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Report to the Legislature
 

Annual Report on Biodiesel 

Ralph Groschen, 651-201-6223 

Christina Connelly, 651-201-6220 

625 North Robert Street, St. Paul, MN 55155
 

www.mda.state.mn.us
 

January 15, 2011 
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Table of Contents
 

Executive Summary......................................................................................... 3
 

Introduction....................................................................................................... 5
 

Background....................................................................................................... 6
 

Biodiesel Task Force’s Technical Cold Weather Issues Team ......................................................... 7
 

B5 Implementation................................................................................................................................ 7
 

ASTM Specifications ............................................................................................................................ 9
 

Biodiesel Prices...................................................................................................................................... 9
 

Biodiesel Supply .................................................................................................................................. 12
 

Impact of Minnesota’s Biodiesel Requirements....................................... 14
 

Production Capacity ........................................................................................................................... 14
 

Feedstocks............................................................................................................................................ 15
 

Appendix A: Minnesota Biodiesel Task Force Member Comments..... 16
 

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Executive Summary
 

In 2005, Minnesota became the first state to implement legislation mandating the use of biodiesel 

by blending biodiesel into its fuel supply at a level of 2 percent—commonly referred to as B2. 

According to subsequent legislation (Minnesota Statutes §239.77, subd. 2), all diesel sold or offered for 

sale in Minnesota must contain 5 percent biodiesel (B5) as of May 2009, increasing to 10 percent 

(B10) in 2012 and 20 percent (B20) in 2015. , 

1 2 

The Biodiesel Task Force was formed in 2003—comprised of appointees from industry, academia, 

and various associations—to advise the Commissioner of Agriculture on implementing the state’s 

biodiesel blend requirement and building the state’s biodiesel production capacity. Since then, the 

Task Force has helped promote the industry and educate biodiesel developers, marketers, consumers and 

manufacturers about biodiesel and related issues in Minnesota. 

Experience and testing demonstrate that biodiesel blends can perform well in cold weather. 

During the first winter following implementation of B5 in May 2009, some diesel fuel users in 

Minnesota reported problems potentially associated with the use of higher blends of biodiesel. In 

January 2010 the Minnesota Department of Commerce issued a temporary waiver for the B5 

requirement in #1 diesel in response to concerns about the potential for clogged filters in extreme cold 

weather. In spite of sub-zero temperatures this winter, though, no issues with the state’s B5 mandate 

had been reported for the winter of 2010-11 at the time of this report. 

Significant progress has been made in providing new industry specifications that establish and 

improve quality guidelines for biodiesel, biodiesel blends, and diesel fuel oil. The American Society for 

Testing and Materials (ASTM) introduced additions to existing standards that incorporated biodiesel 

blends up to B5 into the diesel fuel standard (D975), added a cold soak filtration test for B100 to the 

biodiesel specification (D6751), and established a new specification (D7467) for blends of biodiesel 

from B6 through B20. Discussions related to additional specification parameters are ongoing. 

The price of biodiesel fuel has been volatile along with diesel fuel prices.

3 However, the price 

difference to consumers for biodiesel blends has been moderate: for example, a gallon of B5 has 

averaged just 4 cents more than a gallon of diesel since implementation in May 2009. The federal 

biodiesel blender’s tax credit of $1.00 per gallon expired temporarily at the end of 2009, leading to 

significant changes in both biodiesel and diesel fuel markets. The tax credit was retroactively reinstated 

in December for both 2010 and extended into 2011, which should allow the price margin between diesel 

1 By law, the 10 and 20 percent minimum content levels would be effective from April 1st through October 31st only. 

According to MS §239.77, subd. 2a, “The minimum content for the remainder of the year is five percent. However, if the 

commissioners of agriculture, commerce, and pollution control determine, after consultation with the biodiesel task force and 

other technical experts, that an American Society for Testing and Materials (ASTM) specification or equivalent federal 

standard exists for the specified biodiesel blend level in those clauses that adequately addresses technical issues associated 

with Minnesota's cold weather and publish a notice in the State Register to that effect, the commissioners may allow the 

specified biodiesel blend level in those clauses to be effective year-round.” 2 According to MS §239.77, subd. 2b, the 10 and 20 percent minimum content levels “become effective on the date specified 

only if the commissioners of agriculture, commerce, and pollution control publish notice in the State Register and provide 

written notice to the chairs of the House of Representatives and Senate committees with jurisdiction over agriculture, 

commerce, and transportation policy and finance, at least 270 days prior to the date of each scheduled increase, that certain 

conditions have been met (e.g., ASTM specifications exists, adequate supply is available, etc.) and the state is prepared to 

move to the next scheduled minimum content level.” 

