The rise of the neodiesel companies

Biodiesel? Renewable diesel? Enzymatic biodiesel? Renewable jet fuel? Or, more to the point, a combination of some or all?

Here comes Neo – the neodiesel companies — brimming with technologies to create cleaner alternatives to a powerhouse fuel. They have all the performance, half the carbon, and a range of no-food feedstocks to choose from.

In covering the redefinition of the US ethanol industry, we were reminded by that the first generation biodiesel industry is going through its own tremendous evolution, when news arrived from Iowa that Renewable Energy Group reached an agreement with Tyson Foods to acquire Tyson’s 50% ownership position in Dynamic Fuels, LLC  and its 75-million gallon per year nameplate capacity renewable diesel biorefinery in Geismar, Louisiana.

After all, with 257 million gallons of annual nameplate production capacity at biorefineries across the country, REG is now the established biodiesel production leaders, and the leading pure-play public company in space since its well-received IPO.

A portion of the development and construction of the Geismar biorefinery was funded by $100 million in Gulf Opportunity Zone Bonds, issued through the Louisiana Public Facilities Authority. Closing of the acquisition from Tyson Foods is conditioned on REG’s replacement of the letter of credit Tyson Foods obtained to support issuance of the bonds or completion of a financing sufficient to refinance the bonds prior to December 31, 2014 on terms acceptable to REG. The deal is also contingent upon the closing of REG’s December 2013 announced agreement to acquire substantially all of the assets of Syntroleum Corporation, would give REG full ownership of Dynamic Fuels.

Tyson and Syntroleum formed Dynamic Fuels in 2007 as a 50/50 joint venture. The Geismar facility, completed in 2010, was the first large scale renewable diesel biorefinery built in the U.S.

Partial view of the Dynamic Fuels plant in Geismar, Louisiana

Reaction from REG and Tyson

“Upon closing, this is another milestone for REG in growing our core advanced biofuels business,” said Daniel J. Oh, REG President & CEO. “It gives us the opportunity to further expand our production capacity into new product lines, while growing our overall advanced biofuel manufacturing capability, and bringing on other renewable chemical applications.”

“Selling our interest in Dynamic Fuels to REG provides capital for Tyson to redeploy into other opportunities,” said Andrew Rojeski, Vice President-Renewable Energy for Tyson Foods. “REG is a long-term customer of ours, buying fats, oils and greases to make renewable fuel, and we hope to continue that relationship.”

Under the terms of the agreement, an REG subsidiary would acquire Tyson Foods’ 50% membership interest in Dynamic Fuels by paying Tyson approximately $18 million in cash at closing and up to $35 million in future payments tied to production volume at the Geismar biorefinery over a period of up to eleven and a half years. REG will also fund repayment of approximately $12 million of Dynamic Fuels’ indebtedness to Tyson at closing.

The top 3 new business strategies in biodiesel

1. Diversification of feedstocks through introduction of high FFA-tolerant technologies — and one-step processing.

Although REG has been a pioneer in the introduction of a diversified feedstock set, we were impressed to hear this month of the first commercial-scale use of an innovative biodiesel technology through a joint venture between Benefuel  and FHR known as Duonix .

Benefuel’s ENSEL technology updates 75-year-old chemistry to provide an exciting new process for next-generation renewable fuel and industrial chemicals production. The technology is unique because it allows the use of lower cost, high free fatty acid (FFA) feedstocks such as animal tallow, unrefined oils, used vegetable oils or distillers corn oil. This is accomplished through the use of a solid catalyst that combines esterification and transesterification into a single step, which has been a long-standing goal of the biodiesel industry. The process also ensures the final product meets or exceeds all domestic and European biodiesel standards.

Flint Hills Resources will begin retrofitting the Beatrice, Nebraska biodiesel plant for a planned commencement of operations during the summer of 2015. Once the Duonix Beatrice plant is operational, it will produce approximately 50 million gallons of biodiesel each year and employ about 45 people in the local community.

Flint Hills Resources acquired the Beatrice biodiesel plant out of bankruptcy in 2011. The plant was originally built in 2008, but was not finished and never operated. In May 2013, Benefuel announced a joint venture with Flint Hills Resources, known as Duonix, LLC, to develop domestic biodiesel production capabilities. Duonix Beatrice will be the first joint commercial venture from the companies.

Reaction from Flint Hills Resources and Benefuel

“We are pleased that our Beatrice, Nebraska facility will have the opportunity to bring this innovative technology to life,” said Brad Razook, President of Flint Hills Resources. “We look forward to demonstrating the technology’s commercial application and beginning production.”

“Benefuel’s goal has always been to improve the profitability of biodiesel by reducing the operating costs to produce it,” said Rob Tripp, Benefuel CEO. “For more than six years, we have worked to develop a product we believe will improve the profitability of biodiesel, slow resource consumption and cut waste.”

