CONTENTS: Nebraska Soybean Association Introduction of the Project Development Te Objectives Supporting Events Summary of the findings  Biodiesel Demand Biodiesel Market Price Estimated Biodiesel Production Costs Competition in the Biodiesel Industry Biodiesel Feedstock Resources  Best Locations in Nebraska    State Incentives and Public Policy  Biofuel Industry Trends  The Role of Incentive

Isom, Loren

English

DigitalCommons@University of Nebraska

University of Nebraska - Lincoln DigitalCommons@University of Nebraska - Lincoln Industrial Agricultural Products Center -- Publications & Information Industrial Agricultural Products Center 8-31-2006 Biodiesel Industry – A Statewide Assessment Loren Isom University of Nebraska - Lincoln, lisom2@unl.edu Follow this and additional works at: https://digitalcommons.unl.edu/iapcpubs  Part of the Bioresource and Agricultural Engineering Commons Isom, Loren, "Biodiesel Industry – A Statewide Assessment" (2006). Industrial Agricultural Products Center -- Publications & Information. 5. https://digitalcommons.unl.edu/iapcpubs/5 This Article is brought to you for free and open access by the Industrial Agricultural Products Center at DigitalCommons@University of Nebraska - Lincoln. It has been accepted for inclusion in Industrial Agricultural Products Center -- Publications & Information by an authorized administrator of DigitalCommons@University of Nebraska - Lincoln. 1Nebraska Biodiesel Industry Development SeminarAugust 31, 2006 - Lincoln, NEBiodiesel Industry – A Statewide AssessmentPresented by:  Loren IsomIndustrial Agricultural Products CenterUniversity of Nebraska – Lincoln Lisom@unl.edu or 402-472-8187Nebraska Soybean AssociationUSDA – Rural Development Value Added Producer Grant“Strategically Locating Soybean and BiodieselProcessing Facilities in Nebraska”• Outline– Overview of the Study– Summary of the Findings– Biofuel Industry Trends– The Role of Incentives– Questions and CommentsOverview – Introduction of the Project Development Team• Nebraska Soybean Association, Lori Luebbe, Executive Director• University of Nebraska – Industrial Agricultural Products Center, Dr. Milford Hanna, Director, Loren Isom, Technical Assistance Coordinator, Robert Weber, Research Coordinator• Nebraska Department of Economic Development, Zach Schroeder, Development Consultant• Nebraska Department of Agriculture, Richard Sanne, Ag Promotion and Development• USDA – Nebraska Agricultural Statistics Service, Mark Harris, Director• Nebraska Soybean Board, Victor Bohuslavsky, Executive Director• Nebraska Ethanol Board, Todd Sneller, Executive Director• Nebraska Public Power District, Brian Wilcox, Industrial & Business Account ConsultantOverview - Objectives• to conduct a third party feasibility study and market analysis to evaluate the potential success and risk of investment associated with soybean processing and biodiesel production facilities located in Nebraska;• to identify key site selection criteria for soybean processing and biodiesel production facilities and conducting a statewide assessment of the criteria (feedstocks, markets, and infrastructure) to identify the best location(s); and • to identify and evaluate multiple business structures to position Nebraska soybean producers to capture the greatest value from soybean processing and biodiesel production.Presented at Nebraska Biodiesel Industry Development Seminar,“Strategically Locating Soybean and Biodiesel Processing Facilities in Nebraska,” in August 20062Overview – Supporting Events• the Mobile Biodiesel Workshop to West Central Cooperative’s soybean processing and biodiesel production facilities in Ralston, IA; January 2005; • the IBFG – Feasibility Report presentation to the NSA and NSB board of directors; July 2005; • the Biodiesel Plant Development Seminar presented by IBFG and other state resource providers; August 2005;• the National Biodiesel Board presentation to the NSA, NSB, and state legislators regarding federal and state regulatory issues and opportunities for Nebraska legislation; December 2005;• the Biodiesel Plant Development Workshop presented by the IAPC and the Iowa State University Center for Industrial Research andService; March 2006; and • numerous community and individual based presentationsSummary of the findings• Biodiesel demand• Biodiesel