under no national energy policy and $15.3 million if the Energy Bill were passed. 

• Stand alone supply incentive (Policy option 4) 

Another policy option for consideration is a stand alone supply incentive for 

biodiesel producers. For this option we assumed a policy that provides a grant of 

$0.10 per gallon of biodiesel produced in New York State up to a maximum of 10 

million gallons capped at five years. In the absence of a national energy policy 

this type of incentive employed alone is not likely to attract a significant amount 

of investment in biodiesel production in New York State. The reason for this is 

that while the incentive reduces capital costs it will have no material impact on 

demand. Consequently, Investors face the risk of creating supply for which no 

demand exists. 

Even with an Energy Bill, investors are likely to wait to see how major soybean 

producing states respond in increasing capacity and how New York is supplied 

with biodiesel fuel. As a result, we expect this policy option to attract a minimal 

10 million gallons of biodiesel capacity between 2007 and 2009 at a cost to the 

State of $4.5 million. 

A small capital level of investment and annual production will provide limited 

benefits to the New York economy. This option would increase the New York 

economy by only $75 million by 2012; add $35 million to household income; and 

create only 200 new jobs. Despite the relatively small costs to the State 

Treasury, the limited economic activity generated by this option fall short of 

covering the costs so that a small net loss of about $240,000 is generated. 

As is the case with a mandate, this policy option shifts the costs associated with 

using a more expensive fuel blend from the State to individual highway users of 

biodiesel. Without a National Energy Bill, the total cost to the transportation 

sector is estimated at about $33 million between 2007 and 2012. If the Energy 

Bill is passed with tax incentives for biodiesel, the cost to the transportation 

sector would fall to less than $1 million between 2007 and 2012. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 101 May 5, 2004 

• Combined supply and demand incentive (Policy option 5) 

The final option investigated involved combining a demand incentive with the 

supply incentive described above. This incentive would take the form of a onehalf of one cent exemption from New York State excise taxes on distillate fuel for 

each one percent of biodiesel used. This amounts to a one cent per gallon 

exemption for a B2 blend. Since this equates to $0.50 per gallon for B100, this 

option turns out to be expensive, amounting to a cost to the State Treasury of 

$77.3 million between 2007 and 2012 ($86.0 million when the supply incentive is 

added). 

Since this combination stimulates demand, the option is expected to attract 30 

MGY of biodiesel production capacity and add between $272 and $274 million to 

the New York State economy by 2012; increase household income by $132 

million, and create about 950 new jobs. 

However, the additional revenue generated by this increased economic activity is 

estimated at only $16.4 million, resulting in a deficit to the Treasury of between 

$69.6 and $69.3 million between 2007 and 2012. 

Since this policy option provides a demand incentive in the form of a reduction in 

the New York State excise tax on diesel fuel, the costs to highway users are 

considerably smaller than a mandate option, ranging from $105 million with no 

Energy Bill to $1.5 million if an Energy Bill passes. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 102 May 5, 2004 

TASK 7: TECHNOLOGY TRENDS, RESEARCH, DEVELOPMENT AND 

DEMONSTRATION NEEDS 

The National Biodiesel Board (NBB) has been spearheading the research and 

development of biodiesel in the United States for over 10 years, primarily through 

funding provided by the Soybean Check off program. Government agencies—primarily 

United States Department of Agriculture (USDA) and United States Department of 

Department of Energy (USDOE)—academia and other trade groups like the Fats and 

Proteins Research Foundation have also funded or executed biodiesel research. More 

recently state energy offices like NYSERDA and other state groups have begun to fund 

biodiesel research and development (R&D) activities. 

To assist these entities in determining priority research and development needs, the 

National Biodiesel Board has joined with the USDA and the USDOE to hold an annual 

research brainstorming and prioritization meeting. In this meeting, the best and brightest 

of the biodiesel research community from industry, academia, and government are 

brought together to share the latest technical research and data. NBB regulatory 

experts also review the latest in legislative activity and industry participants provide their 

perspective on new markets and technical activities that could help them sell more 

biodiesel. This group then votes on the technical activities most helpful in eliminating 

barriers or quantifying benefits that will result in increased customer acceptance and 

biodiesel sales. 

The research priority list resulting from this meeting becomes the industry accepted list 

of technical priorities and is used by the National Biodiesel Board, USDA, USDOE and 

other funding entities to help prioritize their efforts. These groups coordinate their 

activities to help ensure high priority technical needs are addressed and to minimize 

duplication of effort. As the interest in biodiesel increases and the sheer number of 

biodiesel researchers and projects grow, it is even more important to coordinate these 

activities so that taxpayer and industry dollars are spent wisely. 

The biodiesel research brainstorming and prioritization meeting is held each year in late 

January or early February. The most recent meeting was held in New Orleans January 

29 and 30, 2003 and over 200 attended the 2003 session. 

Each participant was allowed several votes for their opinion on the top priority. The 

votes could all be cast in one category, or be spread throughout several categories. The 

results of the rankings are instructive. The top priority areas address the range of 

technical and market barriers to increased use of biodiesel that can be addressed by 

research or other technical work. The list also pinpoints new potential markets for 

biodiesel where research or other technical work may be needed in order for biodiesel to 

penetrate them. It was interesting that stability ranked as the number one priority in 

2003, since very few problems regarding stability have been reported by biodiesel users. 

Stability is a universal concern among the engine companies, who were more heavily 

represented in 2003 than at any of the previous meetings and this undoubtedly had an 

influence on the ranking. Perhaps the high ranking for stability is also the reason for the 

lower ranking of OEM warranty in 2003 compared to the 2002 rankings below.
Feasibility of a New York Biodiesel Industry 

LECG, LLC 103 May 5, 2004 

Figure 7.1 

Most Desirable Technical Activities in 2003 

0 10 20 30 40 50 60 70 80

Biodiesel and Water Emulsified Die

Unregulated Emissions

Biodiesel and Ethanol/Diesel Blends

Basic R&D

Biodiesel Use in Fuel Cells

Stationary Pow er

Lubricity 

OEM Future Engine Technology

Low Cost, High Volume Oils

Boiler Research

New Markets 

Biodiesel in Racing Applications

Glycerin Uses

Test Methods

OEMS Warranties

Cold Flow

Reducing NOx

Production Technology 

Fuel Stability

Desired Activity

Indicates a significant change in ranking from 2002 to 2003 Number of Votes

Figure 7.2 

Most Desirable Technical Activities in 2002

0 5 10 15 20 25 30 35 40 45

Biodiesel Use in Fuel Cells

Unregulated Emissions

Boiler Research

Basic R&D

Stationary Pow er

Lubricity

New Markets

Glycerin Uses

Production Technologies

Low Cost, High Volume Oils

Test Methods

Cold Flow

Reducing NOx

Fuel Stability

OEMs

Desired Activity

Indicates a significant change in ranking from 2002 to 2003 Number of Votes
Feasibility of a New York Biodiesel Industry 

LECG, LLC 104 May 5, 2004 

A much higher level of new technology companies and support industry personnel 

attended in 2003 than in previous years. This is a sign of a blossoming industry. It is 

also most likely the reason new production technology was ranked higher than it has 

been in the past. As has been shown in the technology section of this report, better 

production technology may allow one company to out compete another, but the cost of 

technology and/or ‘better’ technology compared to that already available in the market 

will have only a small impact on biodiesel costs. This biodiesel research brainstorming 

and prioritization list provides a starting place for the priorities for each funding entity to 

consider as they prioritize their own activities and allocate resources. 

In order to determine the technical priorities for the FY04 activities of the National 

Biodiesel Board, which begin in October 2003, a smaller group of selected industry 

members and researchers evaluated and re-prioritized the larger brainstorming priority 

list so it coincided with the specific goals and objectives of the members of the National 

Biodiesel Board. A similar voting scenario was employed as was used for the overall 

brainstorming session (i.e. each person got multiple votes which they could allocate 

toward one category or split among several) but the total number of people was much 

smaller, around 20. The list coming out of that effort was approved by the NBB as its 

priority list for the FY04 funding year. 

