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Opinion: Why a biodiesel mandate is bad for Missouri

  

The recent article about legislation filed to mandate the use of biodiesel fuels, a blend of Ultra Low Sulfur Diesel fuel with Biodiesel (B100), touts the benefit of the mandate for Missouri soybean farmers and Missouri as a whole. I would like to present some facts that need to be considered before the Missouri Legislature takes the extreme action of mandating the exclusive sale and use of these B100 biodiesel fuel blends.

Only three states (Minnesota, Oregon, and Pennsylvania) have a biodiesel fuel blend mandate for retail consumption. Of the eight states that border Missouri, two (Illinois and Iowa) offer incentives to promote the sale and use of biodiesel fuel blends, but they do not mandate the sale or use of this fuel. Our neighbors understand that B100 is significantly more expensive than Ultra Low Sulfur Diesel fuel and is not price competitive without some sort of incentive.

The article claims a purpose of the mandate is to ensure that all of the biodiesel produced in Missouri is used in Missouri. While I can understand the desire to encourage Missouri-made products and the goal of some to re-direct consumer choices to alternative fuel sources, I’m at a loss for why this argument is being made for the biodiesel B100 fuel blends as our surrounding states are large markets for them. Shouldn’t Missouri’s biofuel producers be encouraged to sell to all markets regardless of whether those markets are in Missouri?

Diesel fuel is not like gasoline, where you can choose the grade/ethanol mix you want right at the pump. Diesel is a single product. Imagine the public outrage when the diesel fuel users (truckers, farmers, construction companies, and diesel equipment owner/operators) realize they can no longer buy regular diesel fuel and are being forced to buy the costlier biodiesel fuel blends. That’s like telling a Pepsi drinker they can only buy Coke, or a Ford owner they can only buy a Chevy. Customers get to choose what they buy.  

Economics have proven time and again that government mandates disrupt free-market principles by creating artificial demand, higher price points, and limited consumer choices. If the fuel blends were equal to regular diesel in price, energy output, and handling, there would be no need for a mandate. The mandate is only necessary because the biodiesel fuel blends cost significantly more than regular diesel, provide less energy than regular diesel, and in most cases, require special handling, treatment, and equipment to ensure blend quality and consistency. 

The only thing making biodiesel blends a competitive product is a $1 per gallon federal blenders tax credit that essentially buys-down the cost of a gallon of biodiesel B100, the biodiesel product used to create the biodiesel fuel blends. That federal credit is scheduled to expire in 2023.

If Missouri mandates these biodiesel fuel blends as proposed in SB 96 and HB 529, there will be an immediate price increase per gallon and a price spike to retailers when the tax credit expires in 2023, and consumers will bear the brunt of that price increase. Based on current fuel price comparisons, without the benefit of the federal blenders tax credit, the biodiesel blend standards proposed in SB 96, and its House companion, HB 529, would cost Missouri consumers approximately:

  •  9-cents more per gallon for a B5 blend (95 percent ULSD/ 5 percent B100); 
  • 19-cents more per gallon for B10 (90 percent ULSD/ 10 percent B100); and, 
  • 38-cents more per gallon for B20 (80 percent ULSD/ 20 percent B100).

These retailer costs and consumer price increases will have a devastating impact on Missouri. Even if called a “Standard,” this mandate will make Missouri an island with a boutique fuel — raising costs for Missouri fuel retailers, truckers, and farmers and negatively impact the state’s motor fuel tax as higher prices caused by the mandate will send diesel fuel sales to other states. It’s interesting that the Missouri Legislature would entertain forcing retailers only sell a product, yet you aren’t mandating that customers buy biodiesel. Truckers will easily drive out of Missouri to buy fuel and save lots of money. I ask you: How far do you drive to save 5 cents a gallon? How far would you drive to save 38 cents a gallon? My customers will drive right past me to Oklahoma and Kansas.

Moreover, the nearest state with a biodiesel mandate is Minnesota. Biodiesel prices in Minnesota are on average 5-cents a gallon higher than in Missouri where the sale of biodiesel fuel blends is dependent on the free market, proving that mandates increase consumer prices. Additionally, a comparison of soybean prices last month from Minnesota, a mandate state, and Missouri, a free-market state, show that Missouri farmers get a 50-cent per bushel premium price for their soybeans when compared to what Minnesota farmers get for their beans. 

The Missouri Legislature should always consider legislation that benefits Missouri farmers, and on its face, mandating the purchase and sale of biodiesel fuel blends might be appealing. However, the facts prove this mandate will have serious negative consequences for Missouri fuel suppliers, wholesalers, retailers, consumers, trucking companies, truckers, construction, and farmers. The promise of higher prices for Missouri soybean farmers from a biodiesel fuel blend mandate is not confirmed by these facts, and the real effects of this mandate are bad for Missouri.