HARRISBURG -- A law enacted last year to reduce Pennsylvania's dependence on foreign oil is starting to pay dividends, Gov. Ed Rendell said today.

Seven Pennsylvania companies that manufacture biodiesel fuel have passed an important milestone -- they can now make at least 40 million gallons of such fuel each year, he said.

As a result, a year from now, at least 2 percent of every gallon of on-road diesel fuel sold in Pennsylvania must come from biodiesel.

Soybeans are commonly used to manufacture biodiesel fuel, as are animal fats and used cooking liquids, such as the oil that restaurants use to make french fries.

Mr. Rendell said there are at least three major benefits from using biofuels to power diesel trucks. One is that it provides a market for Pennsylvania farmers who grow soybeans. Another is environmental benefits, since biofuels burn cleaner than fossil fuels. And thirdly, increasing the use of home-grown biofuels will help reduce the amount of petroleum-based fuels that the state must import from foreign counties.

There are now seven plants in the state that make biofuels, with two more coming soon, state officials said. Once the state production hits 100 million gallons a year, the amount of each gallon of diesel fuel sold in Pennsylvania must reach 5 percent.

When the state can make 200 million gallons a year, each gallon must have 10 percent biofuel.

Mr. Rendell said the 2008 law also aims to increase the production and use of "cellulosic ethanol" for gasoline in cars. Corn, wood chips and various types of grasses can be used to make ethanol, which is used in gasoline to help reduce the state's need for foreign oil.

Once the yearly in-state production of such ethanol reaches 350 million gallons, all gasoline sold in the state must contain 10 percent ethanol.