Figure 7.3 

National Biodiesel Board FY04 Technical Funding Efforts

0 2 4 6 8 10 12 14 16 18

Test Methods

New Markets 

Lubricity 

Glycerin Uses

Low Cost, High Volume Oils

Production Technology 

Reducing NOx

Cold Flow

OEM Future Engine Technology

OEMS Warranties

Fuel Stability

Activity

Number of Votes

It is interesting that the NBB, comprised mostly of biodiesel companies and feedstock 

organizations, ranked several of the areas differently than the overall group that 

attended the 2003 brainstorming session. This is due in part because the NBB does not 

support R&D activities for production technologies which the NBB members believe is 

largely a private industry or government function. Additionally, the NBB members 

believe cold flow and NOx issues are either largely researched already or new OEM 

technologies will be the solution—especially in the case of NOx reductions. It should be 

emphasized that the low NBB rankings for some of these areas (i.e. new markets) does 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 105 May 5, 2004 

not mean that these areas are not important, it is simply the way in which NBB believes 

its funding can best benefit its members. Other funding agencies that may focus on 

different areas may come up with very different priority ranking. 

The key implication for NYSERDA consideration is that the group attending the February 

brainstorming session is sufficiently large and has sufficient expertise that almost all 

worthwhile funding activities would appear on the overall brainstorming list. The overall 

list, therefore, serves as an excellent basis for recommendations for future NYSERDA 

funding. 

Using the research identified at the brainstorming meeting along with other 

organizational interests and constraints the NBB, USDOE and USDA have determined 

their FY04 funding priorities and almost all of the high priority items are already being 

fully addressed. No further funding of these areas by NYSERDA is recommended. 

Figure 7.4 

Most Desirable Technical Activities in 2003 Funding Currently Being Met

0 10 20 30 40 50 60 70 80

Test Methods: NBB and

industry 

OEMS Warranties: NBB

and USDOE

Cold Flow: Industry

(additive companies) and

USDA

Production Technology: 

USDOE 

Fuel Stability: NBB and

USDOE

Activity and Funding Agenc

y

Number of Votes

The technical activities that currently have some funding but would most benefit with 

additional funding are illustrated in Figure 7.5 below. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 106 May 5, 2004 

Figure 7.5 

Most Desirable Technical Activities in 2003 Requiring Additional Funding 

0 10 20 30 40 50 60

Basic R&D:

Several Universities, National Labs

Biodiesel Use in Fuel Cells:

NBB, Iow a Soybean Association

Stationary Pow er:

Center for Diesel Research (Minn)

OEM Future Engine Technology:

NBB and USDOE

Low Cost, High Volume Oils:

USDA and USDOE

Boiler Research:

Brookhaven, NYSERDA

New Markets:

NBB, Heating Oil Industry

(NORA, Mass Oil Heat, NEFI)

Glycerin Uses: USDA 

Reducing NOx: 

 NBB and USDOE

Activity and Funding Agency

Number of Votes

There is growing interest in biodiesel among the traditional entities who sponsor R&D in 

the alternative fuels areas (USDA, USDOE, State Agencies, Academia) so while some 

of the research needs identified above may not yet be funded, much of it likely will be in 

the not too distant future. NBB serves as the clearinghouse for this information. 

Therefore, is it critical that NYSERDA keep in close contact with the NBB and other 

leading government agencies (USDOE, USDA) as biodiesel R&D funds are allocated 

and prioritized by NYSERDA. 

It also follows that NYSERDA would be best served through funding the areas of 

biodiesel research that would have the most impact on the increased use of biodiesel in 

applications in New York, especially those which other entities may not fund or may 

place on a lower priority. In addition, there are several leading edge concepts of projects 

which have been discussed that NYSERDA may be in a unique position to take a 

leadership role in. Some of these may provide increased fuel usage in the short term 

(one to two years) while others may set the stage for longer-term usage (three to seven 

years). 

The specific topics recommended for additional NYSERDA funding and/or staff activity 

and suggested cooperating entities are below. 

Biodiesel use in Distributed Electrical Generation: 

Optimization for NOx emissions, performance, and blend level. Biodiesel can be used as 

a fuel in conventional diesel generator sets, micro-turbines, or gas turbines to generate 

electricity in the pure form or as a blend with petrodiesel. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 107 May 5, 2004 

This project area would be separated into four main task areas, which could all be 

incorporated into one larger project, or could potentially be separated into four separate 

projects. If they are separated, the research should be closely coordinated: 

1. Development and Prove-out of a biodiesel fuel sensor. 

Partners: Iowa State University, Iowa Energy Center, NBB, Engine Companies, National 

Science Foundation. This task is to develop a robust sensor that can be placed in the 

fuel tank or in the fuel line that will detect the blend concentration of biodiesel in real 

time. The sensor would need an electrical output that can be used as an input to a 

control module or computer. The computer could then adjust various engine parameters 

(in the case of a diesel generator set) or other fuel or air intake parameters (in the case 

of a turbine) to optimize emissions and performance based on the actual concentration 

of biodiesel in the blend. This sensor technology would be targeted for first use in 

electrical generation applications that are less complicated in operational controls than 

on-road engines. Generator sets tend to run at constant speed and torque and do not 

need to adjust fuel and engine parameters based on varying speeds and loads that 

occur in on-road engines. Once developed, this technology could potentially be used in 

ANY biodiesel application for optimization of emissions for any blend of biodiesel, or if 

the blend of biodiesel being used changes from time to time. 

2. NOx optimization: Diesel Generator Sets. 

Partners: Universities, SwRI, Engine Companies, USDOE, NBB. The profile of 

biodiesel emissions is well known when used in unmodified conventional diesel engines: 

PM, HC, CO, SOx and air toxics are decreased while NOx tends to be the same or 

increases slightly. The fact that biodiesel can be used in these engines without 

modification is a major advantage. However, in certain areas of the country—particularly 

those in non-attainment status for ozone—any increase in NOx is unacceptable. Many 

of these areas want NOx reductions while still taking advantage of the benefits of 

biodiesel in terms of global warming (life cycle CO2 reduction), reduced dependence on 

foreign oil, and local economic development. Since biodiesel reduces PM and other 

emissions, it is possible to adjust the engine to reduce NOx while still maintaining or 

even decreasing other regulated pollutants. This work would investigate various engine 

parameters, focusing on the timing map, which could be modified when using biodiesel 

that will provide the following for all blend concentrations from zero to 100 percent 

biodiesel: 

 Maximum NOx reduction while maintaining PM neutrality 

 NOx reduction of 10 percent with as much PM reduction as possible 

 Maximum PM reduction with NOx neutrality 

3. NOx optimization: Micro turbines. 

Partners: Universities, Micro-turbine companies, testing labs, Electric Power Research 

Institute (EPRI). This project will be the same as the NOx optimization with generator 

sets, only using micro-turbines. This project will most likely involve a different set of 

universities, test labs, micro-turbine companies, and other collaborators than would be 

involved with generator sets. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 108 May 5, 2004 

4. NOx optimization: Gas Turbines. 

Partners: Universities, Gas turbine companies testing labs, EPRI. This project will be 

the same as the NOx optimization with generator sets and micro turbines, only using 

larger turbines. This project will most likely involve a different set of universities, test 

labs, turbine companies, and other collaborators than would be involved with generator 

sets. 

Biodiesel Education: 

Partners: NBB, USDA. While not a specific research project, it is clear the more people 

know about biodiesel the more likely they are to use the fuel. NYSERDA has conducted 

educational meetings and conferences regarding biodiesel in the past, and this project 

would be to conduct several educational workshops within New York to further educate 

diesel users, engine and equipment dealers, as well as government agencies and policy 

makers on the benefits of using biodiesel. The USDA recently announced a large 

educational grant to the National Biodiesel Board and the University of Idaho for 

educational efforts around the country and would be willing to provide support and 

cooperative efforts toward such a project. 

