Nebraska Looking at Biodiesel

Aug. 26–YORK, Neb. — Nebraska is one of the top three ethanol-producing states in the country, with 11 facilities producing 540 million gallons this year. But the state has no biodiesel facilities, although one has been proposed in Beatrice.

About 160 people attended a conference Thursday in York to hear the results of a statewide feasibility study on the potential for biodiesel plants in Nebraska.

“There are about six to eight prospects here today who are interested in development,” said Victor Bohuslavsky, executive director of the Nebraska Soybean Board, which sponsored the conference on plant development.

As ethanol relies predominantly on corn production, biodiesel production in the Midwest will rely on soybean oil, although biodiesel products can be produced from a broader mix of vegetable and animal fat products.

In western Nebraska, farmers are starting to grow mustard seed and canola for a biodiesel facility under construction in Colorado.

Nebraska produces more than 200 million bushels of soybeans annually, which gives biodiesel backers hope that developers will build plants here. Gov. Dave Heineman, for example, said he wasn’t concerned about Nebraska’s current lack of biodiesel production, given the state’s soybean production. Officials and potential developers also can use this time to learn from mistakes in other states, he said.

“My sense is we can learn from those other states and quickly surpass them.”

Heineman said it is unclear whether production incentives are necessary. A job-creation economic package passed by lawmakers last spring could help spur development of biodiesel facilities, he said.

“We’re very much in the formularize stage,” Heineman said. “People are trying to sort out what the opportunities are and how we might move forward.”

Other states’ biodiesel operations rely on state and federal credits or incentives to be financially feasible. Even then, they haven’t created strong returns for investors.

“You look at the history, it’s not been a money tree for a lot of folks,” said Leland Tong of the Independent Biodiesel Feasibility Group that conducted the study on Nebraska’s potential.

Jeff Kistner, vice president of project finance for BBI International, said about a dozen business plans for new biodiesel plants are on his desk. Banks, however, require investment groups to have about 50 percent equity in a project to consider lending the rest of the funds.

Biodiesel is largely marketed in blends ranging from 2 percent to 20 percent. Biodiesel is more expensive than regular diesel, so the 2 percent blend is generally the most affordable. There are exceptions, however. Illinois, for example, phases out its fuel sale tax for higher blends of biodiesel, making 11 percent biodiesel more affordable than regular diesel fuel.

In Nebraska, about 69 percent of diesel fuel is used on highways and just under 30 percent is used on farms. Other uses take up various small percentages.

Biodiesel usage was about 25 million gallons nationally last year but could reach as high as 80 million gallons next year. Projections over the next decade show usage could top 1 billion gallons.

In Nebraska, truckers, farmers and other users burned 643 million gallons of diesel fuel in the state in 2003. Capturing 2 percent of that market would have required the total production of a 14 million-gallon biodiesel plant.

“I think biodiesel has got a real future on the demand side,” said State Sen. Roger Wehrbein of Plattsmouth. “A lot of people like me are here to see what the best way is to get production going in the state.

Right now, the soybean board and other groups don’t have any solid proposals for lawmakers. Bohuslavsky said he believes lawmakers will heed activities in surrounding states, which are further along in the industry, and consider similar incentives.

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