September 27, 2008 at 1:34 pm #3410
Diesel initiative on ropes
Congress may do away with project that uses animal fat
By DAVID IVANOVICH Copyright 2008 Houston Chronicle Washington Bureau
Sept. 25, 2008, 10:28PM
WASHINGTON An energy tax package Congress is cooking up this week may fry ConocoPhillips’ production of diesel fuel from Tyson Foods’ leftover animal fat. Houston-based ConocoPhillips and Springdale, Ark.-based Tyson, the world’s largest chicken, beef and pork processor, teamed up last year to use the oil company’s existing refineries to produce renewable diesel fuel from animal fat.
Tyson sends beef tallow from its rendering plant in Amarillo to ConocoPhillips’ refinery in nearby Borger, where it is used as a feedstock to make diesel fuel. This year the partners have produced 4 million gallons of diesel fuel with this method. Eventually, the plan was to ramp up to about 175 million gallons annually, with ConocoPhillips to spend $100 million to upgrade its facilities to handle the animal fat.
The venture gets a $1-per-gallon federal tax credit for diesel produced in this manner. But the House and Senate have been working on separate tax packages designed to encourage energy production from renewable sources. While the two packages differ, both bills would lower the tax credit to 50 cents per gallon.
That could kill the project. “Without the current $1-per-gallon credit, it is unlikely this venture will remain economically viable,” Tyson spokesman Gary Mickelson said in an e-mail. ConocoPhillips spokesman Bill Tanner agreed that passage of the legislation “would likely render the project marginally economic.”
How tax credit beganThe tax credit was first inserted into the Energy Policy Act of 2005 at the behest of House Minority Whip Roy Blunt, R-Mo., to help a renewable-energy company in his district.
While the original language of the bill may have been written to target that operation, ConocoPhillips and Tyson successfully argued before the Internal Revenue Service that the tax credit should apply to their project, too.
That IRS decision angered a number of lawmakers on Capitol Hill, including Rep. Lloyd Doggett, D-Austin, who vowed to keep the partners from enjoying what he called a “dollar-per-gallon windfall from simply throwing a dab of grease into ordinary petroleum.”
ConocoPhillips and Tyson also faced opposition from the National Biodiesel Board, which represents companies that primarily use soybean oil for fuel.
‘Common-sense policy’Manning Feraci, vice president of federal affairs for the board, called the effort to limit the credit to 50 cents per gallon for ConocoPhillips and Tyson “consistent with common-sense energy and tax policy.” But the partners argue that the renewable diesel they are producing burns cleaner than conventional diesel and helps supplement the fuel supply.
ConocoPhillips’ Tanner said: “We’re disappointed that Congress is willing to pass legislation that picks energy winners and losers and that fails to recognize the need for a variety of supplies from all sources, including alternatives, renewables as well as conventional oil and gas.”
Tyson’s Mickelson argued the legislation “will only serve to limit the expansion and availability of alternative fuels and will hurt the ability of livestock farmers and ranchers to participate in the renewable energy business.”
Whether lawmakers can reach agreement on a tax package before leaving town at the end of the week remains an open question.
Nine tries at passageThe Senate approved its tax package on Tuesday. And since the Senate had had so much trouble passing the bill it took nine tries Senate Majority Leader Harry Reid, D-Nev., urged the House to pass the Senate version.
Instead, House leaders broke up the Senate package and began stripping out provisions, including language to encourage production of diesel and other fuels from coal.
The House is expected to vote on its tax package today. If lawmakers take no action, the tax credit will expire at year-end.
September 27, 2008 at 2:11 pm #6541
This is update on the COP Borger JV with Tyson Foods to use leftover animal fat and make bio-diesel to be blended with Borger Refinery Diesel. This was great example of using either waste or coal derived products to extend a refinery fuels products that back out expensive crude imports and meet US demand with US derived products.
The process was similar to some of the initial Butterball applications of Thermal Depolymerzation skid units to break down turkey waste into gasoline / products (see articles Turkey Guts into Gasoline). Solves two large problems & was great answer.
But the COP Borger JV will be in trouble without the $1/gallon tax credit since this is still leading edge technology and fairly initial commercial scale applications. And it is insight into Environmental sector that has put the entire US into an energy crisis by its stupid anti-fossil fuel approach. The Congressmen it has bought via lobbyist would rather see no crude be eliminated than have any fuel made from fossil fuel source that competes for biosource tax credits.
I have no idea why there should be this huge outcry against diesel from waste animal fat – other than it is being blended into petroleum based diesel pool and neither did the IRS. But neither Environmentalist nor the politicians they bought would allow it to stand and have tried 9 times to pass legislation as article mentions to limit the COP/Tyson application.
As both COP & Tyson argue this is time when we need expand all sources for making more diesel and gasoline products and especially from a renewable sector or cleaner burner product. The US should have an even larger tax credit and it should extend to Coal derived fuel products and animal waste fuel products even more so than from grains like corn & soybean that disrupt our entire food industry……idiots.
These type legislative idiots are completely at ease with countries like China that are Subsidizing their fuel products by over $3.00/gallon every year that crush competing US industry and jobs but cannot stand to share a minimal tax credit with a potential fossil fuel use. Mark down these guys names & vote them out at the next election.
October 8, 2008 at 11:36 am #6528
Tyson’s Fats To Fuel Plant On Schedule
Last updated Monday, October 6, 2008 9:43 PM CDT in Business
By Kim Souza The Morning News
GEISMAR, La. – On a day when Wall Street sang the blues, two local companies – Springdale-based Tyson Foods Inc. and Tulsa-based Syntroleum Corp. – found themselves humming Zydeco tunes and eating jambalaya in southern Louisiana.
