A 1998 biodiesel lifecycle study jointly sponsored by the U. S. Department of Energy and the U.S. Department of Agriculture concluded that increased use of biodiesel would benefit our national economy. Inclusion of biodiesel, even at very low levels, would supplement our nation's current energy security programs at little or no cost to the taxpayer. Increased biodiesel production would also result in significant economic benefits to state economies such as Minnesota's as well as agricultural producers.

Discussion Points:

• In May 2000, EPA proposed a limit on sulfur of 15 ppm maximum for on-highway diesel fuel by 2007. This is a reduction of more than 95% from the current limit of 500 ppm. Removing the sulfur from diesel fuel will reduce fuel lubricity, harming engine life. Biodiesel improves lubricity 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 meeting other Minnesota economic development objectives.
• Stanadyne Automotive Corp., the leading independent US manufacturer of diesel fuel injection equipment, supports the inclusion of low levels of biodiesel in diesel fuel for two reasons. First, it would eliminate the inherent variability associated with the use of other additives and whether sufficient additive was used to make the fuel fully lubricious. Second, Stanadyne considers biodiesel a fuel or a fuel component - not an additive. It is possible to burn pure biodiesel in conventional diesel engines. Thus, if more biodiesel is added than required to increase lubricity, there will not be the adverse consequences that might be seen if other lubricity additives are dosed at too high a level.
• The Energy Information Administration reports that the Minnesota on-road, off-road, farm and military diesel fuel market is about 800 million gallons.
• According to economic modeling conducted by the Food and Agricultural Policy Research Institute, (FAPRI), 70 million gallons of annual demand for biodiesel could add from $0.10 to $0.18 per bushel to the price of soybeans.
• An analysis conducted by the USDA Economic Research Service estimates that 100 million gallons of biodiesel demand would increase soybean oil prices by 14%.
• USDA forecasts that ending stocks of soybean oil in 2000-01 will be 1.85 billion pounds. Soybean meal demand is forecasted to increase more than soybean oil demand.
• Inclusion of biodiesel in 800 million gallons of diesel fuel at a level of 2% for lubricity purposes would result in the following:
  • Create demand for more than 16 million gallons of biodiesel.
  • Utilize the oil from more than 11 million bushels of soybeans (more than 123 million pounds of soybean oil).
  • Based on economic analyses conducted by USDA-ERS and FAPRI, add 1.7 to 4.2 cents to the value of a bushel of US soybeans and from 6-8 cents a bushel to Minnesota farmers, who would be closest to the new demand base for soy oil. This will increase gross farm income in Minnesota from between $4 million and $11 million, and decrease federal outlays under the soybean marketing loan program in similar amounts.
  • Potentially reduce fleet operating costs through increased equipment life.
• A macroeconomic study conducted by the Minnesota Department of Agriculture will quantify additional economic impacts, such as increased employment, increased level of economic activity and corresponding state and local tax revenue, and other indirect and induced economic impacts.