Home Heating Oil

Based on the distribution of the distillate fuel market in New York, and its heavy 

concentration in the home heating oil sector, added emphasis was placed on the existing 

and needed activities related to biodiesel for use as a home heating oil blending stock or 

as a substitute for conventional petroleum based home heating oil. 

The National Biodiesel Board, U.S. Department of Energy (National Renewable Energy 

Laboratory, Brookhaven National Laboratory), and the heating oil industry (NORA, NEFI, 

Massachusetts Oil Heat Council) began investigating biodiesel as a home heating fuel 

several years ago. This began with a project in the school district of Warwick, Rhode 

Island where blends of biodiesel at the B20 and lower levels were used successfully 

over several winters. Fuel samples were taken, and equipment impacts (tanks, filters, 

burners, etc.) were monitored. The biodiesel blends worked well, with no negative 

impacts on the equipment or fueling infrastructure. Particular attention was give to the 

fuel filter area, since it is well known that biodiesel is a good solvent and may ‘clean out’ 

fuel systems upon initial use. Heating oil systems can contain more sediment and tank 

bottoms than on-road diesel applications. With the blends in this test, B20 and lower, 

this phenomenon was not observed and there were no differences in filter clogging with 

the biodiesel blends than with the conventional heating oil. 

With this success, a home heating oil market assessment and emissions work was 

undertaken. The emissions work, conducted by Brookhaven National Laboratory with 

cooperative funding from NYSERDA showed significant NOx reductions with B20 blends, 

as well as reductions in other pollutants. The NOx impact is directly opposite that found 

in most heavy duty on-road diesel testing, and has been confirmed in two separate 

studies by the two most well respected heating oil labs in the country (BNL, NEFI), so 

the NOx benefits of using biodiesel in home heating oil applications is real. It appears 

this difference is related to the different method of combustion in a heating oil furnace 

(open flame) and a heavy duty diesel engine (enclosed cylinder compression ignition), 

as well as the fact biodiesel contains 11 percent by weight oxygen. Oxygen is a key 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 109 May 5, 2004 

variable in home heating applications, but is usually adjusted through the intake air 

levels rather than through varying fuel oxygen content. 

The market assessment study, conducted by Lew Derosa on behalf of the NBB, showed 

the benefits of biodiesel are desirable to home heat customers, and found there to be an 

excellent fit between the attributes of biodiesel and customer desires. This study was in 

line with previous feedback from heating oil customers conducted by NORA regarding 

the negative aspects of the image of heating oil. 

In order to provide NYSERDA with recommendations regarding home heating oil 

research and development, all this information was reviewed in a meeting with 

representatives of the leadership of the home heating oil industry. MOHC, NEFI, and 

NORA were all represented. The Oil Heat industry believes they must reposition heating 

oil with their customers, and they believe lower sulfur heating oil combined with biodiesel 

in what is now being referred to as ‘Bio Heat’, along with improved burner technology to 

increase efficiency and reduce emissions, is the answer. This is very encouraging for 

both the biodiesel and heating oil industry and serves as a platform for future R&D 

efforts. Specifics of the activities needed to commercialize ‘Bio Heat’ were discussed 

and agreed upon: 

 Testing biodiesel blends, confirming blend level vs. emissions 

 Cold flow confirmation testing and additive improvements 

 Fouling rates confirmation testing 

 Stability confirmation testing 

 Material compatibility confirmation testing 

 Communication messaging 

 Infrastructure requirements quantification 

 Further field studies and confirmation 

 S15 with biodiesel differences vs. S500 with biodiesel 

Based on these prioritized activities, MOHC, NORA, NEFI, NBB, and USDOE are all 

evaluating their respective roles in funding these efforts along with NYSERDA. A 

recommendation from these groups is forthcoming. Preliminary discussions indicate a 

willingness for the industry groups to fund the market development and communications 

activities, with the government agencies funding the research and testing activities with 

the entire effort closely coordinated between all parties. 

Biodiesel use in Fuel Cells: 

Partners: Iowa Soybean Association, Iowa Energy Center, NBB, Fuel Cell Companies, 

USDOE. This project will provide baseline data with various fuel cell technologies using 

B100 as the hydrogen source to determine optimum reformer conditions, hydrogen 

purity, and overall conversion efficiency. In order to be effective, the biodiesel must be 

essentially free from contaminants and other minor constituents that might cause reformer degradation, so this is most likely an application for biodiesel made from a first 

use oil like soybean oil. Once determined, then B100 would be used in a small 

commercial unit for one year to determine field durability and any other impacts that 

need to be considered if used commercially. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 110 May 5, 2004 

APPENDIX 1 

TECHNOLOGY COMPANY OVERVIEWS AND DETAILED COST ANALYSIS 

Axens:

The Axens process is primarily designed for use with refined oils containing less than 

one percent FFA and less than 0.1 percent water. A design was developed for higher 

FFA feeds, but withdrawn from the market. The information provided by Axens was not 

as complete as that of some of the other companies. 

Axens, a French company formed from the former IFP, has constructed at least 1 facility 

in France rated at 70,000 mt/year, (about 21 MM gallons/year (GPY)). The facility 

processes refined oils. 

Axens has designs for facilities ranging from 3 MM to about 36 MM gallons per year. 

IBFG has taken the indicated capital cost for the process and used internal factors to 

estimate the cost for a complete facility including periphery systems and typical support 

systems. The order of magnitude unit capital cost for a larger facility (in the range of 15 

MM to 20 MM gallons/year) is estimated to be in the $0.75 to $0.80 per annual gallon. 

Thus the estimated cost for a 20 MM GPY plant would be on the order of $15 MM to $16 

MM. The estimated construction time is about 15 months. 

Ballestra:

The Ballestra process has primarily been applied to seed oils with typical feed 

specification of less than 0.5 percent FFA and less than 0.05 percent water. Ballestra, 

an Italian company with representatives in the US, claims that they can process other 

materials, but each feed would have to be individually checked in their pilot to confirm 

process applicability. This is a sound move on Ballestra’s part. 

Ballestra has constructed at least two facilities that process refined oils. The company is 

large and does have an extensive design and support capability. 

The company offers plant designs ranging from about 3 MM to 30 MM gallons per year, 

with larger facilities possible. The estimated unit cost for a facility in the 15 MM to 20 

MM GPY range, based on IBFG estimates, is in the range of $0.75 to $0.85 per annual 

gallon. The estimated construction time is on the order of 15 to 18 months, depending 

on the extent of peripheries, etc. 

BDI:

BDI, a German company of some standing, has been reluctant to share information in a 

generalized fashion due to their workload and previous negative experiences with the 

disposition of the information. However, IBFG has been able to make order-ofmagnitude estimates for various factors based on information it has collected over the 

years. 

The BDI process is capable of handling a range of materials including higher fatty acid 

feeds. They have commercial experience with the higher fatty acid feeds and have two 

plants currently under design that will process used oils. They have constructed at least 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 111 May 5, 2004 

10 plants for biodiesel production worldwide. From a conservative standpoint, IBFG 

estimates that the process should be capable of handling materials such as yellow 

grease, which has an FFA up to 10 percent. 

BDI offers plants ranging in size from a 0.3 MM GPY mobile facility to a 30 MM GPY 

grass roots (i.e. no existing facilities or infrastructure) operation. The estimated cost 

(IBFG factors) for a facility in the 15 MM to 20 MM would be on the order of $0.95 to 

$1.10 per annual gallon, and would depend to a large extent on the FFA content of the 

feed and the extent of process systems required for the specific feed. Obviously, higher 

fatty acid feeds require more extensive processing thus the expected capital would be 

higher than that associated with refined oil feedstocks. The estimated construction time 

is on the order of nine to 14 months depending on the extent of peripheries. 

Biodiesel Industries, Inc.

Biodiesel Industries, a US company based in Nevada, indicates that their process can 

handle feeds with any level of fatty acid content. They currently have constructed two 

facilities that are processing used cooking oils (with indications that commercial yellow 

grease has also been treated). The facilities are rated at 3 MM and 10 MM GPY. 

