Anniversary Book: Funding, Organizational Growth, and Feedstock Wars

July 18, 2022

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(Clean Fuels Alliance America) As the 1990s dawned, more than a decade of renewed research had been performed on various straight vegetable oils and esterified varieties by a number of individuals and universities both in the U.S. (North Dakota State, Idaho, Illinois, etc.) and globally. “Carroll Goering at the University of Illinois was the only researcher who had used soybean oil as a feedstock and had a process, but the fuel was stuck in research,” Kenlon Johannes recounts. Leon Schumacher’s work helped propel soy diesel out of “research mode” and into more practical use, a development that couldn’t have come soon enough for soybean farmers.

The soybean-processing industry was drowning in soybean oil. At a price of 10 cents a pound or less, the mounting stocks and low value were hitting farmers, already reeling from the farm crisis of the 1980s, very hard.

“Unknown to us, Bill Ayres with Interchem Industries had begun researching biodiesel in the fall of 1989,” Johannes recalls. “He collected all of the older research papers and talked with the six researchers who were funded by USDA to investigate biodiesel fuel in the 1980s.”

With Johannes and MSMC having already made the initial funding of $22,000 to the University of Missouri and Schumacher to test soy diesel in a few pickup trucks, the ball was rolling, and interest in this new use for soybean oil was on the rise.

Soon, other state-soybean boards beyond Missouri—Illinois, Nebraska, South Dakota and Iowa—came to see the potential of soy-diesel fuel. Johannes was leading the charge, and a master SoyDiesel plan was needed.

“Soy diesel is a bio-diesel,” Johannes wrote in a March 1992 report to the United Soybean Board. “Bio-diesels are made with any vegetable oil or animal fat through a similar esterification process. Bio-diesels are popular in Europe with tax exemptions in many countries . . . Bio-diesels are and will arrive in the U.S. rapidly. The Missouri Boards and staff are trying to position soybean as the leading oil in bio-diesel application because of its availability, lower cost, ease of use, and the quality of fuel obtained.”

A National Soy Fuels Advisory Committee was formed in spring 1992. Early on, it was determined that QSSB representative membership would require a minimum commitment of $10,000. However, on June 8, 1992, Johannes wrote a letter to a number of organizations, including the United Soybean Board, American Soybean Association, the National Oilseed Processors Association, and QSSBs, noting that “larger commitments will be needed to enact plans.” Smaller investments would allow participation but no voting rights.

To help formulate a blueprint for soy diesel, the committee contracted with Washington, D.C.-based Information Resources Inc. as part of its “plan of attack” and to establish a database. The final IRI report was expected, no doubt with much anticipation, by mid-September.

The NSFAC met four times between its formation in May and September 1992. In an update letter to MSMC members on Sept. 11, 1992, Johannes stated:

“SoyDiesel and biodiesel have received a lot of attention over the past few months. . . . Positioning SoyDiesel as the biodiesel of choice in the U.S. is a major effort. Biodiesel development itself will also require a planned cooperative effort from all feedstock providers. . . . Other feedstocks for biodiesel are not yet as organized, so state soybean programs have started a research and development effort. It is perceived that at the Sept. 18, 1992, NSFAC meeting in St. Louis, the NSFAC will disband and form the National SoyDiesel Development Board. The NSDB will organize and adopt a research, market development, and education plan for biodiesel/SoyDiesel with a budget, including staff structure and proper organization for receiving and giving grants. The NSDB will initially include only those interested in SoyDiesel, but as other groups interested in biodiesel feedstocks become identified they may be brought into the organization with the possibility of ultimately forming an ‘American Biodiesel Development Coalition.’ Many details and plans are underway to organize and enact this type of plan. None are final at this time. Please keep the NSDB in mind as your source of information and benefaction, as we feel we are prepared to lead an organized, cooperative biodiesel/SoyDiesel development program in the U.S.”

Later that month, it became official. At the NSFAC meeting Sept. 18, 1992, in St. Louis—its last—the committee formally decided to incorporate itself into the NSDB. The group received and accepted IRI’s recommended SoyDiesel market development, education and research plans.

