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Supply, Marketing, Distribution, Transportation & Logistics News & Information
August 2017 Issue

Biodiesel Incentives for Government Fleets and Marketers

July 26, 2017 •

Photo Above: Rochester Public Transit has been using biodiesel blends in its buses for nearly two decades. It has achieved financial savings and emissions reductions with biodiesel.

 

By Jon Scharingson, REG

 

There are several reasons why Rochester, Minnesota, runs its public buses on biodiesel blends. But when the city made the switch nearly 20 years ago, two benefits rose to the top.

“One was cost, and the other was lowering emissions,” said Tony Knauer, the city’s Transit and Parking Manager.

Today, those continue to be the two chief reasons why Rochester Public Transit not only uses biodiesel in its 52-bus fleet, but has also increased to a B20 blend, meaning the fuel is 20% biodiesel.

In 2016, the city paid 8 cents per gallon less for B20 than it would have for B10, and it saved 17 cents per gallon over what it would have paid for 100% petroleum diesel, according to Knauer.

As for the environment, it should come as no surprise that the issue is a priority for city officials and residents. Rochester, after all, is home to Mayo Clinic, the renowned health-care system.

“If people were to look out their windows and see black smoke pouring out of buses, that would not be acceptable,” Knauer said. “We are very sensitive to that.”

Renewable Energy Group (REG) has found that municipalities, along with county, state and federal fleets, are among the most advanced adopters of biodiesel. Two of the biggest reasons are price and emissions. As public entities, they are particularly cost conscious. Additionally, an increasing number of government entities are implementing sustainability plans and setting goals for reducing their carbon footprints. Other motivations are related to government policy, community desire and performance benefits.

Smart fuel marketers are adding biodiesel to their offerings so they can tap into the demand created by government fleets. Additionally, some of biodiesel’s financial incentives and regulations directly benefit marketers.

 

Financial Benefits

Let’s start with an area that fleets and marketers care about greatly: financial benefits. The U.S. Department of Energy (DOE) lists 34 federal incentives and laws related to biodiesel. These include the $1-per-gallon biodiesel tax credit. It expired at the end of 2016, but is commonly reinstated retroactively and efforts are ongoing to get it back on the books.

One of the most well-known federal programs is the Renewable Fuel Standard (RFS), which requires certain amounts of renewable fuels to be blended into transportation fuels. The RFS includes renewable identification numbers (RINs), which are used to track compliance with the RFS; they are also a commodity that can be traded and that many in the biodiesel industry view as a value-added benefit.

Another federal law is the Energy Policy Act (EPAct) of 1992. This requires certain state and alternative fuel provider fleets to use alternative fuel vehicles or otherwise reduce their petroleum consumption. Many of these public fleets turn to biodiesel to meet their EPAct requirements.

A National Renewable Energy Laboratory (NREL) fact sheet notes that state fleets have gone “beyond what is required” under EPAct and are “using alternative fuels to help solve local air quality issues, develop local economic opportunities and demonstrate regional leadership.”

Many states also offer incentives, and some have requirements. Here are examples:

REG Danville is a 45-million-gallon-per-year, commercial-scale, state-of-the-art biodiesel production facility in Danville, Illinois.

  • Iowa: Retailers who sell blends of B5 and higher are eligible for a 4.5-cents-per-gallon tax credit, plus an additional 3-cents-per-gallon tax rollback on B11 and higher blends. Infrastructure grants are also available. A three-year commitment to sell certain renewable fuels can result in up to 50% reimbursement for the cost of specific components of a project. That could increase to 70% reimbursement for specific installation costs with a five-year commitment to store and sell renewable fuels and install certain equipment.
  • Texas: The biodiesel portion of blended fuel containing taxable diesel is exempt from the diesel fuel tax. Additionally, grants for 50% of the eligible costs, up to $600,000, are available to construct, reconstruct or acquire a facility to store, compress or dispense alternative fuels—including biodiesel—in air quality nonattainment areas.
  • Minnesota: All diesel fuel sold in Minnesota from April – September must contain at least 10% biodiesel. In the other months, a minimum of B5 is required. In May 2018, the warm weather requirement will increase to B20.

Tips for Marketers: Know the incentives and regulations that are available to you and your customers. The examples above are just a sampling of what’s out there. In addition, look beyond what’s written into codes. Some states have executive orders related to biofuel use. There are also instances of departments within a government having their own policies.

 

Environmental Benefits

Many local and state governments have adopted sustainability plans, and renewable fuels are one way they meet those goals. Biodiesel has become a key part of their strategy to reduce emissions and petroleum usage because:

  • It has lower hydrocarbon, particulate matter and carbon monoxide emissions than petroleum diesel.
  • The California Air Resources Board (CARB), which oversees the state’s Low Carbon Fuel Standard (LCFS), has determined that biodiesel has the lowest carbon intensity value of all liquid fuels, meaning it creates fewer greenhouse gas (GHG) emissions.
  • It can be made from feedstocks that are waste or by-products, such as used cooking oil and inedible corn oil.
  • Public health experts promote the benefits of biodiesel blends.

In Illinois, the American Lung Association has partnered with the Illinois Soybean Association to create the B20 Club, which recognizes Illinois-based fleets that use biodiesel blends of B20 and higher. Several municipal fleets are members.

 

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