market price• Estimated biodiesel production cost• Competition in the biodiesel industry• Availability of biodiesel feedstock resources• Government incentives and public policyBiodiesel Demand• IBFG study projected– 8 MGPY for NE, and– 24 MGPY for NE and surrounding states• If biodiesel can compete $ for $ w/ #2 diesel – Fuel concentration limits (B5 to B20) and feedstock availability are the only limits.Biodiesel Demand• Nebraska diesel sales: 730 MGPY• 204 MGPY on-farm and• 403 MGPY on-highway• Biodiesel demand: on-farm market– assuming a 50% market penetration– 6 MGPY if B5 or 24 MGPY if B20 blends• Biodiesel demand: on-highway market– assuming a 50% market penetration– 4 MGPY if B2 or 10 MGPY if B5 blends• Estimated biodiesel demand in NE: 10–34 MGPY3Biodiesel Market Price• Revised DOE-EIA forecasts, May 2006– $1.50/gallon for wholesale, pre-tax diesel in 2010• based on $48 per barrel crude oil• 33 cents higher than the forecast used in the IBFG study • Is a biodiesel premium realistic?– If not, reduce 37.5 cents• the premium is based on a ¾ cent premium for B2 blends• Is the biodiesel tax credit fully available to producers?– If not, reduce from $1.00 to $0.85-95 per gallon• Passage of the small producer tax credit– add $0.10 per gal. for first 15 MGPY under 60 MGPYBiodiesel Market Price• Depends on the forecast for petroleum diesel?• Nebraska Jan. – June 2006 average: $2.70/gallon– less state & federal taxes (24.6 and 24.4 cents/gallon)– Net: $2.21 per gallon pre-tax• Forecasts:– going higher & higher or peaking and dropping back?4Estimated Biodiesel Production CostsSource: Rudy Pruszko, Iowa State –prices as of Oct. 2004Cost of Biodiesel Production( 3 MGPY vs. 30 MGPY)$ per Gallon % of total $ per Gallon % of total DifferenceCost of Feedstock $1.71 71.5% $1.61 83.9% $0.10Cost of Chemicals 0.24 10.0% 0.18 9.4% 0.06Cost of Energy 0.04 1.7% 0.02 1.0% 0.02Cost of Labor 0.14 5.9% 0.02 1.0% 0.12Depreciation and Maintenance 0.2 8.4% 0.08 4.2% 0.12Administration and Overhead 0.06 2.5% 0.01 0.5% 0.05Biodiesel Cost per Gallon $2.39 100.0% $1.92 100.0% $0.473 MGPYsoybean oil, $0.22/lbs.30 MGPYsoybean oil, $0.22/lbs.5Estimated Biodiesel Production CostsSource: Building a Successful Biodiesel Business -prices as of Oct. 2004Cost of Biodiesel Production(soybean oil vs. animal fat)$ per Gallon % of total $ per Gallon % of total DifferenceCost of Feedstock $1.61 80.9% $1.02 70.3% $0.59Cost of Chemicals 0.18 9.0% 0.18 12.4% 0Cost of Energy 0.02 1.0% 0.04 2.8% -0.02Cost of Labor 0.04 2.0% 0.04 2.8% 0Depreciation and Maintenance 0.12 6.0% 0.15 10.3% -0.03Administration and Overhead 0.02 1.0% 0.02 1.4% 0Biodiesel Cost per Gallon $1.99 100.0% $1.45 100.0% $0.5410 MGPY 10 MGPYsoybean oil, $0.22/lbs. animal fat, $0.14/lbs.Competition in the Biodiesel Industry• Commercial Biodiesel Production Plants, NBB April 2006Competition in the Biodiesel IndustrySource: Leland Tong, IBFGas of January 2006Plant Size(gallons per year)Existing Plants(53 total)Plants Under Construction(42 total)Plants inPre-construction(22 total)< 1,000,001 12 12 11,000,001 – 5,000,000 26 15 35,000,001 – 10,000,000 3 8 510,000,001 – 15,000,000 6 1 315,000,001 – 20,000,000 1 1 1>20,000,000 5 5 9Biodiesel Feedstock Resources• Buy feedstock or crush soybeans?• Estimated soybean meal production in NE:– 2.0 million tons, source: ProExporter Network, 04-05• Estimated soybean meal fed in NE:– 1.5 million tons, source: ProExporter Network, 04-05• Competition form current and expanding distillers grains– 4.8 million tonsNebraska Ethanol Production Ethanol Annual Grind DDGSMGPY  (million bu/year) (tons/yr)Current Production 560 303 2,272,500Expansion and Development 884 340 2,550,000Total 1,444 643 4,822,5006Title7Biodiesel Feedstock ResourcesPotential biodiesel feedstock available in Nebraska MGPY Million poundsNote: major quantities will still go to traditional applications per yearcrude soybean oil from extrusion expellers 5 40crude degummed or refinned soybean oil from solvent extractors 75 570refined corn oil from wet mill ethanol plants 45 340crude corn oil potential from current dry mill ethanol plants 22 169crude corn oil potential from expanding or developing dry mill ethanol plants 95 720animal fat from cattle slaughtering 119 908animal fat from pork slaughtering 27 207yellow grease from restraunts 1 