The crux of the IRI recommendations was the development of the on-road or highway market for soy diesel in trucks and buses and the off-road market through vehicles such as tractors and construction vehicles. The educational aspects should focus on general industry information, public education, and market-access information. Finally, the IRI report recommended a necessary research focus on fuel performance, fuel characteristics, cost-of-fuel analysis, fuel improvements, and new uses for the main product—soy diesel—and coproducts such as glycerin.

As Johannes recounted in his notes prepared for the 2013 National Biodiesel Conference & Expo in Las Vegas, nearly 20 years after the IRI report was conducted and delivered, “The IRI report as it is called said we should start a trade association without an industry. This trade association should be comprised of feedstock providers and a few others interested, and as far as we knew, this was something that was never done before. The report laid out a research and market development program building on the 1990 Clean Air Act Amendments and 1992 Energy Policy Act (EPAct). First markets identified were: City Transit Buses, Federal Fleets, with some interest in forklifts, underground mines, and marine uses.”

In a Sept. 22, 1992, letter to the then-director of USB, David Thomas, Johannes wrote, “NSFAC has recommended that USB’s Industry Information Committee fund through [the American Soybean Association]’s Industry Information contract the FY93 market development and education plan submitted by IRI for $749,513. IRI also recommended that NSFAC/NSDB incorporate a comprehensive, coordinated research program into this total plan of attack.”

In addition to the request for nearly $750,000 to fund the early market development and educational efforts laid out in the IRI report, Johannes asked on behalf of the newly formed NSDB for $600,000, “the amount identified for SoyDiesel in the FY93 USB Research Plan,” from USB’s research committee to fund a single research proposal. As with the request for funds for market development and education, the money sought for research would be used to pursue recommendations provided in the IRI report.

According to that same Sept. 22, 1992, letter to Thomas, Johannes laid out the early leadership of the NSDB and the QSSBs they represented. Those states, representatives and NSDB board positions were: Missouri, Gary Ellington, chairman; Illinois, Jim Gay, vice chairman (and NSDB research chair); Iowa, David Stone, secretary and treasurer; Indiana, Leroy Brammer, member; Nebraska, Richard Prascher, member; Ohio, Don Settlemire, member; and South Dakota, Wayne Bietz, member.

Johannes and Ayres put in a late-evening call to U.S. Sen. Kit Bond, R-Missouri, the night before a congressional vote, asking the senator to insert the language “and other biological materials” into EPAct, which, according to Johannes, allowed soy diesel to become part of the alternative-fuel mix. “USB stepped up to the plate and funded the organization and the biodiesel program, allocating about one-fourth of their entire budget to the National SoyDiesel Development Board,” Johannes recalled in his 2013 recap in Las Vegas. “So here we are with a couple of pickups running on the fuel . . . ” Now, the newly formed association was getting large funds from large organizations expecting results.

However, as relayed by the accounts that follow in this section and others, developing a new fuel—along with the markets to use it and industry to manufacture it, not to mention clearing the regulatory and technical hurdles needed to do so—is a monumental, slow-going, measured set of herculean tasks. Keeping the funding flowing after years of laying groundwork, with little demonstrative return on investment in those formative years, was a constant battle.

Meanwhile, just as Schumacher predicted and Johannes foresaw, the idea that soybean oil alone could fulfill the promise of biodiesel’s potential was facing increasing scrutiny, not only from those on the outside who stood to gain from a multifeedstock biodiesel industry but also from some soybean insiders. Soybean interests were hot on the trail to develop new uses for the surplus soybean oil dragging down the market. They had found the Holy Grail. Now, instead of asking how to find new uses for all this excess bean oil, biodiesel industry developers such as those at Missouri Soybean, NSFAC, NSDB, and the organization that succeeded it in 1994—the National Biodiesel Board—required all hands on deck. Much like Chief Brody from the movie Jaws, who famously said, “You’re gonna need a bigger boat,” Schumacher’s prediction of needing a bigger coalition was proving true. But it didn’t come without a fight.

In the end, the terms “soy diesel” and “SoyDiesel” fell out of fashion and were replaced with the more exciting term “biodiesel.” With a new name and renewed vigor, NBB attracted more QSSBs and nonsoybean interests alike. It grew so much that eventually, unlike in the early days, not every new member had voting rights. It would have been functionally impossible for all the new members to have a direct say on the board. Of course, every member’s input was valued, and the natural evolution of organizational theory unfolded. READ MORE