The venture partners were lauded by Louisiana Gov. Bobby Jindal and numerous other state officials at the groundbreaking of the Dynamic Fuels LLC. renewable diesel plant in Geismar, La., about 30 miles south of Baton Rouge on Monday.
Dynamic Fuels is an equal partnership between Tyson and Syntroleum with plans to refine waste chicken fat and nonedible grease products into 75 million gallons of clean-burning renewable diesel and jet fuel annually.
“We believe this venture will add value to our business and give animal agriculture another opportunity to participate in the production of renewable fuels,” said Tyson Foods CEO Dick Bond.
The Dynamic Fuels venture is expected to generate approximately $84.75 million in annual revenue when fully operational in 2010, the company said in a July conference call.
Retired board chairman Don Tyson said Monday the partnership is all about moving waste products up the food chain. Whether selling chicken feet to China or converting chicken fat to fuel, he said it’s a mission that Tyson Foods takes very seriously.
Construction on the refinery facility is slated to begin within the next 60 days with a projected construction cost of $138 million. L-Con Constructors of Houston was awarded the bid. Long-lead equipment has been ordered and all state and federal permits have been secured, said Lynn Tomlinson, the project director.
Geismar won the site selection on the basis of its existing infrastructure – namely three local sources for hydrogen, which is a key catalyst in the refinery process, said Jeff Webster, director of Tyson Foods’ renewable fuels division.
Dynamic Fuels is leasing the industrial-chemical site from Lion Copolymar. Webster said the logistics surrounding the industrial park includes immediate rail access and two shipping channels along the Mississippi River, just two blocks away, if the company chooses to export its product.
Jindal applauded both Tyson Foods and Syntroleum for their investment in Louisiana, creating 45 high-paying permanent jobs with an annual payroll of $4 million. An additional 200 or so temporary construction jobs will be created over the next year, at a time when jobs are being cut in many business sectors.
“It’s an exciting time to see the construction begin for the first facility of its kind in the country. This process that takes the lowest quality waste products and creates cleaner renewable fuel is a win-win – better for ecology and good for economy while also reducing U.S. dependence on foreign oil,” Jindal told a crowd of about 100 at the site location.
The possibilities for the technology used by Dynamic Fuels are huge, Webster said.
The plant will be capable of producing renewable diesel fuel as well as jet fuel. He said the exact market for the product has yet to be determined as there is still more than a year to go before the plant is fired up for production.
Both Syntroleum and Tyson Foods were fortunate to get financing for $100 million of the $138 million price tag through tax-exempt Go Zone Opportunity Bonds created in 2005 following hurricanes Katrina and Rita. The bonds provide the lowest funding source for the project at a cost of roughly 3 percent to 3.5 percent, Tyson Foods said.
While the approved bonds have yet to be issued, Tyson chief financial officer Dennis Leatherby said the bonds should be issued this month. He, along with a spokesman for the underwriting team, said the present financial turmoil in the credit markets should have little impact on the issue. They are merely waiting for confidence to return or settle somewhat in the fixed income markets, Leatherby said.
Concern has swirled around Syntroleum’s ability raise its half of the investment capital, given the company’s cash struggles in recent quarters.
Scott Alaniz, portfolio manager with Boston Mountain Money Management in Fayetteville, said recent meltdowns in the financial markets have made it more difficult for all companies to raise capital. The $700 billion rescue bailout recently signed into law should ease the liquidity crunch, but not overnight, he said.
Jeff Biggers of Syntroleum said Monday the next capital outlay of $6 million has been set aside in cash and the company will have no trouble making that contribution in December.
That leaves an additional $15 million that Syntroleum will need to raise over the next few quarters. The company remains confident it will get the necessary funds, and Tyson Foods has provided an emergency backstop if necessary to ensure the plant comes online as scheduled in early 2010.
“The groundbreaking is a significant, must-proceed step for Syntroleum, who has put everything on hold to make this project a reality. It is a ‘do or die’ proposition for them,” said Catharina Milostan of Morningstar.com. “It’s good to see them reach this milestone.”
Despite Dynamic Fuels’ “good news” day, it looks as if Tyson Foods’ other fuel initiative with ConocoPhillips is in serious jeopardy.
Tyson’s successful venture with ConocoPhillips has been cut short and is under review as an important $1 per gallon government tax credit was recently reduced by Congress to 50 cents. Webster said without the full $1 per gallon blending credit, the venture would likely not continue. However, he said Tyson is working on two other alternative fuel projects using pond algae and Tyson’s other renewable byproduct resources.
October 8, 2008 at 11:44 am #6527
Here is update on Tyson & Syntroleum Corp JV Fat to Fuel plant in Geismar – Dynamic Fuels LLC. Some question exist if Syntroleum can raise rest of financing for Geismar plant & outlook for the COP Borger plant is not good now that Congress cut the government tax credit- for that project – to $0.50/gallon.
Trying to keep non-petroleum waste to fuel plants as stand alone to get subsidy is going to keep them like rest BioFuel plants from every becoming a realistic answer to large volume displacement of petroleum fuel products & tied to tax credits/subsidy because large scale commercial applications that lead to innovation and technology breakthroughs will elude them. The difference between Biofuel new millions of gallons plants to Oil Industry existing millions of barrels plants has a scale-up factor of 42X which is way beyond the safety factor on labscale research operations trying to go pilot plant scale or pilot plant scale to demonstration commercial plant scale (usually 10-20X factor).
You must be logged in to reply to this topic.