A huge red arrow points toward a fuel pump at Alliance Mart gas station in Monterey, advertising “BIODIESEL HERE NOW.” But the fuel that flows from the pump is only 5 percent plant-derived. The rest is old-fashioned dinosaur grease.

That’s because of a February 2008 state memo limiting biodiesel blends stored underground to 5 percent, until an independent testing lab proves the tanks and their components can safely handle purer biodiesel products. Since most California gas stations use underground storage tanks (USTs), the state clampdown choked the retail supply for biodiesel consumers.

Affected fuel suppliers can now apply to bump their bio-blends up to 20 percent, thanks to a compromise approved by the State Water Resources Control Board in early May. The change is intended to help government fleets meet federal alternative fueling goals, while buying up to three more years for the lengthy equipment safety testing process.

One-fifth biodiesel is an improvement over one-twentieth, but it still falls pitifully short of the fossil-fuel-free future biodiesel enthusiasts had in mind.

Five years ago, Alliance began supplying a 99 percent biodiesel blend, a move that positioned the station to capture a loyal customer base. Within six months it was selling about 1,000 gallons of biodiesel per month.

But last year’s 5 percent rule caused a steep drop-off in biodiesel sales, according to Alliance manager Deanna Daff: “People kinda think, ‘Why bother?’”

The biodiesel mapping website NearBio.com lists Alliance as one of only two retail bio-fueling stations in Monterey County. The other, GG Petroleum in Salinas, has also scaled back its biodiesel content to comply with state rules, according to manager Maribel Alvarez.

Local biodiesel producer Energy Alternative Solutions Inc., by contrast, hasn’t been affected at all, says founder Rich Gillis. After safety testing its product, EASI sells it to a distributor in San Jose, which in turn blends it and sells to retailers, fleets and farmers – most of whom, Gillis says, have aboveground tanks. “We recognized when we got into this business five years ago that putting things underground just didn’t make any sense,” he says.

The company’s Gonzales plant (see story, pg. 16) makes 100 percent biodiesel, which Gillis describes as faster to biodegrade than sugar and less toxic than table salt. But it’s not the basic stuff of biodiesel – animal fat, raw vegetable oil and recycled cooking grease – that concerns the state. Water regulators are more suspicious of the toxic additives and petrofuels that compose a wide spectrum of biodiesel blends, each with a unique chemical makeup.

State law requires all fuels stored underground to be safety-certified by Underwriters Laboratories, a third-party testing organization. Without UL approval, says Bob Hodam of the state water board, the state has no assurance biodiesel blends won’t break down the storage equipment and leak into the ground.

But Kent Bullard, founder of the Southern California Biodiesel Users Group, notes the water board allowed underground biodiesel storage for at least eight years before imposing the 2008 ban. “Why not let it go until they get the testing done?” he asks. “There’s been a great negativity from the water board over this issue.”

Hodam lobs the blame right back. “I think the biodiesel folks feel like they’ve been singled out, but the fact is they didn’t do what all the other fuels are required to do,” he says. “Even though they knew this was a requirement, they’re trying to skate by.”

The biodiesel industry should be pressuring underground tank manufacturers get their equipment UL-approved for biodiesel storage, Hodam says.

But spokesmen for the two leading UST manufacturers suggest the problem is the lab’s. “UL has not established a biodiesel test fuel or test protocol that underground tank manufacturers can use,” writes Ron Shaffer, spokesman for Containment Solutions Inc. “We are unaware of any timeline for UL to have this completed.”

Jim Anderson of UST makerXerxes Corporation agrees. A UL spokesman did not respond to requests for comment.

Meanwhile, the gridlock over biodiesel storage is affecting fuel supplies not only on land, but also in the sea. At Channel Islands National Park, Bullard says, the boats, vehicles and equipment began using biodiesel nearly a decade ago – but had to switch to regular diesel last year when state regulations closed the B100 fuel dock at Ventura Harbor.

“We were forced to go back to using hydrocarbon-based, nonrenewable fuels in the marine environment because of the underground tank issue,” says Bullard, who is the park’s maintenance supervisor.

While the power players stall, Monterey County’s die-hard biodiesel customers are left with only a few fuel sources: backyard grease barrels, Santa Cruz and San Francisco retail stations with aboveground biodiesel tanks, or – in a pinch – two petrodiesel pumps with a hint of peanut oil.