Two buses in Sioux Falls, S.D., will be the center of the first U.S. tests of a diesel fuel substitute made from vegetable oil.

In April Novamont North America, a subsidiary of Ferruzzi-Montedison of Italy, will begin a four-month test of Diesel-Bi in the Sioux Falls public transit buses.Diesel-Bi, which has been tested in mass transportation and as a heating fuel in Europe, can be used in engines and boilers that use diesel without modification, Novamont said.

"The product has been around for quite a while," Leonardo Formaro, president of Novamont North America, told The Journal of Commerce.

But since it emits no sulfur dioxide, unlike traditional diesel fuel, ''there is a necessity for using this kind of product now," Mr. Formaro said.

In a statement, Ferruzzi said Diesel-Bi offers similar power, performance, engine-wear and fuel consumption as traditional diesel made from petroleum.

Diesel-Bi can be made from a number of vegetable oils, including soy, canola and sunflower, which will be supplied by Central Soya Co., of Fort Wayne, Ind., another Ferruzzi subsidiary.

The process to convert the oil to fuel - known as catalytic transesterification - will be done by a third party, but overseen by Central Soya, a Ferruzzi spokeswoman in New York said.

Since Diesel-Bi now is made only in test quantities, Novamont did not have commercial cost projection for the fuel. It is, however, more expensive than traditional diesel, the company said.

But the economics may be improved by "valuable byproducts" from the processing of canola and soy oil, which can be used for feed, said Sen. Thomas Daschle, D-S.D.

At this point, it is not clear whether Diesel-Bi would require a subsidy or tax incentive to be economically viable, Sen. Daschle said in an interview.

Ethanol, an alternative fuel made from corn, is eligible for incentives.

But the public may be open to granting such help for Diesel-Bi, if needed, ''given the reception people have for environmentally acceptable products," the senator added.

Mr. Formaro said Diesel-Bi is "ideal for mass transportation" because it is easier to store and is not as flammable or volatile as other fuels.

Because the fuel is made from vegetable oil, it is biodegradable, he added. ''In the case of a spill, it would break down. There is no need to do the kind of clean up" necessary with petroleum products.

Novamont also is working with an independent laboratory in the United States to test Diesel-Bi for emissions, ensuring that it meets Environmental Protection Agency standards.

"Sulfur dioxide emissions are nil," Mr. Formaro said.

When burned, however, the fuel emits carbon dioxide, which has been linked to global warming. But Novamont claims there is no net gain of carbon dioxide in the environment.