10Total 390 2,9648Title9Best Locations in Nebraska• Concentrations of feedstock resources• soybean processors• animal processors• ethanol producers• Co-processing• Supporting infrastructure for:• regional distribution terminals and• national marketing (railroads)• PROJECT SPECIFIC: size, feedstock preferences, joint venture opportunities with feedstock processorsState Incentives and Public Policy• Minnesota biodiesel mandate• at least 2% biodiesel• Illinois sales tax exemption• exempts 15 to 20 cents per gallon• Missouri farmer owned reimbursement• reimburses development costs• Iowa income tax credit• 3 cent per gallon credit to retailers of B2+• Kansas biodiesel producer incentive• 30 cent per gallon incentive to producersBiofuel Industry TrendsTodd Sneller, Nebraska Ethanol Board• Where is the money coming from?• Who owns the plants?  How are they structured?• Who is selling the products?– Fuel– Co-products • What is the petroleum industry doing?The Role of IncentivesTodd Sneller, Nebraska Ethanol Board• Focus on the Goal: Production• Competitive Position vs. Other States• The Function of a Production Incentive• The Advantage of a Performance Based Production Incentive• Justifying Support for a Production Incentive: Rationale• Process, Opportunity and Timing

Biodiesel Industry – A Statewide Assessment

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University of Nebraska - Lincoln 
DigitalCommons@University of Nebraska - Lincoln 
Industrial Agricultural Products Center -- 
Publications & Information Industrial Agricultural Products Center 
8-31-2006 
Biodiesel Industry – A Statewide Assessment 
Loren Isom 
University of Nebraska - Lincoln, lisom2@unl.edu 
Follow this and additional works at: https://digitalcommons.unl.edu/iapcpubs 
 Part of the Bioresource and Agricultural Engineering Commons 
Isom, Loren, "Biodiesel Industry – A Statewide Assessment" (2006). Industrial Agricultural Products 
Center -- Publications & Information. 5. 
https://digitalcommons.unl.edu/iapcpubs/5 
This Article is brought to you for free and open access by the Industrial Agricultural Products Center at 
DigitalCommons@University of Nebraska - Lincoln. It has been accepted for inclusion in Industrial Agricultural 
Products Center -- Publications & Information by an authorized administrator of DigitalCommons@University of 
Nebraska - Lincoln. 
1Nebraska Biodiesel Industry 
Development Seminar
August 31, 2006 - Lincoln, NE
Biodiesel Industry – A Statewide Assessment
Presented by:  Loren Isom
Industrial Agricultural Products Center
University of Nebraska – Lincoln 
Lisom@unl.edu or 402-472-8187
Nebraska Soybean Association
USDA – Rural Development Value Added Producer Grant
“Strategically Locating Soybean and Biodiesel
Processing Facilities in Nebraska”
• Outline
– Overview of the Study
– Summary of the Findings
– Biofuel Industry Trends
– The Role of Incentives
– Questions and Comments
Overview – Introduction of the 
Project Development Team
• Nebraska Soybean Association, Lori Luebbe, Executive Director
• University of Nebraska – Industrial Agricultural Products Center, 
Dr. Milford Hanna, Director, Loren Isom, Technical Assistance 
Coordinator, Robert Weber, Research Coordinator
• Nebraska Department of Economic Development, Zach Schroeder, 
Development Consultant
• Nebraska Department of Agriculture, Richard Sanne, Ag Promotion 
and Development
• USDA – Nebraska Agricultural Statistics Service, Mark Harris, 
Director
• Nebraska Soybean Board, Victor Bohuslavsky, Executive Director
• Nebraska Ethanol Board, Todd Sneller, Executive Director
• Nebraska Public Power District, Brian Wilcox, Industrial & 
Business Account Consultant
Overview - Objectives
• to conduct a third party feasibility study and market 
analysis to evaluate the potential success and risk of 
investment associated with soybean processing and 
biodiesel production facilities located in Nebraska;
• to identify key site selection criteria for soybean 
processing and biodiesel production facilities and 
conducting a statewide assessment of the criteria 
(feedstocks, markets, and infrastructure) to identify the 
best location(s); and 
• to identify and evaluate multiple business structures to 
position Nebraska soybean producers to capture the 
greatest value from soybean processing and biodiesel 
production.