3 For 2006-2009, the price of biodiesel is the rack (wholesale) price after the $1.00 federal tax credit. For 2010, prices reflect 

wholesale prices without the tax credit, which was reinstated in December 2010. 

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and B5 to shrink to 1.5 cents. However, because credit was only extended for one year, the industry may 

still operate under some uncertainty. 

The value of a Renewable Identification Number (RIN) for a gallon of biodiesel, a feature of the 

EPA’s Renewable Fuels Standard program, has been equal to or greater than the federal biodiesel 

tax credit. As this mechanism settles into the marketplace, it could take the place of the federal tax 

credit and reduce the cost of biodiesel blends to the consumer. 

The supply of biodiesel fuel to Minnesota terminals has generally been constant. Few if any B5 

outages occurred at terminals because biodiesel fuel was not available; instead, common reasons for B5 

outages include local diesel fuel outages and a lack of winter blending equipment at certain out-of-state 

terminals. Plans for the installation of major new winter blending equipment at a terminal in Sioux 

Falls, South Dakota is scheduled for 2011 and is expected to alleviate issues related to winter blending 

in southwestern Minnesota. 

Minnesota’s B2 and B5 mandates have provided an important incentive leading to the establishment of 

the state’s biodiesel production capacity of 65 million gallons. The state’s existing capacity can 

provide all the biodiesel necessary for B5, approximately 80 percent of the product needed for 

B10, and about 40 percent required for future statewide B20 requirements. A new biodiesel plant 

in Minnesota will likely provide additional capacity over the next few years. However, with the high 

cost of feedstock oils and the temporary expiration of the biodiesel tax credit, some Minnesota plants 

have temporarily stopped or reduced production. 

Feedstocks for biodiesel production at Minnesota plants are generally determined by the price and 

availability of the oil or fat used in the process. Given the large soybean oil crushing capacity in 

Minnesota, much of the soy oil used in Minnesota biodiesel plants is likely to be sourced from 

Minnesota oil producers. However, soybean oil prices have been at record high levels recently, 

which has reduced profitability and production. 

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Introduction
 

This report is submitted pursuant to Minnesota Statutes §239.77, subd. 5: 

Beginning in 2009, the commissioner of agriculture must report by January 15 of each year to 

the chairs and ranking minority members of the legislative committees and divisions with 

jurisdiction over agriculture policy and finance regarding the implementation of the minimum 

content requirements in subdivision 2, including information about the price and supply of 

biodiesel fuel. The report shall include information about the impacts of the biodiesel mandate 

on the development of biodiesel production capacity in the state, and on the use of feedstock 

grown or raised in the state for biodiesel production. The report must include any written 

comments received from members of the biodiesel fuel task force by January 1 of that year 

designated by them for inclusion in the report. 

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Background
 

The Biodiesel Task Force was created by the Legislature in March 2003 to help the state carry out its 

biodiesel mandate. Since then, the Task Force has met on an ad-hoc basis to discuss issues related to 

biodiesel production and use. Sub-teams have been formed to address more specific issues such as cold 

weather operability. 

The Biodiesel Task Force members are appointed by the Commissioner of Agriculture. Current 

membership includes: 

Douglas Peterson, Minnesota Farmers Union 

Dustin Haaland, CHS Inc. 

Robert Krogman, Minnesota Petroleum Marketers Association 

Kelly Marczak, American Lung Association of Minnesota 

Thomas Byrne, Byrne & Company, Ltd. 

Charles Neece, FUMPA 

Kristin Weeks-Duncanson, At large
 

Kevin Paap, Minnesota Farm Bureau 

Ronald Marr, Minnesota Soybean Processors 

Kelly Strebig, University of Minnesota Center for Diesel Research 

Dave Slade, Soy Mor 

Ron Osman, Flint Hills Resources, LP
 

John Hausladen, Minnesota Trucking Association
 

Lance Peterson, Minnesota Soybean Growers Association 

Bruce Heine, Magellan Midstream Partners, LP
 

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Implementation of Minnesota’s Biodiesel Requirements
	
	

Biodiesel Task Force’s Technical Cold Weather Issues Team 

The Biodiesel Task Force’s Technical Cold Weather Issues Team was established pursuant to Laws of 

Minnesota for 2008 Ch. 297, Art. 1, Sec. 68. The Team decided that cold weather issues and concerns 

should be addressed by three subcommittees comprised of technical experts in the specific areas of: 1) 

production/blending, 2) distribution and 3) handling of biodiesel, biodiesel blends and diesel fuel. The 

2009 legislative report, “Petroleum Diesel Fuel and Biodiesel Technical Cold Weather Issues,” includes 

results of subcommittee activities on fuel sampling and analysis, product availability and 

recommendations on best practices. 4 In the spring of 2009 the Handling Subcommittee issued “A 

Biodiesel Blend Handling Guide” to help diesel fuel users avoid potential cold weather problems.5 The 

Cold Weather Team met most recently in January 2010 to discuss concerns with filter plugging in cold 

weather. 

