The state considers proposal to mandate alternative fuel

The Sunday Oregonian (Portland, Oregon)

February 5, 2006 Sunday
Sunrise Edition

KAYLA WEBLEY
The Oregonian

OLYMPIA --No one has invented a car that runs on Starbucks coffee --yet --but state Rep. Janea Holmquist is hoping for the next best thing: Cornering the Northwest market on an alternative fuel made with vegetable oil.

Holmquist has introduced an ambitious package of legislation that's making its way through the Washington Legislature with bipartisan support. It would require all diesel sold in the state to contain 2 percent biodiesel by Dec. 1, 2008.

"We can provide the market to jump-start the biofuels industry in Washington --using Washington renewable fuels instead of bringing them in from somewhere else," said Holmquist, R-Moses Lake.

Biodiesel is refined from vegetable oil, derived from soybeans, rapeseed and canola or used cooking oil, then blended with diesel fuel. The fuel can be used in conventional diesel engines, and biodiesel emits 48 percent less carbon monoxide than regular diesel.

The Washington State Ferries system started using a 20 percent biodiesel blend in its fleet in 2004, and King County Metro in the Seattle area will make the transition to all-biodiesel fuel in their buses by the end of this year.

However, as much as Holmquist and other backers cherish the dream of a biodiesel world, they acknowledge the realities of starting a home-grown industry almost from scratch, which meant moving back the original July 2007 deadline to the 2008 target. The bill also calls for a 2 percent market share for ethanol, which is distilled from corn and grain and blended with gasoline.

"The July (2007) time line did not give the infrastructure enough time to get up and running," Holmquist said. "This will allow our farmers to complete another growing cycle."

Similar legislation in Oregon failed last year. One of the primary sponsors, Rep. Jackie Dingfelder, D-Portland, said she's preparing a package of bills for next year's session and looking to Washington to see what direction lawmakers take.

Backers in Oregon hope to get an initiative on the Nov. 7 ballot that would set up research centers at universities to promote biofuels; provide tax breaks; and require an 8 percent renewable fuel blend for all gasoline and diesel sold in the state by 2010.

Minnesota leads industry

Minnesota became the first state to require a biodiesel blend, starting last year. While many states offer incentives to produce biofuels, no other state has a biodiesel standard such as Minnesota's, though several states require the use of biofuels in state-operated vehicles, according to the National Conference of State Legislatures.

Last summer, in the midst of skyrocketing oil prices, President Bush signed a bill setting up a federal blend requirement starting this year and offering tax incentives.

State and federal tax breaks --for such things as growing the right kind of crops or buying machinery to convert the grain into oil --are intended to lower the cost for producers, and ultimately consumers, making the alternative fuel more attractive.

Diesel use --and consequently the biodiesel market --is still a relatively small share of fuel consumption compared with gasoline use: 44 billion gallons of diesel last year through November (mostly in commercial and government vehicles) compared with 127 billion gallons of gas.

But biodiesel's piece of the pie is growing fast: Last year, producers generated 75 million gallons of biodiesel, triple the output of the year before --making it the fastest-growing alternative fuel in the nation, according to U.S. Department of Energy figures.

The Washington Legislature's efforts offer hope for bolstering the retail market for personal cars, sponsors say.

Not enough canola

In Washington, opponents argue that the state's canola crop won't be ready to produce enough biodiesel by the end of 2008. That would mean Washington would be forced to import canola and other crops from other states and Canada to meet the standard.

"I'm not sure if our state is ready to produce the total number of acres to supply the product for the mandate. I know growers want to, but I'm not sure all the tools are in the toolbox yet," said Sen. Mark Schoesler, R-Ritzville, sponsor of a bill that would give incentives to farmers, but not institute a required blend. "A mandate has the potential to get the cart in front of the horse."

And then there's the question of equipment to turn crops into oil, then refineries to turn the oil into fuel. There are no crushers in the state that could produce the high volumes that the biodiesel standard would require. Any crops produced for biodiesel in the state would have to be shipped out of state to process, then returned for use.

Adrian Higginbotham, director of sales for McKay Seed Co., a producer of canola for more than 20 years with facilities in Almira and Moses Lake, said his company is considering buying a crusher to refine the canola it grows. The company had a small-volume crusher last year, but sold it because it needs a larger one.

He supports the idea of a biodiesel standard. "We've (agriculture) been beat up really bad, I just don't know if we could make it fly without a renewable fuel standard," Higginbotham said. "I don't see that it would be economically feasible for us."

Farmers hopeful

David Taylor owns a small ranch in the Yakima area and runs Spectrum Renewable Resources, a company that grows canola. He's looking into the possibility of making a $100 million to $200 million investment for biodiesel equipment and operating expenses.

Taylor doesn't like the 2008 requirement because he's generally "not a big fan of government mandates," but he does like the idea of tax breaks to help producers in the market.

"I think it comes down to reassuring the farmers this isn't just another hope-and-a-prayer type of crop, that there will be a demand for it," he said. "The potential is there. I personally think not only the demand, but the supply will be there."

Members from the petroleum industry have testified against setting a biodiesel standard, saying they support the biofuels industry and incentive programs but don't want to go further.

"You cross the line when you mandate a minimum percentage --you are messing with people's personal choice," said Bill Kidd, a spokesman for BP's crude oil refinery in Blaine. "A lot of people feel good about biodiesel and choose to use it, but it is a very different thing when the government tells you: You have to do it."