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Daniel Savaloja: MN’s biodiesel mandate is costly, risky, unfair

On July 1, by an act of the 2014 Minnesota Legislature, many, but not all, Minnesota diesel users were required to purchase diesel blends containing at least ten percent biodiesel. The trucking industry believes consumers will bear the cost of this doubling of the state’s mandate through higher prices for transportation and goods.

The biodiesel industry does not need a mandate now. It is mature and can stand on its own.

Furthermore, the three major exemptions contained in the state’s new biodiesel statute are a de facto admission by the legislature that a universal, year-round biodiesel mandate is simply too risky for Minnesota’s economy.

First, key industries have been permanently exempted from the requirement to use any biodiesel whatsoever. The state’s nuclear power industry was given an indefinite exemption. A temporary exemption for railroads, taconite and copper mining, logging, and the United States Coast Guard was changed to a lifetime pass. Through such action, legislators acknowledged that biodiesel is not reliable enough to ensure these vital industries would not suffer serious disruptions.

Second, Minnesota’s best cold weather diesel fuel (called #1 diesel) is exempted from the mandate until 2020. This is the fuel diesel users choose to ensure the fuel flows and does not gel or plug filters. Legislators tacitly acknowledged lack of reliability for other grades of diesel during the coldest time of the year by carving out #1 diesel. The exemption is not just for the months of October — March but for the entire year.

Third, the increase to ten percent applies to the #2 diesel used primarily in warm weather months. Lawmakers accented their concern about biodiesel’s reliability by carving out the grades of fuel and seasons of use and designating the exempted industries.

While many critical industries are exempted from the mandate, another major industry bears much of the risk and cost of this mandate year-round: trucking.

Any trucker today purchasing fuel in Minnesota, whether at a truck stop or filling his or her own bulk storage tank, must use biodiesel. Period. No exceptions.

And yet truckers and their customers face the same risk as those exempted industries. A truck bringing food to a nursing home or medical devices to a hospital can no less afford to break down due to a fuel problem en route. 68% of Minnesota communities rely exclusively on truck transportation for everything they ship in and out.

To avoid breakdowns, truckers spend money on a number of preventative measures, including more frequent filter changes, adding heating devices, adding anti-gelling agents to fuel, plus adding #1 diesel which costs significantly more and gets poorer fuel mileage.

The mandate could add $15 to $30 per truck each week to the base cost of diesel fuel. Trucking fleets running exclusively in Minnesota cannot escape these costs. However, truckers who can avoid purchasing fuel in Minnesota do because none of our neighboring states has a mandate.

In recent weeks, a trucker could buy the same gallon of fuel in Hudson, Wisconsin for five cents less than St. Paul, Minnesota under a five percent mandate. And that is after accounting for differences in the tax rate.

Minnesota’s original two percent biodiesel mandate was enacted in 2002. It was sold to the legislature on the promise it was needed to create a new industry for rural Minnesota. The good news is the biodiesel industry in Minnesota and other states is now mature and viable.

I don’t know whether the mandate played a meaningful role in this development. I do know this achievement was accomplished in every other state without a mandate like ours.

All the purported environmental, economic and energy benefits of biodiesel are functionally being met on a national scale without state mandates. Other places have recognized the major role new cleaner-burning — and more expensive — truck engines are playing in the much lower rate of emissions.

So here stands Minnesota as an outlier, on the verge of increasing its biodiesel mandate to 10 percent on July 1 this year and 20 percent in 2018.

It is time to talk about how to phase out the mandate — not increase it.

(Daniel Savaloja is chairman of the Minnesota Trucking Association and an attorney specializing in transportation law. He resides and practices law in Blaine, Minn. He is a Wadena native with extensive experience operating trucking fleets for private businesses and for-hire trucking firms.)