TCEQ wants to halt sales of B20 -- a blend of 20% biodiesel and 80% petroleum-based diesel -- because of worries that the fuel will increase levels of NOx in parts of the state. However, it is still unclear how much NOx is actually emitted from B20.

"Because of conflicting reports on the levels of NOx from B20, the commission felt it was in the best interests to hold off and find an answer to this problem," said Morris Brown of the Chief Engineers Office at TCEQ.

Now the biodiesel industry and state regulators await a report from the Environmental Protection Agency (EPA) on NOx emission levels from B20. The study, which will take a year or more to complete, could affect the Commission's decision to ban or allow the biodiesel mix.

NOx is a serious problem in certain areas of Texas. In order to help control NOx levels, the Texas Low Emission Diesel (TxLED) program was created. The TxLED program regulates NOx and volatile organic compound (VOC) emissions that help form ozone and create smog in populated areas. 110 counties are covered under TxLED, including cities such as Austin, Dallas, Houston and San Antonio.

The TxLED program has a required composition that diesel fuel must meet. There is currently no biodiesel fuel that is TxLED-certified. Now that the decision has been delayed, the industry has another year to develop a fuel that can meet TxLED requirements.

Pure biodiesel (B100) is not regulated by TxLED because it does not meet the program's regulatory definition of diesel fuel. B100, though, makes up only a small part of the market thus far.

If B20 cannot be used in the areas identified by TxLED, it could paralyze the Texas biodiesel industry, said Brent Kartchner, co-owner and director of GeoGreen Fuels, a Houston-based company that produces 8,000 gallons of biodiesel a day.

"We are looking at this potential decision very seriously. To be very blunt about it, if Texas follows through then we will immediately move toward Louisiana and Mississippi and we won't build any more facilities in Texas," said Kartchner.

Texas will consume around 7.5 billion gallons of diesel fuel this year. Current production capacity for biodiesel in the state is around 98 million gallons a year. Even if that production capacity doubles by the end of 2007 as projected by the National Biodiesel Board, it will only provide a fraction of Texas' diesel needs. But, said Kartchner, the industry is growing extremely fast and it needs every incentive to keep growing.

"Texas is very respected because it's the leader in the biodiesel business and one of the leading producers. What this says is 'it's not good for us, but we'll go ahead and ship it to you other uneducated states -- and good luck.' I think this will be very detrimental to the entire biodiesel industry across the whole country."

But CTEQ's Brown said that Texas is looking out for its environmental interests just like any other state.

"We are looking at this issue because areas of Texas have such bad NOx problems. Other parts of the country may not have the same ozone chemistry that we have -- that's why we are going after the problem," Brown said.

This is the second time a ban on the fuel has been proposed by TCEQ and then been delayed. Because of contradictory government studies looking at NOx emissions from B20, TCEQ has decided not to finalize a decision.

A 2002 EPA study found that NOx levels from B20 were higher than what the current TxLED program allows. However, a study conducted by the National Renewable Energy Laboratory (NREL) in 2006 found that "B20 has no net impact on NOx." Robert McCormick, principal engineer for non-petroleum based fuels research at NREL, said that differences in methodology produced different results.

"If you look at the data that [EPA] analyzed, almost half are from studying one engine model. In 2002, knowing what we knew then, that didn't sound like a bad idea," McCormick said. "But in our study we looked at eight types of engines and found a wide variation in emissions of NOx. Some engines showed an increase, but others showed no change or decrease. For the vehicles we tested the average change was zero. Because of the variability, it doesn't make sense to base your conclusions on data sets that are biased toward one engine."

Now the EPA is conducting another study with some assistance from NREL. By reviewing more engine types, the new study may produce results consistent with the 2006 NREL report. If so, the commission could decide that B20 is acceptable under the TxLED program.

"NREL only tested eight engines, which is hardly a representative sample. So we are continuing to test vehicles as opportunities arise. We are also engaged with the EPA to help out with their testing efforts. The TCEQ has essentially said they will hold off until they get more conclusions from the EPA and other studies," said McCormick.

It could be another year or more before a final decision is made. In the meantime, biodiesel producers are continuing operation and many are cautiously looking at expansion. For now the industry can do nothing but move forward and hope that the new EPA study concludes in their favor.

"This limbo is affecting our decision to aggressively expand. But we're excited for the new study and we believe it will find that B20 meets the current standards," said Kartchner.