Tanker on the water

A new frontier for biofuels: Marine and rail

April 1, 2024 | Brock Johnston

Transportation sector could reshape future demand for biomass-based diesel fuels

Changing market trends are continuing to elevate biodiesel and renewable diesel as immediate, cleaner-burning fuel solutions for rail and marine transportation. As fleets seek to decarbonize to meet the needs of their customers, U.S. soybean farmers could be poised to play a larger, more profitable role — producing the feedstock needed to meet future fuel demand.

“Farmers know that their business depends on exports, and those exports depend on robust and reliable transportation,” says Matt Herman, chief officer of demand and advocacy for the Iowa Soybean Association (ISA). “The world is trying to decarbonize, including the companies who logistically help farmers access the global market.”

Petroleum products have accounted for about 90% of the total energy used annually for U.S. transportation. This includes common modes of transport like freight rail, boats and ships, aircraft, light- and heavy-duty trucks and more. Biodiesel, renewable diesel and other biofuels accounted for about 6% of total U.S. transportation sector energy consumption in 2022.

But in recent years, companies have committed more than $6 billion in increased soybean crush capacity through new or expanded facilities, largely due to demand for biodiesel and renewable diesel. This is especially evident in Iowa, which has seen crush growth of its own and leads the nation in both soy processing and biodiesel production.

Iowa’s soybean farmers are continuing efforts to grow biofuel markets through their support of Clean Fuels Alliance America (Clean Fuels), formerly the National Biodiesel Board. The organization, funded in part by the soybean checkoff, has identified the rail and maritime industries as emerging markets primed for clean fuel consumption.

Rail reimagined

According to Clean Fuels, the railroad industry serves as the market with the most immediate potential for increased consumption of higher blends.

Class I railroads, or rail carriers designated by the Surface Transportation Board earning more than $250 million in annual revenue, consumed nearly 3.2 billion gallons of diesel in 2022. It’s estimated that only a small percentage of total gallons contained a biodiesel and/or renewable diesel blend.

Most leading railroads and equipment manufacturers support using blends of 5% biodiesel (B5) to 20% biodiesel (B20). Companies have also expressed support for renewable diesel at varying blend preferences, ranging from 30% renewable diesel (R30) to 100% renewable diesel (R100).

Scott Fenwick, technical director at Clean Fuels, says that while the rail industry has historically been hesitant to incorporate higher biodiesel blends, education and outreach efforts are helping to carve a path forward.

“We’re continuing to work directly with locomotive manufacturers and railroads to help increase their confidence and comfortability with higher blends and the current specifications,” Fenwick says.

Much of this work involves highlighting biodiesel’s high-performance benefits, including a higher cetane rating, improved lubricity and emissions reductions. Consistent reporting and data have also shown that today’s biodiesel meets tighter quality specifications, showing that fuel quality well exceeds the minimum ASTM testing requirements.

“When you look at the multi-million-dollar price tag of a single locomotive, you can see why companies want to be running premium fuel that’s efficient and cost-effective,” says Fenwick. “Our work is showing that clean fuels are quality and compatible with their needs.”

Many North American-based rail companies have publicly signaled that biofuels will play a major role in their plans to lower carbon emissions. Two separate Class I railroads have also announced that 50% of their intended carbon reductions will come from biofuels by 2030.

BNSF — the largest U.S. freight railroad — began testing a 20% biodiesel and 80% renewable diesel (B20/R80) blend in 2022. By working with locomotive manufacturers, the company is aiming to increase the amount of biodiesel and renewable diesel fuels used to operate their fleet of locomotives.

Some passenger rail, including the Bay Area Regional Transit which traverses much of Northern California from the Bay Area to Sacramento, have already fully converted to running R100 in their diesel train fleet.

Clean Fuels estimates around 100 million gallons of biomass-based diesel, including biodiesel and renewable diesel, was consumed within the rail industry in 2023. The group also expects to see increased volumes moving forward as additional crush facilities come online.

“Our progress in the rail market wouldn’t be possible without soybean farmers,” says Fenwick. “They allow us (Clean Fuels) to do the technical, education and market development work needed to enter these fuel markets and grow.”

A strong U.S. biodiesel market helps farmers weather difficult economic times. By increasing soybean oil value, biodiesel supported 13% of the price per bushel of soybeans — or $1.78 per bushel in 2022.

What about marine?

The marine market offers a vast and exciting opportunity for soybean farmers and biodiesel producers. Specifically, for maritime diesel consumers including tugboats, ferry and pilotage vessels, and more that support port operations and inland waterway transportation.

Worldwide, annual marine fuel consumption is about 124 billion gallons.

When used for marine applications, biodiesel blends have historically ranged from B5 to B10.

“Companies like ADM and others are using biodiesel on the inland waterways for barge traffic up and down the Mississippi River, or for small Hornblower Cruises for tourists, at lower blends,” says Herman.

But according to Clean Fuels, interest and demand are building from port operators in major coastal shipping regions like the Northeast. The push comes as customers, investors and policy decisions are pressuring the market to also decarbonize.

“For larger scale operations like marine, electrification is just not an immediate solution or realistic option to meet their end goal,” says Herman.

In New York City, biodiesel blends already play a role in heating homes and powering the city’s equipment fleet to reduce emissions. But it’s the Port of New York and New Jersey that has yet to access the full potential of biomass-based fuels.

An estimated 400 million gallons of diesel fuel are consumed by the port each year. The hub is also the largest active port within the U.S. by cargo volume, moving more than 10 million, 20-foot equivalent unit containers in 2022. That’s equivalent to approximately 9.73 billion soybean bushels in annual volume.

It’s an emerging market that Randy Miller, past ISA president and soybean farmer from Lacona, saw firsthand during a recent biofuels tour in New York City with Clean Fuels.

“I think there’s a lot for farmers to gain if this market took off,” Miller says. “We’ve been able to produce more (soybeans) to meet demand, but the marketplace will decide if we grow soybeans for marine.”

By promoting the capability of existing fuel infrastructure and continuing to educate and work with port operators in specific segments of the marine industry, Clean Fuels says the market could bring new opportunities to renewable fuel producers and soybean farmers.

“Trade and transportation aren’t going away anytime soon,” Miller says. “So it’s in everyone’s interest that soybean farmers and biodiesel producers can capture some of that value.”