Bio-Diesel Mandate

From this week’s House Republican Newsletter:

Senate Panel Passes Biodiesel Fuel Mandate & Repeal of Biodiesel Retail Tax Credits Measure

On Tuesday, March 10, 2009, the Senate Transportation Committee passed Senate File 294, which became Senate File 408 by a 9-aye to 4-nay vote. SF 408 requires that any diesel fuel sold or advertized in this state after July 1, 2009, must be a biodiesel blend of at least 5%. On July 1, 2012, the threshold increases to at least 10% until July 1, 2015 when it must be at least 20% thereafter.

The bill temporarily excludes certain nonmotor-vehicle diesel engines (motors at electrical generating plants that utilize nuclear power unless biodiesel is approved by the nuclear regulatory agency, railroad locomotives, off-road logging equipment and machinery, and vehicles and equipment used at aircraft landing fields) from this requirement until July 1, 2012.

SF 408 includes exceptions to the mandated minimum biodiesel level under which IDALS may issue a threshold suspension order. The first circumstance is when less than 5% of the biodiesel sold in this state under the applicable threshold is produced from nontraditional feedstocks (such as algae cultivated for biofuels production, waste vegetable oil or tallow/animal fat). The second situation is when no specification by the United States Environmental Protection Agency or A.S.T.M. international applies to the designated minimum biodiesel blend threshold fuel. In any circumstance, the minimum level of biodiesel can not be less than 5%. However, IDALS may issue a suspension order applicable to motors in a facility under the control of the federal nuclear regulatory agency if this agency has not approved the designated biodiesel fuel.

In addition to IDALS suspension order authority, SF 408 grants the Governor power by executive order to adjust the biodiesel fuel designation if the Governor determines any of the following:

  1. a major price disparity between biodiesel and petroleum diesel, or
  2. either there is a significant shortage of biodiesel fuel supplies or a systemic market circumstance that will cause material economic harm to retail motor fuel vendors who advertize or sell such fuel in this state.

In any circumstance, the Governor’s executive order cannot adjust the biodiesel fuel designation below 5% or above the applicable threshold level. SF 408 provides IDALS with explicit authority to craft emergency rules to implement a 5% biodiesel fuel requirement by July 1, 2009. SF 408 also repeals the existing biodiesel fuel retail tax credit upon enactment of the bill applicable to biodiesel sold or dispensed after the bill is signed by the Governor. The current biodiesel retail tax credit is 3 cents per gallon of biodiesel fuel that is at least 2% fuel-grade vegetable or animal oil. A retail motor fuel vendor gets the tax credit provided that at least 50% of the retailer’s diesel sale each year is at least 2% biodiesel fuel. This tax credit is authorized through calendar year 2011 which ends December 31, 2011. Senate File 408 was referred to the Senate Ways & Means Committee for its consideration.