In August 2010 the full Task Force met to discuss a variety of issues including ASTM activities related 

to filter issues, results of biodiesel blend samples, new procedures created by industry for reporting 

problems, individual plant production reports and an update on compliance from the Minnesota 

Department of Commerce’s Weights and Measures Division. Members reported on samples taken from 

problem fuels detected in western Minnesota and tested at the National Renewable Energy Laboratory 

(NREL); one sample indicated polymer contamination. Although polystyrene, polyethylene, and isoprene were mentioned, no conclusive identification of the exact polymer or source of the contamination 

was determined. 

A checklist of background information to accompany problem fuels or filter samples sent in for analysis 

was also developed by the handling subcommittee. Previous samples were not accompanied by such 

information, making it difficult for investigators to determine the source of any contamination or fuel 

related problems. This list was presented to local and national entities having interest in such 

investigations. Portions of it will be used by investigators on subsequent fuel problems. 

The Task Force has been crucial to the success of addressing the many complex issues that were bound 

to arise given the groundbreaking initiative of statewide biodiesel blend use in Minnesota’s challenging 

climate. After various bumps in the road, at the time of publication of this report, the B5 mandate has 

gone smoothly this winter. We have heard no reports this year of biodiesel problems from Weights and 

Measures, the Petroleum Retailers or the Biodiesel Help Line. 

Comments on this report from the Minnesota Biodiesel Task Force members can be found in Appendix 

A. 

B5 Implementation 

On May 1, 2009, in accordance with state law, Minnesota increased the amount of biodiesel blended 

into its fuel supply from 2 percent (B2) to 5 percent (B5).6 The increase to B5 represents part of the state 

mandate to increase the biodiesel requirement to 10 percent by 2012 and 20 percent by 2015 (the 10 

4 The report can be found on the Minnesota Department of Agriculture website at 

https://www.mda.state.mn.us/news/publications/news/govrelations/biodieselcoldissues.pdf. 5 The guide can be found on the Minnesota Department of Agriculture website at 

http://www.mda.state.mn.us/news/publications/renewable/biodiesel/biodieselblendguide.pdf. 6 MS §239.77. 

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percent and 20 percent minimum content levels would be effective for the summer months only, unless 

it is determined that adequate federal standards or specifications exist for those level blends to be 

effective year-round).7 To implement these minimum content requirements, several issues must first be 

addressed regarding biodiesel’s cold weather functionality, the establishment of industry specifications 

for B10 and B20 (accomplished in 2008, as discussed below) and the price and supply of diesel and 

biodiesel. The state will only move to the next scheduled minimum content level specified in statute if 

certain conditions are met based on consideration of these issues.8 

Based on past experience and testing by the Minnesota Department of Commerce, state and industry 

experts did not anticipate any difference between the cold weather performance characteristics of B2 

blends and the B5 blends introduced in 2009. Moreover, as discussed in subsequent sections, industry 

specification includes B5 as "standard diesel fuel"—meaning it is safe for use in trucks, emergency and 

maintenance equipment and all diesel equipment provided quality standards are adhered to. Throughout 

the early part of the 2009-10 winter, a number of concerns were expressed by diesel fuel users indicating 

a variety of potential problems.9 However, it was difficult for the state to determine the extent and cause 

of many problems due to inadequate background information about the origin and handling of the fuel 

and because complaints were spotty and/or specific to certain locations and applications. The Minnesota 

Department of Commerce’s Weights and Measures Division developed technology for discerning a filter 

plugged by biodiesel components as compared to more conventional causes. This, along with better 

supporting information, should allow the state to more accurately determine the source of any potential 

biodiesel problems that are detected. During the winter of 2009-2010, biodiesel components were 

discovered in a number of plugged filters submitted to Weights and Measures, but at the time of this 

report no troublesome biodiesel components have been reported in fuel or filters for the 2010-11 winter. 