Presented at Nebraska Biodiesel Industry Development Seminar,
“Strategically Locating Soybean and Biodiesel Processing Facilities in Nebraska,” in August 2006
2Overview – Supporting Events
• the Mobile Biodiesel Workshop to West Central Cooperative’s 
soybean processing and biodiesel production facilities in Ralston, IA; 
January 2005; 
• the IBFG – Feasibility Report presentation to the NSA and NSB 
board of directors; July 2005; 
• the Biodiesel Plant Development Seminar presented by IBFG and 
other state resource providers; August 2005;
• the National Biodiesel Board presentation to the NSA, NSB, and 
state legislators regarding federal and state regulatory issues and 
opportunities for Nebraska legislation; December 2005;
• the Biodiesel Plant Development Workshop presented by the IAPC 
and the Iowa State University Center for Industrial Research and
Service; March 2006; and 
• numerous community and individual based presentations
Summary of the findings
• Biodiesel demand
• Biodiesel market price
• Estimated biodiesel production cost
• Competition in the biodiesel industry
• Availability of biodiesel feedstock 
resources
• Government incentives and public policy
Biodiesel Demand
• IBFG study projected
– 8 MGPY for NE, and
– 24 MGPY for NE and surrounding states
• If biodiesel can compete $ for $ w/ #2 diesel 
– Fuel concentration limits (B5 to B20) and 
feedstock availability are the only limits.
Biodiesel Demand
• Nebraska diesel sales: 730 MGPY
• 204 MGPY on-farm and
• 403 MGPY on-highway
• Biodiesel demand: on-farm market
– assuming a 50% market penetration
– 6 MGPY if B5 or 24 MGPY if B20 blends
• Biodiesel demand: on-highway market
– assuming a 50% market penetration
– 4 MGPY if B2 or 10 MGPY if B5 blends
• Estimated biodiesel demand in NE: 10–34 MGPY
3Biodiesel Market Price
• Revised DOE-EIA forecasts, May 2006
– $1.50/gallon for wholesale, pre-tax diesel in 2010
• based on $48 per barrel crude oil
• 33 cents higher than the forecast used in the IBFG study 
• Is a biodiesel premium realistic?
– If not, reduce 37.5 cents
• the premium is based on a ¾ cent premium for B2 blends
• Is the biodiesel tax credit fully available to 
producers?
– If not, reduce from $1.00 to $0.85-95 per gallon
• Passage of the small producer tax credit
– add $0.10 per gal. for first 15 MGPY under 60 MGPY
Biodiesel Market Price
• Depends on the forecast for petroleum diesel?
• Nebraska Jan. – June 2006 average: $2.70/gallon
– less state & federal taxes (24.6 and 24.4 cents/gallon)
– Net: $2.21 per gallon pre-tax
• Forecasts:
– going higher & higher or peaking and dropping back?
4Estimated Biodiesel Production Costs
Source: Rudy Pruszko, Iowa State –
prices as of Oct. 2004
Cost of Biodiesel Production
( 3 MGPY vs. 30 MGPY)
$ per Gallon % of total $ per Gallon % of total Difference
Cost of Feedstock $1.71 71.5% $1.61 83.9% $0.10
Cost of Chemicals 0.24 10.0% 0.18 9.4% 0.06
Cost of Energy 0.04 1.7% 0.02 1.0% 0.02
Cost of Labor 0.14 5.9% 0.02 1.0% 0.12
Depreciation and Maintenance 0.2 8.4% 0.08 4.2% 0.12
Administration and Overhead 0.06 2.5% 0.01 0.5% 0.05
Biodiesel Cost per Gallon $2.39 100.0% $1.92 100.0% $0.47
3 MGPY
soybean oil, $0.22/lbs.
