Monster on the Big Muddy: REG Geismar to expand renewable hydrocarbon production to 340 million gallons

In Louisiana, Renewable Energy Group said it will undertake a capacity expansion of its Geismar, Louisiana biorefinery by 250 million gallons annually to 340 million gallons per year. This announcement follows a thorough review and site selection process. Construction should begin in mid to late 2021 with target mechanical completion date in late 2023.

The Project

REG said the expansion will require approximately $825 million in capital investment and is committed to supporting jobs and economic development in the communities in which it operates. Louisiana’s Governor John Bel Edwards announced his support for this project with the inclusion of an incentive package that contains comprehensive workforce support and tax incentives.

In July, we reported that REG’s Geismar facility was one of the company’s potential expansion sites in the US and Europe where negotiations were underway with as much as $65 million in potential tax exemptions over 10 years up for grabs, At the time, it was thought that an expansion would cost $1.2 billion.

The Geismar backstory

In 2013, we reported that Renewable Energy Group acquired substantially all of the assets of Syntroleum Corporation, and assume substantially all of the material liabilities of Syntroleum, for 3,796,000 shares of REG common stock worth $40.08 million at the time of the acquisition. Those shares are worth $214 million today. With that, REG entered into the business of producing renewable diesel. Syntroleum had pioneered Fischer-Tropsch gas-to-liquids and renewable diesel fuel technologies, has 101 patents issued or pending, and owns a 50% interest in Dynamic Fuels, LLC, a 75-million gallon renewable diesel production facility in Geismar, Louisiana. Later, REG purchased the outstanding stockholders (Tyson Foods) in 2014 and the plant became a wholly-owned REG subsidiary.

In 2014, we reported that Renewable Energy Group announced commercial-scale quantities of renewable hydrocarbon diesel (RHD) produced at the company’s Geismar, Louisiana biorefinery were now available for sale. These were the truckloads of REG-9000/RHD produced at the 75-million-gallon nameplate biorefinery since REG acquired it. REG had invested as much in $15 million in the plant to increase production stability.

The Geismar site had been expanded in 2017 with the closing of a $20 million acquisition of approximately 82 acres of land at and in close proximity to its Geismar, Louisiana, biorefinery from Lion Copolymer. The purchase included land REG previously leased for its Geismar operations and approximately 62 additional acres in parcels adjacent to and near the facility. The company plans to improve and utilize the new acreage to support existing production capacity and future expansion opportunities. The purchase of the previously leased property would save REG approximately $35 million in future lease payments through 2033, we reported in 2017.

Also in 2017, we reported that the Environmental Protection Agency had approved Renewable Energy Group’s pathway application for naphtha and liquefied natural gas production to generate advanced biofuel D5 RINs from non-food grade corn oil produced at its Geismar, Louisiana facility. The fuel is produced from a hydrotreated process known as the REG Geismar process that uses grid-based electricity, natural gas and hydrogen, reducing greenhouse gas emissions by 78%. The process is similar to one used by Diamond Green Diesel that was analyzed by the EPA in 2013.

The pivot from the Phillips 66 partnership

REG and Phillips 66 had announced plans to build a 250 million gallon renewable diesel plant in Washington state. Following a slowdown in permitting, Phillips 66 and Renewable Energy Group discontinued their joint effort to construct a large-scale renewable diesel plant in Ferndale, Washington.

At the time, REG CEO Cynthia “CJ” Warner said that “Although we are disappointed in this result, REG is undeterred and continues to develop numerous opportunities to grow our renewable diesel production. We remain dedicated to positively impacting the environment and reducing the carbon intensity of transportation fuels through the application of REG’s proven technologies.”

Subsequently, Phillips announced its own 800 million gallon project in California.

Now, REG has announced this 250 million gallons expansion at Geismar.

Reaction from the Stakeholders

“REG Geismar has proven to be a tremendous asset for our company and is a natural site for increasing production of our lower carbon renewable diesel,” said Cynthia (CJ) Warner, President & CEO of REG. “The state of Louisiana and Ascension Parish have been great partners who encouraged us every step along the way as we developed our expansion plan. They truly understand the broad economic and environmental benefits that renewable fuels provide, and we look forward to our continued partnership with them as we undertake this project.”

“Louisiana is recognized as a global leader in energy,” Louisiana Gov. John Bel Edwards said. “That’s an accomplishment we take great pride in, especially as we pursue lower greenhouse gas emissions through our Climate Initiatives Task Force. Attracting investments like REG’s low-carbon project shows Louisiana can be both an energy leader and a climate leader.”

REG Geismar was the first renewable diesel plant built in the U.S. and was acquired by REG in 2014. REG made additional improvements to the plant, taking its initial 75-million gallon nameplate facility up to 90-million gallons per year of demonstrated capacity.

“This is an exciting milestone for our business as we continue to advance our drive to produce low carbon fuels at significant scale,” said Warner. “We are developing this project with our proprietary process technology, and are proud to continue to deliver sustainable fuel solutions to our customers and accelerate the transition to cleaner energy.”

The REG backstory

In 2019, REG produced 495 million gallons of cleaner fuel delivering over 4.2 million metric tons of carbon reduction at its 13 biorefineries in the U.S. and Europe. More on the company in our Multi-Slide Guide, here.

The Bottom Line

So many projects of enormous size have been announced in the world of renewable diesel in recent months, you would be pardoned for wondering, where’s the feedstock? Most of these technologies depend on a finite supply of waste fats, oils and greases. Phillips 66, an expansion at Diamond Green Diesel, expansion at World Energy in California, and numerous announced projects in the 200-800 million gallon range.

We’re not sure all of them will be built — the afore-mentioned feedstock shortage looms, and it doesn’t pay to transport feedstock too far because of the impact on carbon prices for the emissions associated with aggregating the raw materials. The ones most likely to proceed on schedule — Diamond Green, World Energy and Geismar, because these are existing projects with existing relationships with suppliers. We’ve been waiting for REG to tip its hand as to a next move ever since the demise of the Washington state project — now we know.

So, great news for Louisiana in this, too, which is establishing that the state, long known for its strength in traditional oil and gas refining, is going to play a key role as the world shifts to renewables.