In January 2010, Minnesota diesel fuel and biodiesel suppliers requested that Minnesota waive the B5 

requirement for #1 diesel fuel; on January 15, the Minnesota Department of Commerce issued a waiver 

through March 31, 2010. The waiver was granted to allow the biodiesel industry and petroleum 

producing and distributing companies time to identify the root cause of the problems. The decision to 

grant a B5 waiver for #1 diesel fuels only was also made to accommodate certain diesel fuel consumers 

who use straight #1 diesel fuel in the winter months. #1 diesel fuel has better cold flow characteristics in 

the winter, but is more expensive and yields less energy content (and therefore less mileage) than #2 

diesel fuel. The cold flow characteristics of straight #1 diesel fuels seem to be impacted by 5 percent 

biodiesel to a greater degree than #2 diesel or blends of #1 and #2 diesel fuel.10 In addition, cold flow 

additives can be added to #2 diesel fuel or to blends of #1 and #2 diesel fuel to further improve product 

cold flow properties. Most state diesel fuel users have been well served by additives and blends of #1 

7 According to MS §239.77, subd. 2a: “The minimum content for the remainder of the year is five percent. However, if the 

commissioners of agriculture, commerce, and pollution control determine, after consultation with the biodiesel task force and 

other technical experts, that an American Society for Testing and Materials (ASTM) specification or equivalent federal 

standard exists for the specified biodiesel blend level in those clauses that adequately addresses technical issues associated 

with Minnesota's cold weather and publish a notice in the State Register to that effect, the commissioners may allow the 

specified biodiesel blend level in those clauses to be effective year-round.” 8 According to MS §239.77, subd. 2b, “the 10 and 20 percent minimum content levels become effective on the date specified 

only if the commissioners of agriculture, commerce, and pollution control publish notice in the State Register and provide 

written notice to the chairs of the House of Representatives and Senate committees with jurisdiction over agriculture, 

commerce, and transportation policy and finance, at least 270 days prior to the date of each scheduled increase, that certain 

conditions have been met (e.g., ASTM specifications exists, adequate supply is available, etc.) and the state is prepared to 

move to the next scheduled minimum content level.” 9 Reports of concerns came through the Minnesota Biodiesel Council, the Minnesota Petroleum Marketers Association, and 

the Minnesota Department of Commerce’s Weights and Measures division. 

10 Common #1/#2 diesel fuel blends can be 50 percent #1 and 50 percent #2 diesel, or any other variation to meet the 

expected temperature ranges for the season. 

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and #2 diesel, thereby benefiting from better mileage, lower fuel costs and better cold weather 

performance with biodiesel blends. 

ASTM Specifications 

ASTM is the premier international industry association that designates quality specifications for a wide 

variety of industrial products including fuels and lubricants. Updates in 2008 to the existing ASTM 

“Standard Specification for Diesel Fuel Oils D975” incorporated biodiesel blends up to 5 percent. The 

specification D975-09 was not adapted into Minnesota Statutes, however, because of objections from 

some members of the petroleum industry who believed that adding 5 percent biodiesel into #1 diesel fuel 

would not allow that fuel to meet required distillation properties. An ASTM committee is currently 

working to resolve this issue; however, the state waiver for B5 in #1 fuel temporarily addresses this 

concern in Minnesota. 

At a December 2010 meeting of the ASTM, a voluntary specification for a winter biodiesel product 

(“Grade #1B”) was proposed as an amendment to D6751. This amendment included some of the same 

elements that were adopted in standards used by some Minnesota terminals and refiners. However, 

ASTM members had asked for specific additional data to document that such an amendment was needed 

and would be effective, but the data was not provided. Therefore the proposal was rejected and the 

amendment was not adopted. In the meantime, various suppliers who did not experience significant 

problems attributed to biodiesel elected not to adopt the more stringent requirements. Some industry 

members suggest that overly stringent requirements established without significant proof of need only 

increase the potential cost of biodiesel and reduce product fungibility in regional and national markets. 

These issues continue to be the subject of further debate. 

Various refiners and terminals have their own standards for delivery of biodiesel and other products into 

their systems and these may actually be more stringent than ASTM specifications. In fact, biodiesel 

requirements among some Minnesota terminals and refiners are more stringent than ASTM D6751, but 

not all have adopted these strict requirements. 

The existing ASTM “Standard Specification for Biodiesel Fuel Blend Stocks for Middle Distillate Fuels 

D6751” was also amended in 2008 to include the cold flow filtration test into the recommended test 

parameters to address cold flow issues. In addition, the federal government established a penalty for 

trading biodiesel not passing the cold flow filtration test that would be sold, transported or used after 

September 1, 2009. This stipulation may have greatly reduced the chances of finding off-spec biodiesel 

in the marketplace in the winter of 2010-11. 

A new ASTM “Standard Specification for Diesel Fuel Oil, Biodiesel Blend (B6 to B20)” was approved 

in 2008 as D7467. The standard establishes specifications for biodiesel blends including B10 and B20, 

which are proposed for general usage in Minnesota in 2012 and 2015, respectively. 

Biodiesel Prices 

The price of biodiesel fuel has experienced volatility along with diesel fuel prices. A graph of the net 

average wholesale prices (at the rack)—adjusted to illustrate after-tax costs of B100 compared to the 

wholesale cost of diesel at major Minneapolis/St. Paul terminal locations—can be seen in Figure 1. 