2. Development of a broad portfolio of technologies in biodiesel, diesel, jet and chemicals.

This is the route that REG has been taking — not only with its proposed acquisition of Dynamic Fuels, but its completed acquisition of LS9. Now branded as REG Life Sciences, this unit uses modified e.coli, using sugar as its carbon source, to create a wide variety of target fuels and chemicals including biodiesel, fatty alcohols and surfactants.

It also is the route being taken by the likes of Amyris and Solazyme, though only Solazyme at this time specifically produces biodiesel (Soladiesel) using an algae-based fermentation technology, while Amyris focuses on diesel and jet in its fuels portfolio, using a modified yeast fermentation.

A number of algae-based companies have been working on this route.

Case in point? In 2012, Cellana announced the launch of its ReNew brand and ReNew Omega-3 line of algae-based products. The ReNew portfolio is comprised of four main product categories: ReNew Omega-3, including both  ReNew Omega-3 products includes ReNewEPA and ReNewDHA, ReNew Feed as a nutritional product for the animal feed market; ReNew Fuel as an algae-based biocrude, particularly for jet fuels for commercial and military aircraft; and ReNew Algae, available in bulk for customers to apply their own extraction technologies and develop customized solutions within these application areas. The ReNew product line is derived from Cellana’s scalable, sustainable, and patented ALDUO algae production technology. Cellana’s six-acre Kona Demonstration Facility on Hawaii’s Big Island has produced more than nine tons of algal biomass for commercial testing.

3. Enzymatic biodiesel.

It wasn’t long ago that we first got news that enzymatic biodiesel was on its way — that is, using enzymes rather than caustic inorganic catalysts to separate the glycerine from the fatty acid methyl esters that are constituents of triglyceride oils that are found in plants and animal fats.

Novozymes has been hard at work in developing such a process, and companies such as Piedmont Biofuels and Viesel have licensed it. Piedmont has been operating for some time — albeit at a smaller-scale — for some time. The new process utilizes Novozymes’ Callera Trans L enzyme. This is the first implementation in the world of enzymatic transesterification at 30 million gallon commercial scale.

Commercial progress was made in January when, Blue Sun Energy announced the implementation of its enzymatic biodiesel processing technology, making the Blue Sun St. Joe Refinery the most advanced biodiesel production facility in the world. The process at the St. Joe refinery produces very high quality biodiesel, which is even further improved by the state-of-the-art distillation system installed last year at the refinery.Blue Sun’s process is more efficient in methanol recovery and use, further reducing costs. In co‑products, the value of glycerin produced is much higher than in standard biodiesel operations – 20 to 30 cents per pound versus less than 10 cents per pound traditionally.

The development of such a technology had been tipped before.

In 2012, the California Energy Commission awarded $1.86 million to Yokayo Biofuels to expand and upgrade its facilities, increasing its biodiesel production capacity from 1,400 gallons a day to 2,000 gallons a day using a pioneering enzymatic production process. The Ukiah-based company collects used fryer oil from more than 1,000 restaurants and other facilities in Northern California and converts it into biodiesel.  The pioneering enzymatic process to be used in the facility was described as “environmentally cleaner and more efficient than current methods, and also produces a higher quality biodiesel. In addition, the process allows greater use of brown grease, typically from grease traps, which can only be used in very small quantities in traditional biodiesel production.”

Also in June 2012, Piedmont Biofuels opened its new FaESTER enzymatic biodiesel refinery, created as a result of a three-year, $1.2 million U.S. DOE Small Business Innovation and Research grant. Piedmont had been partnered with Novozymes since the project’s inception.

Back in 2011, Biodiesel Experts International related that it has developed a process – and would provide engineering, onsite supervision, startup, training, enzyme material, and complete plants – for an enzymatic process to convert waste oils or greases into ASTM spec biodiesel. “The enzymatic process consist of two different types of enzyme, one for transesterification and one for esterification,” BEI’s Ernie DeMartino advised the Digest.  “Feed stocks with 0-100 FFA can be processed at an operating temperature of 85 F with minimal methanol required.  No caustics are required and there is no soap formation.” According to BEI, existing biodiesel plants can be re-engineered to utilize the process.

Back in 2010, Sunho Biodiesel tipped that it had developed what it termed a complete enzymatic process for biodiesel production lower than the cost of producing diesel. According to Sunho’s researchers, their process eliminates the need for pre-treatment, and operates at room temperature and pressure, and produces a high-value, pharma-grade technical glycerine. Total process time is said to be in the 30 minute range.

The Bottom Line

The diversification strategies may be fewer in number, but are no less profound in their scope. In REG’s case, the company has followed the reaching of large-scale in its biodiesel portfolio with an astonishing diversification into renewable diesel, jet fuel, and chemicals.

Other companies that have been embracing the new strategies have been focusing more on launching first commercial facilities — as is the case with Solazyme, Cellana, Blue Sun and Viesel.

One item to note — though the strategies are diverse, and the gallonage is substantial given the involvement of REG and the likes of Solazyme, the vast majority of biodiesel producers have opted to remain focused on their lead product and a narrower range of feedstocks. We’ll see how that shakes out as a strategy during the next few years.