More More RHD: REG expanding drop-in diesel?

May 7, 2017 |

From Iowa we received news that Renewable Energy Group has agreed to acquire approximately 82 acres of land at its Geismar, Louisiana biorefinery from Lion Copolymer, for $20M. The goal? To improve and utilize to support existing production capacity and future expansion opportunities.  Previously, the land was leased.

The near-term gain

The transaction is expected to reduce REG’s operating costs and create opportunities for expansion at Geismar, a 75-million gallon annual nameplate capacity renewable hydrocarbon diesel biorefinery that also produces renewable naphtha and renewable liquefied petroleum gas.

The bigger picture: more diesel

REG is evaluating a number of other sites for expansion of the company’s renewable hydrocarbon diesel production capacity, including REG’s plants in Seneca, Illinois and Grays Harbor, Washington, in addition to other West Coast locations.

The race for biobased — that’s renewable hydrocarbon diesel — has been heating up of late. What’s at stake? For most retailers, biodiesel is limited to B20 blends owing to blendwall limits for some vehicles. Now, with US production of biodiesel hovering at less than 2 billion wet gallons, there’s absolutely no concern of a B20 saturation point — that wouldn’t occur until biodiesel production went north of at least 6 billion gallons.

But as Propel Fuels has found, you can sell as much as 3X renewable diesel as you can biodiesel in key markets like California — it’s just easier to distribute the product and secure customer acceptance for a drop in.

Plus, you can distribute 5X as much product with a 100% renewable hydrocarbon product — no need to sell four gallons of petroleum diesel for every gallon of renewable product, as is the case  with B20 biodiesel. Overall, the immediate demand uptick could be as much as 15X — if the feedstock can be affordably sourced. And that will be the limiting factor, long before there’s a challenge in distribution.

Perhaps that’s why REG is looking at multiple locations, especially on the West Coast. That’s closer to the market, and closer to the most affordable (waste) feedstocks like yellow grease.

The competition heats up

Titans like Neste and Tesoro are all over the trend. We reported here on the latest with Neste and here on the latest with Tesoro.

The feedstock sources

Are there 30 billion affordable gallons of waste grease available. No one really knows — because there’s waste grease in every gallon of water going through wastewater treatment, and there’s trap grease and waste fish oils — but no one would have an exact gallonage right now. It would be a real stretch, however, to find anything like those kinds of gallon targets. We looked at that math challenge here.

So the answer may lie in oilseed crops for the near term — but think beyond soybeans and rapeseed, because AltAir is partnering to access camelina-based crop oils, and Agrisoma is deploying carinata oilseed crops as fast as it can.

It’s going to be difficult to see how sugars could be a source for fuel-based oils — the best conversion platform for that, so far, is TerraVia’s algae-based technology — and they have now abandoned the fuels arena because they feel they can’t be cost competitive in a world of $60 oil in the near-term. For now, the best sources from that world will likely be corn oil.

But oilseeds have low yields, at this time, compared to grain stocks. It’s one of the reasons that ARPA-E sponsored that PETRO project to improve oilseed yields. We wrote about those technologies here.

So, who has a tech to convert CO2, water and some nutrients into a high-yield plant that can grow in soil rather than in expensive ponds, like algae?

You may find that the answer lies in the tobacco plant — and Lord knows, tobacco growers could use an application beyond smoking products. We looked at some of the efforts on tobacco, here.

Reaction from the stakeholders

“This acquisition is consistent with REG’s tactic of expanding the footprint of its biorefineries in preparation for complementary activities,” said Daniel J. Oh, President and CEO. “With the recent increase in production at REG’s Geismar site and the growing market demand for renewable hydrocarbon diesel, we believe now is the right time to evaluate capacity expansion opportunities.”

“We expect the evaluation process for renewable hydrocarbon diesel expansion to proceed according to our strategic decision-making process,” said Brad Albin, REG Vice President, Manufacturing. “This includes an analysis of economic viability, logistics, feedstock availability, market demand, financing options and state and local support.”

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