The American Soybean Association (ASA) is pleased with actions taken yesterday in the House Commerce Committee to make biodiesel eligible for use in federal, state and other public fleets. The committee passed an amendment to the Energy Policy Act (EPACT) of 1992 that will allow transit fleet operators to gain credits each year for their use of renewable biodiesel. The legislation would increase demand for soybeans and could add 11 cents to the price of every bushel of U.S. soybeans.

"The House Commerce Committee’s decision to give EPACT credits for use of biodiesel is a good fit for soybean producers and vehicle fleet operators," said ASA President Mike Yost, a soybean producer from Murdock, Minnesota. "Producers will benefit from the new domestic market, which is especially important in a year like 1998 when the farm economy is suffering. Meanwhile, vehicle operators will have the option of using this domestically produced renewable fuel to help them comply with EPACT’s goals of reducing America’s dependence on imported fuels."

Representatives John Shimkus (R-IL) and Karen McCarthy (D-MO) have championed biodiesel legislation this year and introduced H.R. 4017 that would classify a blend of 80 percent diesel and 20 percent biodiesel (B-20) as an eligible fuel under EPACT. Yesterday, Shimkus, McCarthy and Joe Barton (R-TX) introduced an amendment that is supported by the natural gas industry as well as soybean producers. The amendment would give credits to vehicle fleet operators for use of biodiesel. The Senate agreed to designate B-20 as an alternative fuel on July 16.

EPACT requires public fleet managers to increase the share of vehicles capable of operating on alternative fuels to 10 percent by the year 2000 and 30 percent by 2010. However, petroleum use in this sector is steadily increasing because EPACT does not require fleets to actually use alternative fuels. In addition, the U.S. Department of Energy indicates that petroleum import dependence will rise from about 40 percent in 1992 to almost 60 percent by the year 2005.

Yesterday’s action will allow fleet operators to use biodiesel as an alternative fuel and to receive credits under EPACT during each year they use biodiesel rather than just when they purchase an alternative-fuel vehicle. They will also receive more credits for use of biodiesel in heavy-duty trucks and buses that burn more petroleum than passenger cars.

Biodiesel is not a threat to any alternative fuel’s market share because fleets already are failing to meet their vehicle purchase requirements at the same time those requirements are continuing to increase. The legislation does not give a tax break to biodiesel nor does it mandate that biodiesel be used. It simply gives biodiesel an opportunity to compete as an alternative fuel.

Enactment of the biodiesel legislation could add 11 cents to the price of every bushel of U.S. soybeans. Here’s how: The government’s fleets include more than 375,000 buses, 295,000 medium and heavy-duty trucks and a large numbers of off-road vehicles. If the fuel used in these mostly diesel-powered vehicles were allowed to count toward EPACT’s light-duty vehicle purchase mandates, they would require more than 1.5 billion gallons of fuel annually. If biodiesel blends were permitted under EPACT, a 20 percent biodiesel blend running in just 10 percent of these EPACT vehicles would use 30 million gallons of neat (100%) biodiesel each year. This market would absorb 219 million pounds of soyoil and support the price of oil by 1 cent a pound. Because there are 11.4 pounds of oil in a bushel, this would push up the price of soybeans by over 11 cents per bushel.