30 MGPY
soybean oil, $0.22/lbs.
5Estimated Biodiesel Production Costs
Source: Building a Successful Biodiesel Business -
prices as of Oct. 2004
Cost of Biodiesel Production
(soybean oil vs. animal fat)
$ per Gallon % of total $ per Gallon % of total Difference
Cost of Feedstock $1.61 80.9% $1.02 70.3% $0.59
Cost of Chemicals 0.18 9.0% 0.18 12.4% 0
Cost of Energy 0.02 1.0% 0.04 2.8% -0.02
Cost of Labor 0.04 2.0% 0.04 2.8% 0
Depreciation and Maintenance 0.12 6.0% 0.15 10.3% -0.03
Administration and Overhead 0.02 1.0% 0.02 1.4% 0
Biodiesel Cost per Gallon $1.99 100.0% $1.45 100.0% $0.54
10 MGPY 10 MGPY
soybean oil, $0.22/lbs. animal fat, $0.14/lbs.
Competition in the Biodiesel Industry
• Commercial Biodiesel Production Plants, NBB April 2006
Competition in the Biodiesel Industry
Source: Leland Tong, IBFG
as of January 2006
Plant Size
(gallons per year)
Existing 
Plants
(53 total)
Plants Under 
Construction
(42 total)
Plants in
Pre-construction
(22 total)
< 1,000,001 12 12 1
1,000,001 – 5,000,000 26 15 3
5,000,001 – 10,000,000 3 8 5
10,000,001 – 15,000,000 6 1 3
15,000,001 – 20,000,000 1 1 1
>20,000,000 5 5 9
Biodiesel Feedstock Resources
• Buy feedstock or crush soybeans?
• Estimated soybean meal production in NE:
– 2.0 million tons, source: ProExporter Network, 04-05
• Estimated soybean meal fed in NE:
– 1.5 million tons, source: ProExporter Network, 04-05
• Competition form current and expanding distillers grains
– 4.8 million tons
Nebraska Ethanol Production Ethanol Annual Grind DDGS
MGPY  (million bu/year) (tons/yr)
Current Production 560 303 2,272,500
Expansion and Development 884 340 2,550,000
Total 1,444 643 4,822,500
6Title
7Biodiesel Feedstock Resources
Potential biodiesel feedstock available in Nebraska MGPY Million pounds
Note: major quantities will still go to traditional applications per year
crude soybean oil from extrusion expellers 5 40
crude degummed or refinned soybean oil from solvent extractors 75 570
refined corn oil from wet mill ethanol plants 45 340
crude corn oil potential from current dry mill ethanol plants 22 169
crude corn oil potential from expanding or developing dry mill ethanol plants 95 720
animal fat from cattle slaughtering 119 908
animal fat from pork slaughtering 27 207
yellow grease from restraunts 1 10
Total 390 2,964
8Title
9Best Locations in Nebraska
• Concentrations of feedstock resources
• soybean processors
• animal processors
• ethanol producers
• Co-processing
• Supporting infrastructure for:
• regional distribution terminals and
• national marketing (railroads)
• PROJECT SPECIFIC: size, feedstock 
preferences, joint venture opportunities 
with feedstock processors
State Incentives and Public Policy
• Minnesota biodiesel mandate
• at least 2% biodiesel
• Illinois sales tax exemption
• exempts 15 to 20 cents per gallon
• Missouri farmer owned reimbursement
• reimburses development costs
• Iowa income tax credit
• 3 cent per gallon credit to retailers of B2+
• Kansas biodiesel producer incentive
• 30 cent per gallon incentive to producers
Biofuel Industry Trends
Todd Sneller, Nebraska Ethanol Board
• Where is the money coming from?
• Who owns the plants?  How are they 
structured?
• Who is selling the products?
– Fuel
– Co-products 
• What is the petroleum industry doing?
The Role of Incentives
Todd Sneller, Nebraska Ethanol Board
• Focus on the Goal: Production
• Competitive Position vs. Other States
• The Function of a Production Incentive
• The Advantage of a Performance Based 
Production Incentive
• Justifying Support for a Production 
Incentive: Rationale
• Process, Opportunity and Timing


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