This spring, the Illinois General Assembly passed a new bill that gives big incentives to higher biodiesel blends in the state. Gov. J.B. Pritzker signed it into law in late April, and the folks who pushed it forward say it’s the biggest legislative move in biofuels in nearly 30 years — and it’s good for more than just soybean demand.
The law extends the current B10 sales tax exemption until 2023 and then increases the biodiesel blend level that gets an exemption to B13 in 2024, B15 in 2025 and B19 in 2026. It has the potential to increase demand for soybean oil by a third or more. That’s a big deal in Illinois, which currently ranks fourth in biofuel production and third in consumption.
“Every gallon of biodiesel has 7 pounds of soybean oil, and there are 10.8 pounds of soybean oil made per bushel,” says Andrew Larson, director of market development for the Illinois Soybean Association, adding that the state’s current sales tax exemption policy for B10 and above has been on the books since 2003. He estimates that law has driven the use of 250 million gallons of biodiesel in Illinois annually.
“The new sales tax exemption could drive the use of B20 in 2026 and consume about 375 million gallons of B100 each year, which would be equivalent of oil from 240 million bushels of soybeans,” Larson adds.
For farmers, that will translate into increased demand. Today, annual biodiesel consumption in Illinois requires oil from 160 million bushels of soybeans. Larson’s calculations of use at 240 million bushels by 2026 represents a 33% increase.
The 2003 legislation had a five-year sunset, which required lobbying and education efforts every five years to get it passed — through budget stalemates and at least one appearance on Pritzker’s tax exemption chopping block in 2021. They managed to save it every time, and Larson says those efforts resulted in better-educated lawmakers.
ISA lobbied for the current legislation for the past three years, with the help of Illinois ag groups and some less likely partners — including Chicagoland fleets, railroads and legislators. Some groups came onboard because using biofuels gives them a positive story to tell about combating emissions. Predictably, petroleum groups were the most organized opposition.
Behind the scenes
Steve Pitstick, ISA chairman and Maple Park, Ill., farmer, says he had no idea what went into getting a bill like this passed.
“I did not know there was a convenience-store lobby!” he says, laughing and adding that everybody’s got their position and their issues, and ISA and its partners had to work through them. Pitstick says the big fleets around Chicago, like the Chicago Park District, had been using biodiesel for years and knew it worked for them.
They may use it at a greater rate than farmers. Pitstick says some farmers may hesitate due to a bad experience. Ten years ago, when biodiesel was first on the market, they learned it couldn’t sit for six months because it would get rancid and plug up filters. But the industry fixed that.
“I’ve had no problem with it recently,” Pitstick says. “I don’t see a reason why all farmers aren’t using it.”
Still, Pitstick says the new exemption law is a huge win for Illinois agriculture, in part due to current conversation around sustainability.
“There’s potential for growth in the suburban counties because of clean air issues,” says Pitstick, who farms right up to the western suburbs. “The addition of soybean oil and biodiesel will help in a time when everybody’s paying attention to green energy. It’s a perfect time for that.”
Ag’s a player
Larson wants to build on their legislative success, showing politicians that ag can play a huge role in helping them meet climate change goals, using an Illinois product. The three largest biodiesel plants in Illinois currently produce 180 million gallons annually, located at Danville, Seneca and Gilman, Ill.
Plus, Marquis Energy is partnering with LanzaJet to build a sustainable jet fuel plant at Hennepin, Ill. The plant would produce 120 million gallons annually, using low-carbon feedstocks, and would deliver the fuel to O’Hare and Midway airports near Chicago. Whether that feedstock will come from corn or soybeans is still unknown.
Aviation’s biofuel interest makes sense, Pitstick says, because sustainable aviation fuel is the only way the industry can get green; there won’t be electric or hydrogen planes. Biofuels is how they can clean up their environmental impact.
Clearly, all the biofuel demand — for any number of transportation modes — is increasing soybean oil demand, which has flip-flopped the soybean processing market. Ten years ago, soybean meal drove value and processers worked to get rid of oil. Now it’s the other way around.
“Soybean oil is worth 85 cents right now,” Pitstick says. “That’s a huge win for Illinois agriculture.”