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Minnesota's biodiesel mandate: Costly, risky, unfair

Thursday, July 3, 2014  
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Minnesota's biodiesel mandate: Costly, risky, unfair

Truckers bear a significant part of this burden. Ultimately, consumers will, too.

Article by: Daniel Savaloja

Updated: July 2, 2014 - 6:51 PM

As of July 1, by an act of the 2014 Minnesota Legislature, many, but not all, Minnesota diesel users are required to purchase diesel blends containing at least 10 percent biodiesel. The trucking industry believes consumers will bear the cost of this doubling of the state’s mandate through higher prices for transportation and goods.

The biodiesel industry does not need a mandate now. It is mature and can stand on its own.

Furthermore, the three major exemptions contained in the state’s new biodiesel statute are a de facto admission by the Legislature that a universal, year-round biodiesel mandate is simply too risky for Minnesota’s economy.

First, key industries have been permanently exempted from the requirement to use any biodiesel whatsoever. The state’s nuclear power industry was given an indefinite exemption. A temporary exemption for railroads; taconite and copper mining; logging, and the U.S. Coast Guard was changed to a lifetime pass. Through such action, legislators acknowledged that biodiesel is not reliable enough to ensure that these vital industries would not suffer serious disruptions.

–March, but for the entire year.

Third, the increase to 10 percent applies to the No. 2 diesel used primarily in warm-weather months.

But while lawmakers accented their concern about biodiesel’s reliability by carving out these grades of fuel and seasons of use and designating the exempted industries, another major industry bears much of the risk and cost of this mandate year-round: trucking.

Any trucker purchasing fuel in Minnesota today, whether at a truck stop or filling his or her own bulk storage tank, must use biodiesel. Period. No exceptions.

Yet truckers and their customers face the same risks as those exempted industries. A truck bringing food to a nursing home or medical devices to a hospital can no less afford to break down due to a fuel problem en route. Some 68 percent of Minnesota communities rely exclusively on truck transportation for everything they ship in and out.

To avoid breakdowns, truckers spend money on a number of preventive measures, including making more frequent filter changes, adding heating devices, adding anti-gelling agents to fuel, and adding No. 1 diesel, which costs significantly more and gets poorer fuel mileage.

The mandate could add $15 to $30 per truck each week to the base cost of diesel fuel. Trucking fleets running exclusively in Minnesota cannot escape these costs. However, truckers who can avoid purchasing fuel in Minnesota do so because none of our neighboring states has a mandate.

In recent weeks, under the 5 percent mandate, a trucker could buy the same gallon of fuel in Hudson, Wis., for 5 cents less than in St. Paul. And that is after accounting for differences in the tax rate.

Ultimately, consumers end up paying for this mandate through higher prices for goods.

Minnesota’s original 2 percent biodiesel mandate was enacted in 2002. It was sold to the Legislature on the grounds that it was needed to create a new industry for rural Minnesota. The good news is the biodiesel industry in Minnesota and other states is now mature and viable.

I don’t know whether the mandate played a meaningful role in this development. I do know this achievement was accomplished in every other state without a mandate like ours.

All of the purported environmental, economic and energy benefits of biodiesel are functionally being met on a national scale without state mandates. Other places have recognized the major role new cleaner-burning — and more expensive — truck engines are playing in the much lower rate of emissions.

So here stands Minnesota as an outlier, having increased its biodiesel mandate to 10 percent on July 1 and planning to make it 20 percent in 2018.

It is time to talk about how to phase out the mandate, not increase it.


Daniel Savaloja is chairman of the Minnesota Trucking Association.