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11 12 13 Figure 1. Diesel and Biodiesel Price Trends, 2006-2010. 

Source: Minnesota Department of Agriculture analyses of Axxis pricing data through August 13th, 2010. 

From 2006 to 2010, the net after-tax cost of B100 to the blender has at times been lower and higher than 

the commensurate cost of diesel fuel. For example, in 2006 the net price of B100 was about 14 cents 

lower per gallon than the price of one gallon of diesel fuel, while it was 52 cents higher in 2009. 

To consumers buying biodiesel blends, however, these differences are not as dramatic as it might 

appear—Figure 2 demonstrates computed prices for biodiesel blends based on actual B100 and diesel 

prices at the rack, as follows: 

Where: 

Pb = Net price of one gallon of biodiesel to blender (after tax credit) 

Pd = Price of one gallon of diesel at the rack 

%b = Percent of biodiesel in blended fuel 

%d = Percent of diesel in blended fuel 

(Pb * %b) + (Pd * %d) = Computed price of biodiesel blend 

For example, from May 1 to the end of 2009, the average net price of B100 to the blender was 

$2.2629 and the price of biodiesel at the rack was $1.9009. Thus, the price of one gallon of B5 is 

computed to be $1.9190—less than a two cent difference ($0.0181) above the price of diesel per 

gallon. 

 

11 Price of diesel at the rack (wholesale). 

12 For 2006 to 2009, the price of biodiesel is the rack (wholesale) price after the $1.00 federal tax credit. For 2010, prices 

reflect wholesale prices without the tax credit, although the value of Renewable Identification Numbers (RINs) for biodiesel 

has been equal to the tax credit value and the tax credit was retroactively reinstated in December 2010 through 2011. 

13 Generally, prices were recorded by Axxis daily (on business days). However, in 2006 prices were only recorded weekly 

and did not start until February for biodiesel and May for diesel. In 2007, diesel prices were consistently recorded on a daily 

basis throughout the year, while biodiesel prices were only recorded weekly from January through June and then daily for the 

remainder of the year. As such, average prices for 2006 and 2007 represented in the chart may be less consistent than those in 

subsequent years. In addition, from March 24, 2008 to May 2, 2008, data on the price of biodiesel was not available through 

the Axxis pricing service. After a review of data in May, Axxis determined that the increase in price was not an error, but 

actually reflected market conditions. Axxiss reestablished B100 prices effective May 2, 2008. To avoid the appearance of 

understating the price of biodiesel during that period, the average price of the last day of available data (March 28) and the 

first day of data (May 2) was inserted for the month of April. Prices for 2009 are through November 30th of that year. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14 15 16 Figure 2. Diesel and Biodiesel Blend Prices (per gallon), 2006-2010. , 

Year (Blend Mandate) 

Net Cost of 

B100 to Blender 

Average Rack 

Price of Diesel 

Computed 

Price of B2 

Computed 

Price of B5 

Net Price Impact of 

Biodiesel Blends 

2006 (B2) $2.0584 $2.1944 $2.1917 -- -0.27¢ 

2007 (B2) $2.4983 $2.3388 $2.3420 -- 0.32¢ 

2008 (B2) $3.6607 $3.0538 $3.0659 -- 1.21¢ 

2009 before May 1 (B2) $2.2064 $1.4120 $1.4278 -- 1.59¢ 

2009 after May 1 (B5) $2.2629 $1.9009 -- $1.9190 1.81¢ 

2010* (B5) $3.4915 $2.1974 -- $2.2621 6.47¢ 

2010** (B5) $2.4915 $2.1974 -- $2.2121 1.47¢ 

*without federal tax credit 

**with federal tax credit 

Source: Minnesota Department of Agriculture analyses of Axxis Petroleum pricing data through August 13th, 2010. 

The computed price of biodiesel blends has generally been between 1 and 2 cents higher per gallon than 

diesel fuel. Computed prices for B2 and B5 have tracked closely with actual prices for these fuels at the 

rack, which generally ranged from about 2 cents less to 6 cents more per gallon compared to diesel. 

These differences may be attributed to a variety of factors including the additional impact of the timing 

and length of marketing contracts; the marketing strategies of biodiesel producers, petroleum refiners, 

pipeline operators and position holders (marketers), the temporary loss of the federal tax credit; and the 

amortization of the cost of blending equipment installed at refiners and terminals. 

Impact of Federal Tax Credit 

Historically, biodiesel blenders have received a federal tax credit of $1.00 per gallon of biodiesel 

blended with diesel—but the credit expired at the end of 2009, significantly disrupting pricing and 

supply in the biodiesel markets. As demonstrated in the previous figures, the 2010 difference between 

the price of B100 without the tax credit and the price of diesel widened considerably from earlier years. 