The company has an established design for a 3 MM gallon per year module and for 

plants in the 6 MM to 9 MM gallon per year range they would supply multiple modules. 

Large facilities would be based on a scale-up of the base module design. 

The basic process module cost (3 MM GPY) ranges from $0.5 MM to $1.5 MM 

depending on various factors. Periphery support systems, e.g. tankage and the like, are 

extra. From a conservative estimating standpoint, a facility in the 15 MM GPY rate 

range, is estimated to cost on the order of $0.85 to $1.10 per annual gallon depending 

on the actual feed material and extent of plant peripheries. About three to four months is 

required for module preparation and shipment to site. From an overall standpoint, IBFG 

estimates that the total construction time with this approach would be on the order of 

eight to 10 months. 

Cimbria-Sket/Bratney:

The Cimbria-Sket process is based on the same technology as the CD Process from 

Conneman, thus the two are obviously quite similar. Bratney companies represent 

Cimbria Sket, a Scandinavian company, exclusively in the US. The process is based on 

a refined oil feedstock and the plants constructed to date have used these as feeds. 

Typical feeds are less than 0.1 percent FFA and less than 0.05 percent water. The 

company has constructed at least 6 plants ranging in size from 1.5 MM to 36 MM gallons 

per year. The information provided by Cimbria Sket for the NYSERDA project was more 

complete and detailed than most other companies. 

The estimated cost for a facility in the 15 MM GPY range (IBFG estimate) is on the order 

of $1.00 to $1.20 per annual gallon. The company offers facilities in the range of 1 MM 

(skid mounted) to 60 MM gallons per year production rate. The estimated construction 

time for a larger facility (IBFG estimate) is in the range of 12 to 18 months, depending on 

project scope. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 112 May 5, 2004 

Connemann:

The Connemann CD process, developed in Germany with affiliations from ADM and 

Westfalia Separator, has primarily been applied to treating refined oils, although the 

company claims that it can process higher fatty acid oils with the addition of an 

esterification step. They have not used this step in any of their commercial facilities to 

date, thus for assessment purposes, the process should be considered as primarily for 

refined oils. Their process design has been used in four facilities ranging in rate from 12 

MM to 42 MM gallons per year. The company offers standard size plants in the 12 MM 

to 40 MM GPY range. The information provided for the NYSERDA request was lacking 

compared to other technology companies. 

The estimated cost for a facility in the 15 MM GPY range is on the order of $1.00 to 

$1.20 per annual gallon. The time to construct a facility is in the range of 12 to 15 

months. 

Renewable Energy Group:

The Renewable Energy Group is a joint venture between Crown Iron works and West 

Central Cooperative in the US. They offer process design as well as startup training. 

Through a relationship with Todd and Sargent, they also offer turn key constructed 

plants. The process is based primarily on the use of refined oil feeds. The typical feed 

would have less than 0.3 percent FFA and less than 0.007 percent water. The company 

has constructed at least one facility rated at about 12 MM GPY. The information 

provided by the Renewable Energy Group is more comprehensive than that provided by 

most of the other technology companies. 

The estimated unit cost for a plant in the range of 15 MM GPY would be about $1.00 to 

$1.10, based on IBFG estimates. The estimated time for construction would range from 

12 to 18 months. 

EKOIL:

Ekoil, a Slovakian company, supplies a process that has mainly been applied to refined 

oils. Typical feedstock would contain less than 0.1 percent FFA and less than 0.2 

percent water. The company has supplied process modules for several facilities in the 

1.5 MM to 4.5 MM GPY production rate range, and offers standard design for this range. 

The estimated cost for a complete facility in the range of plants provided by the company 

(i.e. 4.5 MM GPY) is on the order of $0.85 to $0.90 per annual gallon. The estimated 

construction time is in the range of nine to 10 months. 

Energea:

Energea, an Austrian company, claims that their process can be adapted to handle 

feeds with any level of fatty acid content. They currently have at least one large (12 MM 

GPY) facility based on their process technology (and modules) in operation. This plant 

processes a range of materials including yellow grease. From a “typical” standpoint, the 

feed would contain four percent to 12 percent FFA. Water should be less than 0.5 

percent. The company has standard plant module designs ranging from 6 MM to 75 MM 

gallons per year production rates. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 113 May 5, 2004 

The estimated capital cost for a facility in the range of 15 MM GPY, based on a 

combination of Energea estimates (for process modules) and IBFG factors (for a 

complete facility) would be on the order of $0.80 to $1.00 per annual gallon. The 

estimated construction time would be on the order of nine to 10 months, (using 

Energea’s estimate for module delivery and IBFG factors for field work). 

Lurgi-PSI:

Lurgi-PSI, located in Memphis with a home office in Germany, has constructed at least 

seven facilities to produce methyl esters and biodiesel ranging in size from 10 MM to 30 

MM gallons per year. The majority of the plants were designed for refined oil feeds, 

although Lurgi now claims that it can process feeds with virtually any level of FFA. For 

oils containing in excess of 20 percent FFA, modifications to the esterification portion of 

the process are required. Lurgi provided the most comprehensive package in response 

to the NYSERDA request of all the companies and it was quite impressive. The 

information provided alone is almost enough to convince a potential customer to choose 

Lurgi. 

The estimated unit capital cost for a facility in the 12 MM to 15 MM GPY production rate 

range using a high i.e. >10 percent FFA feed, would be on the order of $1.00 to $1.15 

per annual gallon. For low fatty acid feeds, the unit cost would be on the order of $0.95 

per annual gallon (due to the decreased process needs associated with high FFA feeds). 

The estimated construction time would range from 12 to 15 months. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 114 May 5, 2004 

APPENDIX 2 

BIODIESEL PRODUCTION ECONOMICS FOR 

ALTERNATIVE FEEDSTOCK COMBINATIONS 

Biodiesel Production Analysis for Mixed Feedstocks 

 

 Production of Biodiesel, gal/yr 11,972,789 

 Capital Cost Estimate $14,500,000 

 

 Yearly Price Annual

 Amount Per Unit Dollars

Costs 

 Real Annual Cost of Capital $3,146,500 

 Sales and Admin $1,557,653 

 Annualized Cost of Working Capital $178,481 

 Fat/Oil, pounds, Soybean Oil 26,664,000 $0.21 $5,599,440 

 Fat/Oil, pounds, Yellow Grease 61,544,554 $0.11 $6,769,901 

 Alcohol $793,939 

 Catalyst $387,200 

 Plant Labor, incl. Benefits $480,000 

 Utilities, Maintenance, Insurance $1,047,175 

 

Total Costs $19,960,289 

 

 

By Products Credits 

 Glycerin, pound $982,147 

 Fatty Acid, pound $0 

 

Total By-Product Credits $982,147 

Net Annual Costs $18,978,142 

Biodiesel Cost, $/gallon $1.59 

 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 115 May 5, 2004 

Biodiesel Production Analysis for Soybean Oil, 0.5 % 

Free Fatty Acid 

 

 

 Production of Biodiesel, gal/yr 2,993,197 

 Capital Cost Estimate $3,250,000 

 

 Yearly Price Annual

 Amount Per Unit Dollars

Costs 

 Real Annual Cost of Capital $705,250 

 Sales and Admin $636,786 

 Annualized Cost of Working Capital $72,965 

 Fat/Oil Feedstock, pounds 22,220,000 $0.21 $4,666,200 

 Alcohol, gallon 403,333 $0.50 $199,870 

 Catalyst, pound 33,000 $2.00 $66,000 

 Plant Labor, incl. Benefits $480,000 

 Utilities, Maintenance, Insurance $250,544 

 

Total Costs $7,077,615 

 

 

By Products Credits 

 Glycerin, pound 2,640,000 $0.10 $264,000 

 Fatty Acid, pound 0 $0.10 $0 

 

