30/09/05 NEW YORK, (Bernama) -- Even as Malaysia debates over theincreased use of palm-oil based biodiesel as an alternative toconventional fossil fuel in the future -- biodiesel was a key themediscussed at the recent International Palm Oil Congress 2005 in PetalingJaya -- the use of agriculture-derived renewable sources of energy isproceeding apace in other parts of the world.

In the United States, for example, Minnesota became the first state toenforce the requirement from Thursday that all diesel fuel sold in thestate is, at least, partly distilled from soybeans.

The move is seen as an attempt to mitigate the pressure on the demand inthe US which has developed a voracious appetite for crude oil.

Indeed, the Minnesota Department of Agriculture claims that Minnesota isthe first US state to pass such a law that specifically aims to promotebiodiesel, a fuel produced from agricultural oils and fats.

While Malaysian consumers rightly complain of rising oil prices, theyshould take consolation from the fact that oil prices in the US havesurged more than 80 percent in the past three years.

A barrel of oil costs over US$65 today and gasoline retail prices haverisen to over US$3 a gallon in many parts of the US. To make mattersworse, the two dreaded hurricanes Katrina and Rita have caused disruptionsin fuel production in the Gulf of Mexico, creating bottlenecks in suppliesin some regions.

Unlike in the past, when the fossil oil industry did not seem particularlyenthusiastic of the development of alternative sources of energy, there isnow official incentive for the development of biodiesel.

US President George W. Bush recently signed a new energy bill whichincluded tax breaks for biodiesel. The requirement was actually passed in2002 but its implementation had been held back because biodieselproduction was considered insufficient then.

Minnesota, which is the biggest US producer of the soybean-basedalternative biodiesel, has already sold the fuel to more than 200 petrolpumps in the state.

The state's experts and representatives of a number of associationsconnected with the oils and fats sector have been closely monitoringdevelopments in Malaysia which is proactively promoting palm-oil basedbiodiesel, considered a competitive product to soybean-based fuel.

Indeed, American soybean producers have in the past been critical of palmoil and had projected it, at one time, as harmful to human health.

An intensive campaign, launched by various palm-oil interest groups inMalaysia, to dispel such misnomers succeeded in putting across the messagethat palm oil was not, in fact, harmful to human health.

Minnesota already has two plants -- one in Alberta Lea and the other inBrewster -- which have started to produce the first batches of thesoybean-based biodiesel.

As the largest producer of soybeans, it intends to ship a large part ofthe production outside the state.

Officials of the Minnesota Department of Agriculture have been citing thecase of European countries such as Germany, the Netherlands and Francewhere alternative fuels are not only accepted but also promoted throughtax rebates or even exemptions.

Petrol attracts higher taxes in Europe, making it easier and necessary forproducers and consumers to look at alternative fuels. However, this wouldbe difficult in the US where the strong oil lobby would vent itsopposition.

US experts say that Europeans are "way ahead of the United States as faras tapping alternative forms of fuel and reducing dependence on fossilfuels are concerned".

"Of course, they (Europeans) are pioneers in this respect. Their approachhas been far more innovative than ours in pushing the development ofalternative sources of energy," says James Marconi, an energy consultantbased near New York City, who regularly monitors developments in otherregions.

US critics of oil as fuel have been calling for higher taxes on oil as ameans to curb its "wasteful usage". Because US taxes are much lower, theyargue, there is less pressure in the US than in Europe on the use offossil fuel.

However, with oil prices hitting the roof, these critics expect therewould be pressure now to develop renewable fuels in the US too.

US experts note that Malaysia is going to establish three plants for theproduction of palm-based biodiesel, according to an announcement made atthe International Palm Oil Congress 2005.

They believe that Malaysia, which has abundance of palm oil to producebiodiesel, will initially concentrate on its domestic market and thenexport to one or two European countries which are "more open" than the USin welcoming agro-based form of energy.

Whether Malaysian palm-oil based biodiesel will eventually make its wayinto the US market remains to be seen, according to soybean producers.

However, the US cultivators of soybeans are confident that their biodieselhas a good chance of being accepted nationwide in the long run.

They point to the abundant availability of soybean in the country. Forexample, in Albert Lea, one of the sites in Minnesota for soybeanbiodiesel production, there are huge soybean fields around the newenvironment-friendly biodiesel plant which is one of the three in whichmore than 3,000 farmers of the state pumped huge investments running intomillions of dollars.

The National Biodiesel Board, which promotes the development of agro-baseddiesel, says that Minnesota is one state which has shown a strongpropensity to develop biodiesel and, in effect, has been a pioneer in thedevelopment of biodiesel in the US.

The two plants in the state will produce a combined 63 million gallons ofbiodiesel annually.

Malaysian producers of biodiesel should also note that two multinationalcorporations -- Cargill Inc of Minnetonka, Minnesota, and Archer DanielsMidland of Decatur, Illinois -- plan to set up biodiesel refineries in theUS as they have done in Europe.

Though biodiesel production in the US is still very much at an "infantstage" with only 30 million gallons of the fuel produced last year by 35plants, its production capacity is expected to increase to 124 milliongallons and even more in the current year, according to the projections ofthe US Department of Agriculture.

The rising oil prices have, unwittingly, proved to be a blessing for theUS agro-based fuel industry.

Demand has received a strong impetus because of the new Minnesota law andthe tax benefits offered in the state of Illinois for biodiesel.

-- BERNAMA