The computed price of a gallon of B5 in 2010, without the tax credit, was about 6.5 cents higher than a 

gallon of diesel (see Figure 2). 

The tax credit was retroactively reinstated for 2010 and through 2011 as a part of the Tax Relief, 

Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Industry experts indicate that 

within 30 days of the bill’s passage, the IRS is required to issue a notice providing for an expedited 

process to submit retroactive claims. Within another 30 days, the IRS must begin accepting claims for 

at least a six-month time period; claims must be paid within 60 days.17 

14 Price of diesel at the rack (wholesale). 15 Generally, prices were recorded by Axxis daily (on business days). However, in 2006 prices were only recorded weekly 

and did not start until February for biodiesel and May for diesel. In 2007, diesel prices were consistently recorded on a daily 

basis throughout the year, while biodiesel prices were only recorded weekly from January through June and then daily for the 

remainder of the year. As such, average prices for 2006 and 2007 represented in the chart may be less consistent than those in 

subsequent years. From March 24, 2008 to May 2, 2008, data on the price of biodiesel was not available through the Axxis 

pricing service. After a review of data in May, Axxis determined that the increase in price was not an error, but actually 

reflected market conditions. Axxiss reestablished B100 prices effective May 2, 2008. To avoid the appearance of 

understating the price of biodiesel during that period, the average price of the last day of available data (March 28) and the 

first day of data (May 2) was inserted for the month of April. Prices for 2009 are through November 30th of that year. 16 The figures for 2009 are based on the average of biodiesel blend prices before and after the switch from B2 to B5 on May 

1, 2009. 

17 From the Oil Price Information Service (OPIS) newsletter (retroactive tax credit is available only to the “blender of 

record”). 

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The difference in price between a gallon of B5 and a gallon of diesel at the rack in 2010 shrinks to about 

1.5 cents when the tax credit is included in calculations.18 Biodiesel marketers and/or blenders will 

receive the retroactive tax credit after filing appropriate documentation with the IRS. Some have stated 

their intensions to provide payments to return the credit to their customers after they receive it. This 

would mean that what was shown as an extra 6.5 cents per gallon in cost to consumers, should actually 

reduce that cost by 5 cents or more. It is not clear at this time that all blenders will do the same. If not, 

then some marketers and consumers may not benefit from the credit. The credit was extended for the 

entire year 2011 and should again reduce fuel cost to customers during that time. 

Impact of RINs 

The federal Renewable Fuel Standards (RFS2) program allocates Renewable Identification Numbers 

(RINs) to each gallon of biodiesel produced. RINs are assigned a value in the market when the fuel is 

blended and the RINs change hands. Each qualified gallon of biodiesel earns 1.5 RINs, which can be 

used by the blender to offset the cost of biodiesel. In December of 2010, the value of a biodiesel RIN 

was between 80 cents and 85 cents—therefore each qualifying gallon of biodiesel has a RIN equivalent 

value of about $1.25. This value is over and above the federal biodiesel tax credit ($1.00). Higher RIN 

values could likely be available up to the point where U.S. refiners have collected enough RINs to 

document their compliance with RFS2 requirements, after which RIN values could decline. RINs can 

also be carried forward into the next year; therefore, the exact behavior of the RIN market will be 

difficult to predict. 

Summary 

In general, the cost of biodiesel could be higher and/or the return to the producer could be lower based 

on the availability of tax credits, the value of RINs or other mitigating factors. These factors can also 

contribute to fluctuations in profitability, the loss of jobs and the price of B100 becoming uncompetitive 

with diesel, putting the industry at risk. RINs provided an offset that fully compensated for the loss of 

the federal tax credit in part of 2010 and have the capacity to do the same in 2012 if the tax credit is not 

extended beyond 2011. However, establishing RINs as a de-facto replacement for the tax credit could 

increase the volatility of biodiesel prices and plant profitability, adversely impacting small and farmerowned plants. Total dependence on RINs could also work as a cap on renewable fuel production and 

use, possibly making smaller independent plants even more vulnerable to competition from larger 

entities. 

Thus, the net cost of biodiesel to the blender (which could ultimately be passed onto the consumer) is 

dependent on a number of variables including unpublished wholesale customer discounts, term contract 

prices versus spot market differentials, the value of RINs, tax credits, profit margins and marketing 

strategies. The ability to manage these variables can add to the profitability of blending; thus, the “actual 

cost” of biodiesel to blenders is not always reflected by rack or retail prices alone. 

Biodiesel Supply 

The supply of biodiesel fuel to Minnesota terminals has generally been constant. Few, if any, B5 

outages occurred because B100 was not available. More common reasons for blend outages were the 

lack of diesel fuel at terminals or the lack of winter blending equipment at some out-of-state terminals. 

