Massachusetts Suspends 2% Biodiesel Mandate

State Cites Expiration of Federal Tax Credit
By Michele Fuetsch, Staff Reporter

This story appears in the July 19 print edition of Transport Topics.

Massachusetts has indefinitely suspended a mandate that was to take effect July 1 requiring all diesel fuel and heating oil sold there to be 2% biodiesel.

“Due to the practical challenges of achieving industrywide compliance and the cost implications of doing so, implementation of the Massachusetts mandate is determined to be infeasible at the present time,” the state’s Department of Energy Resources said in a June 30 statement.

Dwayne Breger, director of renewable energy development in the department, said suspension is linked to the expiration of a federal tax credit for biodiesel producers.

Until January, when the tax credit expired, biodiesel producers received a $1 tax credit per gallon, designed by the federal government as an incentive to make biodiesel prices competitive with regular diesel fuel.

Breger said a state mandate without the federal tax credit would drive up the cost of biodiesel, meaning “that the Massachusetts consumers would have to bear that full cost.”

Massachusetts law covering renewable fuel mandates, Breger said, specifies that mandates must not hurt consumers.

Massachusetts officials estimated that without the federal tax credit, a mandate would have made the cost of biodiesel 3 cents higher per gallon than regular diesel, he said.

Officials at the National Biodiesel Board, which has been working to get Congress to renew the tax credit, disagreed.

“I don’t know where they got their numbers, but that’s not what it is,” said Shelby Neal, director of state governmental affairs for the board at its Jefferson City, Mo., headquarters.

Neal said the estimated cost difference at the pump in Massachusetts between diesel and biodiesel probably would have been about a penny.

The trucking industry strongly opposes state biodiesel mandates, said Richard Moskowitz, vice president and regulatory affairs counsel for American Trucking Associations.

Such mandates “distort fuel distribution efficiencies and erode fuel price competition,” Moskowitz said, adding that ATA is “relieved that Massachusetts recognized the significant cost disparity between biodiesel and petroleum-based diesel and suspended its mandate, which would have disadvantaged the trucking industry and other diesel consumers.”

Other states with biodiesel mandates — Minnesota, Oregon, Pennsylvania and Washington — are not talking about canceling them, despite expiration of the federal tax credit, said Neal.

“So, I think that Massachusetts really is its own case. I don’t believe that it’s representative of what’s going on in the rest of the country,” he said.

New Mexico on July 1 implemented its requirement for a 5% biodiesel blend in all state, local government and public school vehicles.

And Pennsylvania’s 2% mandate took effect June 1, despite the expiration of the federal tax credit several months before then, Neal said.

Breger also said the mandate was suspended because blended biodiesel fuel does not reach a threshold stipulated in the Massachusetts law that states a mandated renewable fuel must have greenhouse gas emissions at least 50% lower than diesel.

Pure biodiesel fuel, Neal said, produces emissions that are 86% lower than those produced by diesel fuel.

Minnesota has moved from a 2% biodiesel mandate to 5% but recently suspended the 5% requirement between October and March until 2012 to explore consumer complaints that, in freezing temperatures, the 5% blend freezes and clogs fuel filters.

A state biodiesel task force is studying the complaints in an effort to pinpoint the cause of the clogging, said Ralph Groschen, senior marketing specialist with the state Department of Agriculture.