The Location Decisions of Biodiesel Refineries T. Randall Fortenbery,Steven C. Deller, and Lindsay Amiel ABSTRACT. We examine the community character- istics that lead to locating a biodiesel plant. Utilizing data that includes all biodiesel plants in the United States, we employ spatial econometrics to evaluate those characteristics that lead to a plant siting. While public policies associated with biofuels may be en- dogenous to location decisions, we find them unim- portant except in the case of consumption mandates. Despite evidence of plant clusters, it does not appear that operating plants are critical to the siting of a new plant. Results provide insights for community leaders relative to actions that can increase the probability a plant will be built. (JEL O18, Q42) I. INTRODUCTION Despite significant growth in U.S. biofuels production capacity, controversy exists con- cerning the impacts biorefineries have on in- dividual communities. As a result there are a range of reasons some plants face little local resistance and others fail to get local approval (Fortenbery and Deller 2008; Low and Isser- man 2009). The earliest domestic biorefiner- ies focused on the production of ethanol, with biodiesel production lagging substantially. In 2009, for example, the United States produced 10.75 billion gallons of ethanol from plants that had a total capacity of about 13.5 billion gallons (Renewable Fuels Association 2010), while total U.S. biodiesel production was only 490 million gallons from plants with a total capacity of about 2.7 billion gallons (National Biodiesel Board 2010). Due to ethanol’s domination in the U.S. biofuels market, there have been several stud- ies examining the relationships between eth- anol plants and their host communities (see, e.g., McNew and Griffith 2005; Swenson 2008; Fortenbery, Turnquist, and Foltz 2008; Flora 2008). The works of Sarmiento and Wil- Land Economics • February 2013 • 89 (1): 118–136 ISSN 0023-7639; E-ISSN 1543-8325  2013 by the Board of Regents of the University of Wisconsin System son (2007), Haddad, Taylor, and Owusu (2010), Lambert and his colleagues (2008), and Low and Isserman (2009) are the most germane to this study in that they explicitly model the location decisions of ethanol plants in the United States. Because of much lower market penetration, however, little work has focused on issues associated with biodiesel plants. Such work is important for two rea- sons. First, the current federal Renewable Fu- els Standard (RFS) explicitly allows for bio- diesel to be counted as an advanced biofuel, meaning it can count toward the RFS. This provides significant opportunity for biodiesel to enter the fuel stream for commercial trucks. More importantly, understanding the location criteria surrounding biodiesel plants could provide important insight in understanding next-generation biorefineries. Since corn- based ethanol has essentially reached its max- imum allowable contribution to the RFS, plants focused on cellulosic ethanol produc- tion and other advanced biofuels (bio–jet fuel etc.) will need to be developed. Because these plants will be developed as part of a compre- hensive energy policy, not as a rural devel- opment initiative, the issues surrounding plant location may be much more similar to those associated with biodiesel plants, as opposed to earlier-generation ethanol plants. Initially one might presume that impacts would not be all that different: both generate employment and other benefits from the pro- duction of renewable transportation fuels, and the positives and negatives associated with biofuel manufacturing might be similar re- gardless of whether the fuel produced is a gas- oline or a diesel fuel substitute. From a The authors are, respectively, professor and Tom Mick Endowed Chair, School of Economic Sciences, Washington State University, Pullman; professor, De- partment of Agricultural and Applied Economics, University of Wisconsin–Madison; and graduate re- search assistant, Department of Agricultural and Ap- plied Economics, University of Wisconsin–Madison.