Total By-Product Credits $264,000 

Net Annual Costs $6,813,615 

Biodiesel Cost, $/gallon $2.28 

 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 116 May 5, 2004 

Biodiesel Production Analysis for Soybean Oil, 0.5 % 

Free Fatty Acid 

 

 

 Production of Biodiesel, gal/yr 11,972,789 

 Capital Cost Estimate $12,000,000 

 

 Yearly Price Annual 

Dollars

 Amount Per Unit 

Costs 

 Real Annual Cost of Capital $2,604,000 

 Sales and Admin $2,378,446 

 Annualized Cost of Working Capital $272,530 

 Fat/Oil Feedstock, pounds 88,880,000 $0.21 $18,664,800 

 Alcohol, gallon 1,613,333 $0.50 $799,480 

 Catalyst, pound 132,000 $2.00 $264,000 

 Plant Labor, incl. Benefits $480,000 

 Utilities, Maintenance, Insurance $972,175 

 

Total Costs $26,435,431 

 

 

By Products Credits 

 Glycerin, pound 10,560,000 $0.10 $1,056,000 

 Fatty Acid, pound 0 $0.10 $0 

 

Total By-Product Credits $1,056,000 

Net Annual Costs $25,379,431 

Biodiesel Cost, $/gallon $2.12 

 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 117 May 5, 2004 

Biodiesel Production Analysis for Animal Fat, 3% Free 

Fatty Acid 

 

 

 Production of Biodiesel, gal/yr 2,993,197 

 Capital Cost Estimate $3,500,000 

 

 Yearly Price Annual

 Amount Per Unit Dollars

Costs 

 Real Annual Cost of Capital $759,500 

 Sales and Admin $553,041 

 Annualized Cost of Working Capital $63,369 

 Fat/Oil Feedstock, pounds 23,540,000 $0.16 $3,745,000 

 Alcohol, gallon 403,333 $0.50 $199,870 

 Catalyst, pound 44,000 $2.00 $88,000 

 Plant Labor, incl. Benefits $480,000 

 Utilities, Maintenance, Insurance $258,044 

 

Total Costs $6,146,824 

 

 

By Products Credits 

 Glycerin, pound 2,640,000 $0.10 $264,000 

 Fatty Acid, pound 1,320,000 $0.10 $132,000 

 

Total By-Product Credits $396,000 

Net Annual Costs $5,750,824 

Biodiesel Cost, $/gallon $1.92 

 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 118 May 5, 2004 

Biodiesel Production Analysis for Animal Fat, 3% Free 

Fatty Acid 

 

 

 Production of Biodiesel, gal/yr 11,972,789 

 Capital Cost Estimate $13,000,000 

 

 Yearly Price Annual

 Amount Per Unit Dollars

Costs 

 Real Annual Cost of Capital $2,821,000 

 Sales and Admin $2,043,466 

 Annualized Cost of Working Capital $234,147 

 Fat/Oil Feedstock, pounds 94,160,000 $0.16 $14,980,000 

 Alcohol, gallon 1,613,333 $0.50 $799,480 

 Catalyst, pound 176,000 $2.00 $352,000 

 Plant Labor, incl. Benefits $480,000 

 Utilities, Maintenance, Insurance $1,002,175 

 

Total Costs $22,712,268 

 

 

By Products Credits 

 Glycerin, pound 10,560,000 $0.10 $1,056,000 

 Fatty Acid, pound 5,280,000 $0.10 $528,000 

 

Total By-Product Credits $1,584,000 

Net Annual Costs $21,128,268 

Biodiesel Cost, $/gallon $1.76 

 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 119 May 5, 2004 

Biodiesel Production Analysis for Yellow Grease, 10% 

Free Fatty Acid 

 

 

 Production of Biodiesel, gal/yr 2,993,197 

 Capital Cost Estimate $4,000,000 

 

 Yearly Price Annual

 Amount Per Unit Dollars

Costs 

 Real Annual Cost of Capital $868,000 

 Sales and Admin $432,677 

 Annualized Cost of Working Capital $49,578 

 Fat/Oil Feedstock, pounds 21,980,198 $0.11 $2,397,840 

 Alcohol, gallon 399,340 $0.50 $197,891 

 Catalyst, pound 55,000 $2.00 $110,000 

 Plant Labor, incl. Benefits $480,000 

 Utilities, Maintenance, Insurance $273,044 

 

Total Costs $4,809,030 

 

 

By Products Credits 

 Glycerin, pound 2,376,238 $0.10 $237,624 

 Fatty Acid, pound 0 $0.10 $0 

 

Total By-Product Credits $237,624 

Net Annual Costs $4,571,406 

Biodiesel Cost, $/gallon $1.53 

 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 120 May 5, 2004 

Biodiesel Production Analysis for Yellow Grease, 10% 

Free Fatty Acid 

 

 

 Production of Biodiesel, gal/yr 11,972,789 

 Capital Cost Estimate $14,500,000 

 

 Yearly Price Annual

 Amount Per Unit Dollars

Costs 

 Real Annual Cost of Capital $3,146,500 

 Sales and Admin $1,549,660 

 Annualized Cost of Working Capital $177,565 

 Fat/Oil Feedstock, pounds 87,920,792 $0.11 $9,591,359 

 Alcohol, gallon 1,597,360 $0.50 $791,564 

 Catalyst, pound 220,000 $2.00 $440,000 

 Plant Labor, incl. Benefits $480,000 

 Utilities, Maintenance, Insurance $1,047,175 

 

Total Costs $17,223,824 

 

 

By Products Credits 

 Glycerin, pound 9,504,950 $0.10 $950,495 

 Fatty Acid, pound 0 $0.10 $0 

 

Total By-Product Credits $950,495 

Net Annual Costs $16,273,329 

Biodiesel Cost, $/gallon $1.36 

 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 121 May 5, 2004 

APPENDIX 3 

CALCULATION OF INCENTIVE PAYMENTS 

The following information is utilized to calculate the level of payment to eligible 

producers of biodiesel: 

Conversion Factor for soybeans: 1.4 

Payment Factor: 1.0 

Payment Rate: 

Less than 65 million gallons/yr 

More than 65 million gallons/yr 

2.5 

3.5 

Formulas: Incremental Gallon Payment for Soybean Oil = ((((Increased Biodiesel 

Production in Gallons ÷ Conversion Factor) ÷ Payment Rate) x Posted 

County Price) x Payment Factor) 

Incremental Gallon Payment for Other Oils = (((((Increased Biodiesel 

Production in Gallons ÷ Conversion Factor) ÷ Payment Rate) x Posted 

County Price) x Payment Factor) x (Other Oils Price/Soybean Oil Price)) 

 Base Production Payment = (((Incremental Gallon Payment ÷ Incremental 

Biodiesel Production) x Base Production Prorate Factor) x Base Production 

in Gallons) 

 Total Payment = Incremental Gallon Payment + Base Production Payment 

Example 1: In FY03, a biodiesel producer using soybean oil generated a 

1,000 gallon increase in biodiesel production (conversion rate = 1.4) with a base 

production capacity of 1,000 gallons (payment rate = 2.5) when the relevant 

Soybean Posted County Price is $5.59 per bushel and the payment factor is 100 

percent for FY03 

Incremental Gallon Payment: ((((1,000 ÷ 1.4) ÷ 2.5) x $5.59) x1.0) = $1,597.00 

Base Production Payment: ($1,597 ÷ 1,000) x 50%) x 1,000) = $798.50 

Total Payment: $1,597.00 + $798.50 = $2,395.50 

Example 2: In FY03, a biodiesel producer using yellow grease generated a 

1,000 gallon increase in biodiesel production (conversion rate = 1.4) with a base 

production capacity of 1,000 gallons (payment rate = 2.5) when the relevant 

Soybean Posted County Price is $5.59 per bushel and the payment factor is 100 

percent for FY03. Soybean oil price was $.2259 per pound while the yellow grease 

price was $.1000 per pound of oil. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 122 May 5, 2004 

Incremental Gallon Payment: (((((1,000 ÷ 1.4) ÷ 2.5) x $5.59) x1.0) x (.1000 ÷

.2259))= $707.01 

Base Production Payment: ($707.01 ÷ 1,000) x 50%) x 1,000) = $353.51 

Total Payment: $707.01 + $353.51 = $1,060.52 

USDA Grants and Loan Programs 

Value-Added Agricultural Produce Market Development Grant Program (VADG)

In September 2003, the Rural Business-Cooperative Service announced the availability 

of approximately $27.7 million in competitive grant funds for FY03 to help independent 

agricultural producers enter into value-added activities. These funds were to be used for 

one of two types of activity (1) developing feasibility studies or business plans and (2) 

acquiring working capital to operate a value-added business venture or an alliance that 

will allow the producers to better compete in domestic and international markets. 

