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Energy bill likely to fuel use of biodiesel and ethanol blends

President George W Bush has signed into law an energy bill expected to expand the use of biodiesel thanks to a 7.5-billion gallon renewable fuels standard and the extension of a federal excise tax credit.

By 2012, 7.5 billion gallons of pure renewable fuels — particularly ethanol and biodiesel — will be mixed in with the on-road gas and diesel supply. Refiners will determine the ratio of biodiesel to ethanol to fulfill the mandated production requirement.

“I believe most of the mandate will be met with ethanol,” said Rich Moskowitz, assistant general counsel and regulatory affairs counsel for the American Trucking Associations (ATA).

When biodiesel production to fulfill the mandate begins, distribution is likely to stay focused on the Midwest. “Economics will drive (the geographic distribution) issue,” Moskowitz said. “Because biodiesel is not transported by pipeline, we expect it will be used in the parts of the country where biodiesel is produced, and particularly where soybeans are grown.

“As you move further away from where biodiesel is produced, transportation costs becomes prohibitive,” Moskowitz said. “In the Midwest, biodiesel is very competitive with regular diesel.”

According to the most recent survey by the Energy Information Administration, in the Midwest a 20% biodiesel blend was 1.5 cents less than petroleum-based diesel. However, on the Gulf Coast the same biodiesel blend was 11.4 cents more, and it was 8.7 cents more in the Rocky Mountains. “(The price is) a function of how far you transport the product,” Moskowitz said.

Because the refiners will determine the geographic distribution of biodiesel, the mandate won't likely affect the cost of retail pump prices, Moskowitz said. In a press release, ATA said the bill “will do little to curb the effects rising fuel costs currently have on the motor carrier industry.”

There is no cap on the percentage of biodiesel to be mixed with petroleum-based diesel. “While we believe biodiesel has positive attributes, we are concerned that a high percentage blend will create operation challenges,” Moskowitz said. “From a commercial standpoint we don't support (20% biodiesel blends) because we're concerned with cold weather performance, and the energy value. A (2% blend) fuel is favorable as an appropriate additive to restore the lubricity lost in producing ULSD (ultra-low sulfur diesel) fuels.”

Additionally, the energy bill contains a $100 million diesel truck retrofit and fleet modernization program, a $1 billion diesel engine retrofit program, and $94.5 million earmarked for idle-reduction technology related to heavy trucks.

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