Biodiesel: short-term crush or long-term relationship?

Biodiesel is the latest fever. So far, it does not pay, and that would be the end of the discussion if this were a normal product. But we are talking about a substitute for petroleum, which is the most important product there is.

Let's not oversell it. Biodiesel does not get us to "energy independence," or mean that we can forget drilling in the earth. Biodiesel is not that good, nor is anything else. But one source told me Washington has enough farmland to replace 20 percent of the diesel we use. Another said 10 percent. Even the smaller figure would be 100 million gallons a year.

Since last May, the state's commercial biodiesel capacity has been 5 million gallons, all at Seattle Biodiesel. Founder Martin Tobias, a Microsoft alumnus and venture capitalist, says a bigger plant is on the drawing board. Rivals are ready to jump in. "All we need is a market," he says, "and good old American capitalism will solve the rest of the problem."

Without subsidy, the industry would need a market at above $4 a gallon. Federal subsidy knocks the cost to just above $3. That's low enough for a boutique industry only.

Enter the mandate. A bill by Rep. Janéa Holmquist, R-Moses Lake, would mandate that all diesel sold in Washington contain at least 2 percent biodiesel, with an ultimate target of higher than that. This is a kind of protectionism, of forbidding people to buy ordinary diesel in order to favor biodiesel.

The intention is also to favor a biodiesel crop. Seattle Biodiesel has been using soybean oil from the Midwest. "We need to establish an oilseed industry in Washington," says Jim Armstrong, spokesman for the Spokane County Conservation District.

Legally, the state cannot mandate local biodiesel. That would be a trade barrier against other states. And yet, a local industry is the goal. Hence the measure in Holmquist's bill that would delay the 2-percent mandate until the state determines that Washington's farmers are ready to supply a substantial amount of vegetable oil.

The crop in mind is canola. It is a useful rotation crop for wheat fields, but is not lucrative here. A better crop might be mustard, because the pungent chemical in mustard might give the crushed seed value as a natural herbicide and pesticide, which could be worth more than fodder. Ag people aren't sure yet, but the vision is there.

Imagine a farm crop that replaced an equivalent amount of petroleum diesel and petrochemical pesticides.

Imagine a yellow Palouse.

You see the attraction of it. It is infectious. It reminds Michael Conklin, CEO of Cooperative Agricultural Producers, Rosalia, of the enthusiasm for strawboard. That was an idea of making construction panels out of straw. It was technically feasible, but it didn't pay. It couldn't beat panels from wood. Conklin believes biodiesel will eventually pay: He has a proposal for a 5 million-gallon plant in Spokane.

What will make it pay, Conklin believes, is peak oil, the geologic theory that world oil production will start to fall soon. Norm Leatha, who teaches entrepreneurship at Gonzaga University and works with the Delta Angel Group, also cites peak oil. He has not invested in biodiesel, but he says, "It will work at some point."

How long will the industry need to be favored? If only a few years, we will be glad we did it. If it lives as a hothouse flower for decades, we will have adopted another pet to take care of.

The industry says it wants and expects to survive on its own, but it can't wait, and has been saying this for several years. People began listening when oil prices went up on account of demand from China. If peak oil is even half true, the search for new fuels is urgent — maybe urgent enough to break capitalism's rule about starting industries that don't pay.

Bruce Ramsey's column appears regularly on editorial pages of The Times. His e-mail address is bramsey@seattletimes.com