VADG was authorized by the Agriculture Risk Protection Act of 2000 and was amended 

by the Farm Security and Rural Investment Act of 2002, better known as the Farm Bill. 

The Farm Bill establishes four related, but different programs from the $40 million of 

funds per year. The programs are (1) VADG producer grants, (2) a resource center, (3) a 

series of innovation centers, and (4) university research on the impact of value-added 

activities. Title VI of the Farm Bill authorizes up to $40 million per year for six years, 

beginning in FY02. 

Application forms can typically be obtained by contacting your State USDA Rural 

Development office or through the website at www.rurdev.usda.gov/rbs/coops/vadg.htm. 

This is a highly competitive grants program. FY01 applicants had about a 9 percent 

success rate. Applicants should also note you can apply for funds for “Planning” or 

“Working Capital” but not both. These two types of grants have different scoring criteria 

under the FY03 program. Other important points include: 

• You must pursue an emerging market 

• The grant requires a one-for-one match for all grant funds requested. 

• You must be able to show how producers are committed to the project. 

Biodiesel operations would qualify under the criteria of this program. 

Rural Business Opportunity Grants (RBOG)

The purpose of the RBOG program is to promote sustainable economic development in 

rural communities with exceptional needs. This is accomplished by making grants to 

pay the costs of providing economic planning for rural communities, technical assistance 

for rural businesses, or training for rural entrepreneurs or economic development 

officials. 

To be eligible for a Rural Business Opportunity Grant (RBOG) applicants must be a 

public body, nonprofit corporation, Indian tribe, or cooperative with members that are 

primarily rural residents. You must have significant expertise in the activities you 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 123 May 5, 2004 

propose to carry out with the grant funds and financial strength to ensure you can 

accomplish the objectives of the proposed grant. You must be able to show that the 

funding will result in economic development of a rural area (any area of a State that is 

not within the boundaries of a city with a population in excess of 10,000 inhabitants.) 

Your project must include a basis for determining the success or failure of the project 

and assessing its impact. 

Grant funds may not be used for: 

• Duplication of current services or replace or substitute support previous provided. 

• Pay costs of preparation of application. 

• Costs incurred prior to effective date of the grant. 

• Fund political activities. 

• Acquisition of real estate, building construction or development. 

Most RBOG grants are $50,000 or less. Applications must go through the Rural 

Development State Office in the State where the grant will be conducted. 

Renewable Energy Systems and Energy 

In April 2003, the Rural Business Cooperative Service announced the availability of 

approximately $23 million in competitive grant funds for FY03 to make direction loans, 

loan guarantees, and grants to agricultural producers and rural small businesses to 

purchase renewable energy systems and make energy efficiency improvements. 

Biodiesel projects would be eligible under the program guidelines, however RBS has 

indicated they currently plan to only initiate the program in FY03. 

Business and Industry Direct Loans

The Business and Industry (B&I) Direct Loan Program provides loans to public entities 

and private parties who cannot obtain credit from other sources. Loans to private parties 

can be made for improving, developing, or financing business and industry, creating 

jobs, and improving the economic and environmental climate in rural communities 

(including pollution abatement). This type of assistance is available in rural areas (this 

includes all areas other than cities or unincorporated areas of more than 50,000 people 

and their immediately adjacent urban or urbanizing areas). 

Eligible applicants include any legally organized entity, including cooperatives, 

corporations, partnerships, trusts or other profit or nonprofit entities, Indian tribes or 

Federally recognized tribal groups, municipalities, counties, any other political 

subdivision of a State, or individuals. Loans are available to those who cannot obtain 

credit elsewhere and for public bodies. 

The maximum aggregate B&I Direct Loan amount to any one borrower is $10 million. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 124 May 5, 2004 

Business and Industry Guaranteed Loans

This program provides guarantees up to 90 percent of a loan made by a commercial 

lender. Loan proceeds may be used for working capital, machinery and equipment, 

buildings and real estate, and certain types of debt refinancing. The primary purpose is 

to create and maintain employment and improve the economic climate in rural 

communities. 

 

Business and Industry loan guarantees can be extended to loans made by recognized 

commercial lenders or other authorized lenders in rural areas (this includes all areas 

other than cities or unincorporated areas of more than 50,000 people and their 

immediately adjacent urban or urbanizing areas). Generally, recognized lenders include 

Federal or State chartered banks, credit unions, insurance companies, savings and loan 

associations, Farm Credit Banks or other Farm Credit System institutions with direct 

lending authority, a mortgage company that is part of a bank holding company, and the 

National Rural Utilities Finance Corporation. Other loan sources include eligible Rural 

Utilities Service electric and telecommunications borrowers and other lenders approved 

by RBS who have met the designated criteria. 

Assistance under the B&I Guaranteed Loan Program is available to virtually any legally 

organized entity, including a cooperative, corporation, partnership, trust or other profit or 

nonprofit entity, Indian tribe or Federally recognized tribal group, municipality, county, or 

other political subdivision of a State. 

The maximum aggregate B&I Guaranteed Loan(s) amount that can be offered to any 

one borrower under this program is $25 million. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 125 May 5, 2004 

APPENDIX 4 

METHODOLOGY FOR ECONOMIC ANALYSIS 

1. Macroeconomic Impacts 

The U.S. biodiesel industry is in its infancy compared to the much larger ethanol industry 

but has the potential to grow and develop in much the same way. Biodiesel (mono-alkyl 

esters) are manufactured from naturally occurring vegetable oils and fats (also known as 

triglycerides). Mono-alkyl esters are also made for purposes other than biodiesel such 

as intermediates for industrial chemicals and consumer products. Much of current 

biodiesel technology is based on a “simplification” of well-known and well understood 

conventional ester production techniques. 

Biodiesel is a product of the industrial inorganic and organic chemicals industry and uses 

inputs supplied primarily by the agriculture and food processing industry (oilseed 

refining), other sectors of the chemicals industry (alcohol and catalysts) as well as 

utilities and water, and maintenance services. Spending on these goods and services 

represents the purchase of output of other industries. In addition, the construction of 

new biodiesel plants results in spending for a wide range of goods and services. At an 

estimated construction cost of $1.25/gallon for a new biodiesel plant, 40 MGY of new 

biodiesel capacity would represent the expenditure of $50 million. 

The spending associated with biodiesel production and investment spending on new 

plant capacity will circulate throughout the entire economy several fold. Consequently 

this spending will stimulate aggregate demand, support the creation of new jobs, 

generate additional household income, and provide tax revenue for government at all 

levels. The impact from the creation of a biodiesel industry on the New York economy 

was estimated by applying the most appropriate final demand multipliers for output, 

earnings, and employment for the relevant supplying industry calculated by the U.S. 

Bureau of Economic Analysis (BEA) to the estimates of spending consistent with the size 

and scale of the industry outlined by each Policy Scenario. 

The Regional Input-Output Modeling System (RIMS II)62

The effective estimation of the full implications of a public- or private-sector project or 

programs at the State and local levels requires a systematic analysis of the economic 

impacts of these projects and programs on affected regions. In turn, systematic analysis 

of economic impacts must account for the interindustry relationships within regions 

because these relationships largely determine how regional economies are likely to 

respond to project and program changes. Thus, regional input-output (Input-Output) 

multipliers, which account for interindustry relationships, are useful tools for conducting 

regional economic impact analysis. 