18 With the tax credit reinstated, the cost of B100 would be $2.4915 ($3.4915 minus the $1.00 tax credit) and diesel was 

$2.1974; thus, [($2.4915*0.05) + ($2.1974*0.95)] - $2.1974 = 0.0147; thus, B5 would be only 1.5 cents more per gallon than 

straight diesel fuel. 

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In November 2009, Magellan announced plans to construct biodiesel blending infrastructure at its 

petroleum distribution terminal in Sioux Falls, SD. Those plans were put on hold after Minnesota 

regulators and legislators enacted provisions to waive the statutory biodiesel requirement for #1 diesel 

fuel in the colder months of the year. 

In December 2010, Magellan reversed this decision under the expectation that Congress, under federal 

RFS2 regulations, and Minnesota’s legislature are committed to their respective programs and 

mandates. As such, Magellan is now scheduled to complete construction of the biodiesel infrastructure 

at its Sioux Falls terminal in the second or third quarter of 2011. The availability of biodiesel blends at 

this terminal should provide petroleum marketers in the southwest portion of the state an additional 

option to comply with the statutory requirements for biodiesel sales in Minnesota. 

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Impact of Minnesota’s Biodiesel Requirements
	

Production Capacity 

Assuming 800 million gallons of annual state diesel fuel use, it is estimated that the B5 mandate requires 

40 million gallons of biodiesel; the B10 mandate would require 80 million and the B20 mandate would 

require 160 million gallons of biodiesel to meet state blending requirements. The state’s existing 65 

million gallons of production capacity could therefore provide all the biodiesel necessary for B5, 

approximately 80 percent of the product needed for B10, and about 40 percent of that required for B20. 

Differences in the actual rate of state diesel fuel usage and gallons of state production will increase or 

decrease the percentage of biodiesel available from state producers. 

Minnesota’s biodiesel mandate was an important incentive leading to the establishment of the state’s 

existing biodiesel production capacity of 65 million gallons. The requirement to further increase the 

minimum biodiesel content to B10 and B20 will no doubt be an important driver of additional state 

biodiesel production capacity. However, the temporary expiration of the federal tax credit caused many 

producers to struggle to meet production capacity. Moreover, without an extension of the federal tax 

credit beyond 2012, some investors may become discouraged. However, if the RIN value for biodiesel 

is used to reduce the cost of biodiesel to the consumer, this could bring profitability back to the biodiesel 

producer and restore investor confidence. At the time of this report, Minnesota plants were producing 

below capacity and one had temporarily stopped production. The U.S. Environmental Protection 

Agency (EPA) recently found that 52 U.S biodiesel plants, representing a production capacity of 600 

million gallons, have been idled since the tax credit expired. 

The prospect for new and increased biodiesel production capacity will also depend on developing 

markets and the relative price of organic fats and oils compared to diesel fuel. In September 2009, the 

EverCat Fuels biodiesel plant opened in Isanti with 3 million gallons of production capacity and plans to 

expand capacity to 30 million gallons in the future. If that expansion occurs, the state would have at 

least 93 million gallons of capacity, which would provide sufficient biodiesel for a statewide B10 blend 

and more than 50 percent of a B20 blend. 

The RFS2 is likely to have additional impact on any increased production that occurs in Minnesota and 

elsewhere around the country. In November 2010, the EPA (which sets the rules for implementing the 

RFS2) significantly lowered the 2011 requirement for cellulosic biofuels (from 250 million gallons 

specified in the Clean Air Act to just 6.6 million gallons) while holding steady the 2011 requirements for 

biomass-based diesel (800 million gallons), advanced biofuels (1.35 billion gallons) and total renewable 

fuel volume requirements (13.95 billion gallons).19 Cellulosic fuels and biomass-based diesel sold in 

excess of RFS2 requirements will count towards the advanced biofuel and total renewable fuel volume 

requirements. Given that biodiesel earns 1.5 RINs per gallon, the entire advanced biofuels requirement 

for 2011 could be fulfilled by 900 billion gallons of biodiesel.20 Thus, the RFS2 could prove an 

important driver of biodiesel production throughout the United States. 

19 The requirements for advanced biofuels and and total renewable fuels are stated in terms of “ethanol equivalent” gallons.
	

Corn-based ethanol has a RIN value of 1 for each gallon; however, if requirements are fulfilled by other types of fuels like 

biodiesel or cellulosic ethanol , the actual gallons required will differ based on the number of RINs assigned to each gallon of
 

fuel.
 20 This figure is calculated by dividing the total advanced biofuels requirement of 1.35 billion gallons by 1.5, the RIN value 

assigned to biodiesel.
 

