A groundbreaking in Mexico, Mo., brings the beginning of biodiesel production to the state. The site is one of many across the country that is building U.S. biodiesel capacity.

In October, ground was broken for Missouri's first biodiesel plant. It will be located in Mexico, Mo., adjacent to an existing ADM soybean crushing facility. When completed, the Mid America Biofuels plant will produce some 30 million gallons of biodiesel per year.

Mexico isn't alone in welcoming a biodiesel facility to the community. While the industry's tide has been on the rise for a few years, government incentives and energy prices have pushed investment in recent months. Plants are under construction, in equity drives, or on the drawing board across the country.

A year ago, President Bush signed a biodiesel tax incentive that amounts to an excise tax credit of a penny per percentage point of biodiesel blended with petroleum diesel. The penny applies to biofuels made from first-use oils such as soybean oil. Oil from other sources, such as recycled cooking oil, receive a half penny per percentage of blend.

The incentive took effect in January 2005 and will last at least until 2008.

According to a report from the National Biodiesel Board, as of September 2005 there are more than 45 companies actively marketing bio-diesel in the United States and 54 companies plan to build biodiesel plants in the near future.

Questions about bio-diesel capacity and potential demand have crept into press accounts recently. Using the Biodiesel Board's numbers, current U.S. capacity for production of biodiesel is 290 million gallons, but only 180 million of that is from dedicated biodiesel plants. The balance comes from the oleo chemical industry, i.e. facilities that extract animal or plant fats for other reasons.

If all 54 companies that have plans to build biodiesel plants made it to the production stage, U.S. capacity would jump to 570 million gallons. But those 54 represent facilities in various stages, including early planning and equity drives. There is no reason to believe every one of them will make it.

Still, the Biodiesel Board says capacity has doubled in the past year.

Amber Thurlo-Pearson, a communications specialist at the National Biodiesel Board, said that capacity questions have to be viewed against the domestic market for dieselÑsome 50 billion gallons per year.

A certain momentum is being built at local levels. "This year there were 170 pieces of legislation related to biodiesel in 36 states, so you can see that demand will probably grow in every state. A good example is Illinois, which has built a sales tax exemption for blends of biodiesel above B11(in biofuel nomenclature, the 'B' indicates the fuel is biodiesel and the number following indicates the percent of biodiesel in the blend). Those blends are cheaper than B2," said Thurlo-Pearson.

"Someone in our office filled up with B20 [in early November] and it was 20 cents cheaper than [petroleum] diesel. The tax incentives help make biodiesel blends competitive or cheaper, which is their designÑto build demand and infrastructure."

In 2002, Minnesota passed a law that mandates diesel sold there be at least a B2 blend. But the law stipulated that the state have biodiesel production capacity enough to meet at least a certain portion of that demand. With two new biodiesel plants in the state, the mandatory B2 language took effect in September.

Missouri's legislative efforts include a Qualified Biodiesel Producer Incentive program that provides producers of biodiesel a 30-cent-per-gallon grant for the first 15 million gallons produced annually, and 10 cents per gallon up to 15 million gallons produced beyond their initial 15 million gallons.

Dale Ludwig, executive director for the Missouri Soybean Association, said that production and capacity will be addressed by individual biodiesel facilities. In the case of Mid America Biofuels, the business entities that helped form it will direct production. "That's one reason companies like Growmark, MFA Oil, Ray Carroll [Fuels] and ADM are involved," said Ludwig. "Growmark, MFA Oil and Ray Carroll call for what they need and ADM works to broker the rest," he said.

"I think it's been proven well enough that biodiesel is a better quality fuel when it comes to engine wear," said Ludwig. "And I think if we can supply the market with fuel at substantially the same price [as petrodiesel] we can command a significant market share. So basically, demand will boil down to price.

"Will people pay a lot more for biodiesel? Probably not. Will they pay a slight premium? Some will. But if it's the same price, they will buy biodiesel," said Ludwig.