In the 1970's, the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) 

developed a method for estimating regional Input-Output multipliers known as RIMS 

(Regional Industrial Multiplier System). An enhancement to RIMS, known as RIMS II 

 

62 This section is based on material from the U.S. Department of Commerce, Bureau of 

Economic Analysis. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 126 May 5, 2004 

(Regional Input-Output Modeling System) was introduced in the 1980’s, and has been 

continuously updated and enhanced. 

RIMS II is based on an accounting framework called an Input-Output table. For each 

industry, an Input-Output table shows the industrial distribution of inputs purchased and 

outputs sold. A typical Input-Output table in RIMS II is derived mainly from two data 

sources: BEA's national Input-Output table, which shows the input and output structure 

of nearly 500 U.S. industries, and BEA's regional economic accounts, which are used to 

adjust the national Input-Output table to show a region's industrial structure and trading 

patterns.63

Using RIMS II for impact analysis has several advantages. RIMS II multipliers can be 

estimated for any region composed of one or more counties and for any industry, or 

group of industries, in the national Input-Output table. The accessibility of the main data 

sources for RIMS II keeps the cost of estimating regional multipliers relatively low. 

Empirical tests show that estimates based on relatively expensive surveys and RIMS IIbased estimates are similar in magnitude.64

To effectively use the multipliers for impact analysis, users must provide geographically 

and industrially detailed information on the initial changes in output, earnings, or 

employment that are associated with the project or program under study. The multipliers 

can then be used to estimate the total impact of the project or program on regional 

output, earnings, and employment. 

The Use of RIMS II to Calculate the Economic Impact for New York of a Biodiesel 

Industry

RIMS II uses BEA's 1999 national Input-Output table, which shows the input and output 

structure for approximately 500 industries. Since a particular region may not contain all 

the industries found at the national level, some direct input requirements cannot be 

supplied by that region's industries. Input requirements that are not produced in a study 

region are identified using BEA's regional economic accounts. Currently, data for 2000 

are used. 

Measuring impacts of a new industry on a state economy such as New York has two 

facets: measuring the size of the industry and then determining its impact, based on its 

size. The direct contribution of the biodiesel industry to the New York economy is 

related to the value added by the industry. Value added measures the contribution of 

the industry’s employees and owners above the value of the goods and services 

purchased by the industry required to produce biodiesel fuel. 

The biodiesel industry’s value added is its direct contribution to the State economy. 

Industry operations also have indirect effects through the purchases of goods by its 

 

63 See U.S. Department of Commerce, Bureau of Economic Analysis, The Detailed Input-Output 

Structure of the U.S. Economy, Volume II (Washington, DC: U.S. Government Printing Office, 

November 1994); and U.S. Department of Commerce, Bureau of Economic Analysis, State 

Personal Income, 1929-93 (Washington, DC: U.S. Government Printing Office, June 1995). 64 See U.S. Department of Commerce, Regional Input-Output Modeling System (RIMS II), 

chapter 5. Also see Sharon M. Brucker, Steven E. Hastings, and William R. Latham III, "The 

Variation of Estimated Impacts from Five Regional Input-Output Models," International Regional 

Science Review 13 (1990): 119-39. 
Feasibility of a New York Biodiesel Industry 

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employees and through the employment and value added generated in its supplying 

industries. The biodiesel industry’s indirect contribution to the New York economy and 

hence its total direct and indirect effect on the State economy is measured using final 

demand multipliers. Final demand multipliers measure how industry purchases generate 

value added and employment in its supplying industries. Table A4.1 displays the final 

demand multipliers for output, earnings and employment for the industries relevant to 

this analysis. 

Table A4.1 

RIMS II Final demand Multipliers for New York

 Final DD Final DD Final DD 

 Output Earnings Employment 

 ($) ($) (Jobs) 

Industrial inorganic and organic chemicals 1.6878 0.3402 6.6000 

New industrial Construction 1.8744 0.5198 13.2000 

Oilseed production 1.8170 0.3451 14.4000 

Edible fats & oils/animal fats 1.6915 0.2820 8.3000 

• The final demand output multiplier for the New York industrial inorganic and 

organic chemicals industry is approximately 1.7 and the output multiplier for new 

industrial construction is approximately 1.9. This means that every dollar of 

value added created by the biodiesel industry generates approximately an 

additional seventy cents of output in the economy for a total contribution of 

approximately $1.70 while the construction activity to build capacity generates a 

total contribution of nearly $1.90. 

• The earnings multiplier for the industrial inorganic and organic chemicals industry 

in New York is 0.32 while the new construction multiplier is 0.52 meaning that 

every dollar of value added created by the biodiesel industry generates 

approximately an additional $0.32 of additional household income for New 

Yorkers while every dollar of construction activity to build biodiesel capacity 

generates $0.52 of income. 

• Increased economic activity creates jobs. Every million dollars of value added 

created by the biodiesel industry supports the creation of 6.6 new jobs 

throughout the entire New York while 13.2 jobs are created by the construction 

activity to build biodiesel capacity. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 128 May 5, 2004 

2. Agricultural Impacts 

The impacts of a biodiesel industry on New York’s agricultural sector were analyzed 

through the use of a long-term model of U.S. agriculture that includes detailed soybean 

and soybean product supply, demand, and prices and the livestock and poultry sector. 

This model was used to develop a baseline forecast for soybean, soybean oil, and 

soybean meal supply and prices that is consistent with the December 2003 USDA World 

Agricultural Supply and Demand Estimates and agricultural and energy policy in effect at 

that time. An alternative scenario for the Energy Bill was developed that incorporated 

the renewable fuel standard provisions and tax incentives for ethanol and biodiesel 

under consideration by the U.S. Senate. 

The model produces forecasts at the national level. LECG economists linked New York 

agriculture performance to this to determine both a baseline and Energy Bill Scenario 

specific to New York. This effort relied on State specific data for area planted, 

harvested, average yield and production data for soybeans, corn, wheat, and hay, and 

farm-level process provided by the New York Department of Agriculture and Markets 

and New York Agricultural Statistics Service. Cash receipts and farm income specific to 

New York were determined by calculating the change in the value of production and 

marketings required for each policy scenario under both Baseline and Energy Bill price 

paths. This analysis was linked to Subtasks 2.2 and 2.3 and specifically considered 

impacts associated with New York State biodiesel production levels consistent with each 

policy option. 

The main assumptions underlying the agricultural analysis for soybeans, corn, and hay 

are summarized in the following supply and utilization tables A4.2 through A4.4. 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 129 May 5, 2004 

Table A4.2 

New York Soybean Supply and Utilization 

Baseline and Energy Bill Scenario 

BASELINE 

 NY NY NY NY NY U.S. U.S. U.S. 

 Soybeans Soybeans Soybeans Soybeans Soybean Soybean Soybean Soybean 

 Planted Harvested Yield Production Farm Price Farm Price Oil Price Meal Price

 Thou ac Thou ac bu/ac Thou bu $/bu $/bu $/lb (1) $/Ton (2) 

1998 100 97 41 3,977 $5.10 $4.93 $0.1990 $138.50

1999 130 128 37 4,736 $4.20 $4.63 $0.1560 $167.70

2000 135 132 33 4,356 $4.55 $4.54 $0.1415 $173.60

2001 160 158 33 5,214 $4.55 $4.34 $0.1646 $167.73

2002 145 144 32 4,608 $5.85 $5.31 $0.2204 $181.75

2003 144 142 37 5,254 $6.94 $6.81 $0.2749 $217.94

2004 152 149 35 5,221 $5.75 $5.65 $0.2258 $180.68

2005 156 153 35 5,400 $5.52 $5.42 $0.2167 $162.56

2006 161 157 36 5,585 $5.73 $5.63 $0.2250 $168.79

2007 165 162 36 5,776 $5.72 $5.62 $0.2246 $168.45

2008 169 166 36 5,974 $5.73 $5.62 $0.2247 $168.56

2009 174 170 36 6,178 $5.75 $5.65 $0.2259 $169.42

2010 179 175 37 6,388 $5.72 $5.61 $0.2244 $168.28

2011 183 180 37 6,606 $5.82 $5.71 $0.2283 $171.25

2012 188 185 37 6,830 $5.99 $5.88 $0.2350 $176.28

 

ENERGY BILL SCENARIO 

 NY NY NY NY NY U.S. U.S. U.S. 