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The RFS2 plus the considerable value of biodiesel RINs could be a potent force to greatly expand the 

use of biodiesel. Finally, while the recent cost of biomass oil has been high, the world crude oil market 

has also proven to be very unpredictable. Some experts have predicted that gasoline prices could exceed 

$4.00 per gallon before the end of 2011, which means that diesel fuel could be in excess of $4.50. There 

is, therefore, no guarantee that the cost of biodiesel will remain higher than that of diesel. 

Feedstocks 

The feedstocks used at biodiesel plants are generally determined by the price and availability of the 

various oil or fat products available and the ability of plants to process the oil being considered. 

Minnesota Soybean Processors (MnSP) in Brewster will use oil from their own soybean crushing plant. 

The SoyMor plant in Glenville has bought oil from various soybean oil producers; however, the plant 

has been inactive and is reported to be in the process of remodeling their 30 million gallon operation to 

allow for the processing of a wide variety of fats and oils. FUMPA in Redwood Falls is capable of 

using soy, spent cooking oil or animal fats from their own rendering operation. The EverCat fuels plant 

in Isanti reportedly has the capacity to produce biodiesel out of plant and animal fat, spent cooking oil, 

or even fatty acid materials from various industrial sources. 

Although various lipid feedstocks can be used, the large soybean oil crushing capacity in Minnesota 

suggests that much of the feedstock used in Minnesota’s biodiesel plants can be sourced from Minnesota 

soybean oil producers. Currently, high soy oil prices make this very difficult. The most current 

Minnesota Department of Agriculture report (2006) on soybean and biodiesel production impact on the 

state is available at: 

http://www.mda.state.mn.us/news/publications/renewable/soyecoimpactsummary.pdf. 

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 ________________________________________________________________________________________________________________________ 

Appendix A: Minnesota Biodiesel Task Force Member Comments
 

December December30, 30, 2010 2010 

Flint Hills Resources thanks thanks the Minnesota Biodiesel Task Force for the opportunity tto o provide provide 

comments for its annual report to Ihe the legislature legislature on on biodiesel. For your consideration, we 

provide the following summary comments and and request that they they be incorporated into the January 

20 II report. 

Flint Hills Resources Summary Comments: 

Flint Flint Hills Resources has ongoing concerns related to the use of of bi biodiesel odiesel blends blends and the manner 

of implementation in Minnesota. We believe ththat at the following following areas of concern merit further further 

evaluation evaluatjon by the Minnesota Biodiesel Biodiesel Task Force and the the state of Minnesota Minnesota. . 

I. The economic impact of biodiesel bl blends ends on Minnesota Minnesota consumers and the state's 

economy. 

2. 2. The limited limited availability of of commercially viable biodiesel produced produced in Minnesota that that 

meets generally accepted quality standards. 

33. . Operability COncerns of biodiesel blends in Minnesota's climate, climate, particularly at 

increasing increasing biodiesel blend content. 

44. . Enforcement of the the biodiesel blending requirements. requirements. 

Flint Hills Resources Resources appreciates appreciates the the opportunity 10 to participate on on the Minnesota BBiodie iodiesel Task 

Force Force and and llook ooks s forward to working with with the task force force member members s and the state tate of MMinnesota innesota to 

further evaluate these areas of concern concern. . 

Sincere Sincerely, ly, 


 

Brett Webb Webb 

General MManager anager 

Marketing and Commercial Development 

Flint Hill Hills s Resources, LP LP 

16 
 

December 29, 2010 

CHS Inc. appreciates the opportunity to provide comments to the Minnesota State Legislature. The 

CHS business spans petroleum refining, petroleum fuel and renewable fuel marketing, soybean 

processing, and other agriculture related businesses. 

CHS remains committed to biodiesel. In order to ensure a high degree of customer success with 

biodiesel blends, CHS recently upgraded its proprietary biodiesel specification in two key areas: 

1. Adopted a maximum .45 monoglyceride % wt specification factor 

2. Implemented a 6 hour minimum oxidative stability factor (an increase from 4 hours) 

These factors are above and beyond the current ASTM D6751 standard, but CHS firmly believes the 

improved factors have contributed to a positive end user experience with biodiesel blends this 

fall/winter. 

CHS’ biodiesel suppliers and distribution partners have worked diligently to maintain a biodiesel supply 

chain with the revised specification. I am pleased to report that as a result of these upgraded factors, 

there has been a drastic reduction in the number of end user complaints associated with biodiesel blends. 

CHS recognizes there are pending revisions to ASTM D6751 that are complementary to the CHS 

specification. CHS is hopeful this revised standard is implemented. Furthermore, CHS supports the 

efforts of those involved in the ASTM proceedings to ensure fuel quality standards are maintained on a 

national basis. 

Sincerely, 

Dustin Haaland 

Director, Renewable Fuels and Additives Supply 

CHS Inc. 

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