Companies Find Solutions to Possible Biodiesel Ban in Texas

B20 is a blend of 20 percent biodiesel and 80 percent petroleum-based diesel. The Texas Commission on Environmental Quality (TCEQ) is considering banning current fuel mixes because of worries that it will raise nitrogen oxide (NOx) emissions and other volatile organic compounds (VOC) that contribute to smog. TCEQ delayed a decision for a year so that more scientific analysis could be performed on NOx emissions.

The Environmental Protection Agency (EPA) and the National Renewable Energy Laboratory (NREL) are conducting a study to determine if B20 raises NOx levels. A 2002 EPA study found that B20 increased NOx levels, but a 2006 NREL study found that "B20 has no net impact on NOx." The new, more comprehensive study will determine TCEQ's decision about the fuel. The study is not due out until December of this year.

Meanwhile, some companies are taking action and preparing for a possible change in regulation. Earlier this month, California-based ORYXE Energy was the first company to receive approval from TCEQ for its biodiesel additive that will lower NOx and VOC emissions. ORYXE produces the additive at its blending facility in Pasadena, Texas.

"While people are trying to figure out scientifically whether there is a NOx bump or not, our additive, when blended with B20, lowers emission profiles, including NOx, so that they meet the Texas Low Emission diesel standards," said Jim Cleary, Chairman and CEO of ORYXE Energy.

Texas has some of the worst smog problems in the United States. In order to combat smog, the Texas Low Emission Diesel (TxLED) program was created to regulate NOx and VOC emissions from diesel. TxLED regulates B20 because it meets the program's definition of diesel fuel. Pure biodiesel does not fall under TxLED's jurisdiction because it does not meet that definition.

The TxLED regulations cover 110 counties and several major cities including Austin, Dallas, Houston and San Antonio. The Texas biodiesel industry could face a setback if they can't sell their current blends in these areas.

"If we see some sort of ban, I'll see company revenues falling by 80 to 90 percent over night," said Jeff Plowman, Vice President of Business Development at Safe Renewables Corporation, a biodiesel company based out of The Woodlands, Texas.

Plowman hopes that the state can find a non-additive solution to the NOx issue.

"I think the science has shown that B20 does not raise NOx levels, but we'll see when the [EPA] study comes out. We could run into a situation were we are double additizing the product and spending a lot more money," Plowman said.

But ORYXE's Cleary said that the additive would add very little cost to the final product.

"Any time you make a transition from one fuel specification to another, there is going to be some inherent cost," Cleary said. "Our additive, which happens to be the same additive that we now offer for sale in Texas to additize regular diesel, adds pennies per gallon to the cost," he said.

ORYXE is the only company to win approval from TCEQ, but there could be a few more additives introduced in Texas over the next year.

Getting an additive approved by TCEQ is a long process. After a company submits its test report, the report goes through a 2-3 week technical review at the Commission and then goes to the EPA for another 1-2 week technical review.

"The process is fairly strenuous and it's not an easy thing to do -- otherwise we'd probably have a lot more additives in the market," said Morris Brown of the Air Quality Planning Section at TCEQ.

Instead of waiting for more additives to come into the marketplace, some producers are making their own TxLED-compliant fuels. World Energy Alternatives, a global distributor of biodiesel, is doing just that. According to John Kellogg, Director of Communications at World Energy, the company is on the verge of releasing a fuel that will meet Texas standards.

"We are currently in the final phases of developing a product that would not need an additive," said Kellogg. "We cannot say the exact timeframe of when it will be released because it's still being tested. But it will not be a big change in our technical process."

TCEQ's Brown said that other companies will probably do the same and "take it into their own hands to create a cleaner diesel down the road."

Most refiners believe the EPA study due in December will show that there is no net NOx increase from burning biodiesel. But the industry must still prepare itself to do business under the TxLED regulations. World Energy saw the situation in Texas and adapted its refining process for any change in emissions standards. Kellogg wouldn't comment on how much it cost to alter the process, but he reiterated that the company "didn't have to change much."

Texas is a very significant state for World Energy's business, said Kellogg. It will be necessary to adapt to new regulations. Indeed, Texas is the second largest producer of biodiesel in the U.S. According to figures from the National Biodiesel Board, Texas will produce approximately 250 million gallons of biodiesel this year. That is more than double the state's production capacity from 2006. Because of that, Kellogg seemed confident that the government will proceed cautiously.

"Biodiesel is a very important product for the people of Texas and the Texas economy. I think the regulators will go very slow on anything that could be described as a ban because they realize how important biodiesel is," Kellogg said.