 Soybeans Soybeans Soybeans Soybeans Soybean Soybean Soybean Soybean 

 Planted Harvested Yield Production Farm Price Farm Price Oil Price Meal Price

 Thou ac Thou ac bu/ac Thou bu $/bu $/bu $/LB $/Ton 

1998 100 97 41 3,977 $5.10 $4.93 $0.1990 $138.50

1999 130 128 37 4,736 $4.20 $4.63 $0.1560 $167.70

2000 135 132 33 4,356 $4.55 $4.54 $0.1415 $173.60

2001 160 158 33 5,214 $4.55 $4.34 $0.1646 $167.73

2002 145 144 32 4,608 $5.85 $5.31 $0.2204 $181.75

2003 144 142 37 5,254 $6.94 $6.81 $0.2751 $218.06

2004 152 149 35 5,221 $5.88 $5.77 $0.2309 $184.69

2005 156 153 35 5,400 $6.08 $5.97 $0.2388 $179.11

2006 161 157 36 5,585 $6.17 $6.05 $0.2421 $181.54

2007 177 174 36 6,215 $6.28 $6.16 $0.2465 $175.62

2008 195 191 36 6,891 $6.26 $6.15 $0.2459 $175.20

2009 215 211 36 7,639 $6.17 $6.06 $0.2423 $172.66

2010 237 232 37 8,469 $6.25 $6.14 $0.2455 $174.89

2011 261 255 37 9,388 $6.14 $6.03 $0.2411 $171.79

2012 287 281 37 10,407 $6.16 $6.05 $0.2419 $172.34

 

(1). Soybean oil price, Crude, Tanks, Decatur 

(2) Soybean meal price, 48% Protein, Decatur 
Feasibility of a New York Biodiesel Industry 

LECG, LLC 130 May 5, 2004 

Table A4.3 

New York Corn Supply and Utilization 

Baseline and Energy Bill Scenario 

BASELINE 

 NY NY NY NY NY U.S. 

 Corn Corn Corn Corn Corn Corn 

 Planted Harvested Yield Production Farm Price Farm Price

 Thou ac Thou ac bu/ac Thou bu $/bu $/bu 

1998 1,130 580 114 66,120 $2.21 $1.84

1999 1,150 590 101 59,590 $2.24 $1.71

2000 980 450 98 44,100 $2.35 $1.85

2001 1,030 540 105 56,700 $2.51 $1.96

2002 1,040 450 97 43,650 $2.85 $2.30

2003 1,020 460 112 54,280 $2.54 $2.16

2004 1,050 536 100 53,550 $2.49 $2.11

2005 1,055 538 101 54,343 $2.23 $1.89

2006 1,060 541 102 55,141 $2.18 $1.86

2007 1,065 543 103 55,944 $2.44 $2.07

2008 1,070 546 104 56,753 $2.59 $2.20

2009 1,075 548 105 57,566 $2.71 $2.30

2010 1,080 551 106 58,385 $2.88 $2.45

2011 1,085 553 107 59,208 $3.12 $2.65

2012 1,090 556 108 60,037 $3.16 $2.68

 

ENERGY BILL SCENARIO 

 NY NY NY NY NY U.S. 

 Corn Corn Corn Corn Corn Corn 

 Planted Harvested Yield Production Farm Price Farm Price

 Thou ac Thou ac bu/ac Thou bu $/bu $/bu 

1998 1,130 580 114 66,120 $2.21 $1.84

1999 1,150 590 101 59,590 $2.24 $1.71

2000 980 450 98 44,100 $2.35 $1.85

2001 1,030 540 105 56,700 $2.51 $1.96

2002 1,040 450 97 43,650 $2.85 $2.30

2003 1,020 460 112 54,280 $2.54 $2.16

2004 1,050 536 100 53,550 $2.77 $2.36

2005 1,055 538 101 54,343 $2.83 $2.40

2006 1,060 541 102 55,141 $2.94 $2.49

2007 1,045 533 103 54,894 $2.97 $2.52

2008 1,050 536 104 55,692 $3.20 $2.72

2009 1,055 538 105 56,495 $3.22 $2.74

2010 1,060 541 106 57,304 $3.24 $2.75

2011 1,065 543 107 58,117 $3.27 $2.78

2012 1,070 546 108 58,936 $3.39 $2.88
Feasibility of a New York Biodiesel Industry 

LECG, LLC 131 May 5, 2004 

Table A4.4 

New York All Hay Supply and Utilization 

Baseline and Energy Bill Scenario 

BASELINE 

 NY NY NY NY U.S. 

 Hay Hay Hay Hay Farm Hay Farm 

 Harvest Yield Production Price Price 

 thou ac tons/ac thou tons $/ton $/ton 

1998 1,400 2.22 3,110 $93.00 $84.60 

1999 1,500 1.98 2,975 $108.00 $76.90 

2000 1,520 2.04 3,098 $103.00 $84.60 

2001 1,660 2.14 3,548 $104.00 $96.50 

2002 1,720 2.17 3,726 $106.00 $92.40 

2003 1,600 2.20 3,596 $102.75 $92.57 

2004 1,627 2.17 3,530 $98.77 $88.98 

2005 1,597 2.17 3,465 $98.31 $88.57 

2006 1,567 2.17 3,400 $99.15 $89.32 

2007 1,536 2.17 3,334 $100.17 $90.24 

2008 1,506 2.17 3,269 $101.05 $91.04 

2009 1,476 2.17 3,203 $101.68 $91.60 

2010 1,446 2.17 3,138 $102.45 $92.30 

2011 1,416 2.17 3,072 $103.21 $92.98 

2012 1,386 2.17 3,007 $103.55 $93.29 

 

ENERGY BILL SCENARIO 

 NY NY NY NY U.S. 

 Hay Hay Hay Hay Farm Hay Farm 

 Harvest Yield Production Price Price 

 thou ac tons/ac thou tons $/ton $/ton 

1998 1,400 2.22 3,110 $93.00 $84.60 

1999 1,500 1.98 2,975 $108.00 $76.90 

2000 1,520 2.04 3,098 $103.00 $84.60 

2001 1,660 2.14 3,548 $104.00 $96.50 

2002 1,720 2.17 3,726 $106.00 $92.40 

2003 1,600 2.20 3,596 $102.75 $92.57 

2004 1,627 2.17 3,530 $98.77 $88.98 

2005 1,597 2.17 3,465 $98.31 $88.57 

2006 1,567 2.17 3,400 $99.15 $89.32 

2007 1,536 2.17 3,334 $100.17 $90.24 

2008 1,478 2.17 3,208 $101.80 $91.04 

2009 1,449 2.17 3,144 $102.43 $91.60 

2010 1,419 2.17 3,080 $103.21 $92.30 

2011 1,390 2.17 3,016 $103.97 $92.98 

2012 1,360 2.17 2,951 $104.32 $93.29 
For information on other

NYSERDA reports, contact:

New York State Energy Research 

and Development Authority

17 Columbia Circle

Albany, New York 12203-6399

toll free: 1 (866) NYSERDA

local: (518) 862-1090

fax: (518) 862-1091

info@nyserda.org

www.nyserda.org
STATEWIDE FEASIBILITY STUDY FOR A POTENTIAL

NEW YORK STATE BIODIESEL INDUSTRY

FINAL REPORT 04-02

STATE OF NEW YORK

GEORGE E. PATAKI, GOVERNOR

NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY

VINCENT A. DEIORIO, ESQ., CHAIRMAN

PETER R. SMITH, PRESIDENT