Animal planet: Another avenue to renewable fuels

Issue 3 and Volume 11.

Animal by-products such as fats and oils are usually a waste product with a related disposal issue, but they can be converted into a renewable fuel. Marty Weil reports on one US meat processing company’s efforts to explore the commercial development of animal-based biodiesel.

Meat production is a big and energy-intensive business, especially in America. The Springdale, Arkansas-based food giant Tyson Foods slaughters roughly 25% of the total US meat supply, including beef, poultry, and pork. And a by-product of these operations is animal fat.

In rough numbers, Tyson produces some 300 million US gallons (1135 million litres) of animal fat feedstocks annually. This is a significant and important source of blubber, especially as new refining technology now makes it possible to convert this fat into renewable fuel products, principally biodiesel.

Bob Ames, senior director of commercialization for Tyson Renewable Energy observes: ‘Through our operations we have access to a lot of animal fat; our goal is to turn that animal fat into renewable fuel.’ Ames adds: ‘But our customers don’t buy fuel from us; they buy chicken, beef, and pork. We don’t have the full complement of capabilities needed to produce and distribute fuel, so we began talking to pipeline companies, fuel distribution companies, and refiners about the possibility of partnering together.’

As a result of those talks, Tyson has embarked on several initiatives to turn its large animal fat resource into renewable fuel. Key among these projects is the recently announced 50:50 joint-venture – known as Dynamic Fuels – between Tyson Foods and Syntroleum Corporation of Tulsa, Oklahoma. Tyson will supply animal fat and other agricultural by-products, while Syntroleum will primarily contribute the company’s proprietary technology for converting animal and vegetable fat feedstocks into middle distillate products, such as renewable diesel and jet fuel. Together with Tyson Foods, Syntroleum is focused on building a stand-alone plant based on its trademarked ‘Biofining’ technology. The venture was formed to construct and operate multiple renewable synthetic fuel facilities, with production on the first site beginning in 2010.

‘Any time you are able to turn what is normally a waste stream into a product, people notice the value it offers,’ says Allen Schaeffer, executive director of the Diesel Technology Forum (DTF), a non-profit organization based in Frederick, Maryland, and dedicated to raising awareness about the economic importance and environmental progress of diesel engines and equipment. ‘When two operations can coexist and harmonize together, that’s powerful. Tyson is a leader in meat processing, and it generates waste by-products. Meanwhile, the US needs to reduce its dependence on foreign oil and move toward renewable energy. There is a natural synergy here. This is not unlike asphalt plants and others that take waste products and turn them into useable products.’

Chewing the fat

Using Tyson’s wellspring of animal fat, Dynamic Fuels will produce 75 million gallons (284 million litres) of biodiesel annually. The plant will be larger than 89% of all US biodiesel plants, ensuring economies of scale. ‘Our operating costs are estimated to be 38 US cents per gallon (10 cents/litre),’ says Gary Roth, president and chief executive officer of Syntroleum. ‘Combined with our ability to process the lowest-cost feedstocks, we will be a low-cost producer of renewable diesel,’ he adds.

Joe Jobe, chief executive of the National Biodiesel Board (NBB), adds an important distinction between renewable diesel versus renewable fuels made from animal fats, such as co-processed renewable diesel, biodiesel, and others saying: ‘Renewable diesel is a term for a renewable substitute for diesel fuel that is produced in a stand-alone facility that is 100% renewable. As a finished fuel, renewable diesel will meet a commercial grade specification and EPA registration requirements.’ Schaeffer says too, that ‘the second generation renewable fuels are more fungible, meaning they can be shipped through pipelines,’ referring to the interchangeability of modern biofuels with existing fossil fuels.

While discussion of the chemical properties of renewable fuels and the subtle differences between fuel products can quickly degenerate into an advanced chemistry lesson, the most important thing to understand, according to Syntroleum’s Roth, is that the synthetic renewable diesel fuel that will be produced by Dynamic Fuel is a finished product, not a blendstock. ‘Our renewable diesel meets the same specifications and quality as the ultra-low sulphur diesel that is currently used in the United States,’ says Roth.

By comparison, co-processed renewable diesel, ethanol, and biodiesel are types of blendstocks which are exposed to demands from the blender and which could impact profit margins. The making of a 100% renewable, non-blended product is what has industry watchers like Joe Jobe interested in what is happening at Dynamic Fuels. ‘The NBB supports renewable diesel products that are 100% pure renewable diesel, which we believe will result in the building of stand-alone facilities that add refinery capacity to the nation’s fuel supply,’ he says.

Fat city

Dynamic Fuels is in the process of building a stand-alone facility in Geismar, Louisiana, having signed an agreement in November 2007 with Lion Copolymer to use the site to produce renewable diesel and jet fuel.

‘The Syntroleum jet fuel is the first renewable fuel certified by the military in their B-52s,’ says Roth. ‘One of the reasons we are in Louisiana is because of Barksdale Air Force base, which is just 300 miles (480 km) to the north. We definitely see the military component to this process.’ To highlight this fact, Dynamic recently announced that it has signed a renewable jet fuel contract with the US military. ‘This work is directly applicable to developing an additional market for our refined products from the Geismar facility,’ says Roth. ‘It took seven years to certify FT jet fuel for the B-52H. Through that certification, we set the standard for synthetic fuels. The delivery of the 500 gallons (1900 litres) of renewable jet fuel should significantly expedite the certification process.’

The Geismar facility is located in south Louisiana, between New Orleans and Baton Rouge, near both Interstate 10 and the Mississippi River. ‘Our selection of the Geismar site was the culmination of a rigorous site selection process that included the screening of more than 50 sites in six states,’ says Roth. ‘The screening criteria included consideration of the available land, industrial neighbours, transportation access, existing utilities, and infrastructure. One of the biggest drivers was access to hydrogen.

For its part, Tyson has invested $75 million of its equity capital in Syntroleum Biofining technology, which is being commercialized in their joint venture.

According to Tyson, the plant’s sophisticated filtration process enables the company to process not just the clean, clear fats, but also dirty fats such as yellow and brown greases, like those found in a fast food restaurant’s deep fryer. ‘We produce some of these kinds of fat, lower grades of fat if you will, when we cook bacon,’ says Ames. ‘As well, we have some of the fats that come from cleaning out restaurant traps: a really nasty fat that drips down the drain, collects, and coagulates in a grease trap. As you might imagine, this is a very impure, very dirty animal fat. Dynamic Fuels can use these ‘dirty fats’ in its refining process. These fats are much cheaper feedstocks. Even though it will take more steps to clean up the fat, great value can be derived through the Syntroleum operations.’

Syntroleum’s Roth expands on Ames’ point: ‘We are employing a well-proven business model – that of crude oil refiners. The most profitable refiners spend capital to employ complex refining methods, which enables them to buy the lowest-quality, cheapest feedstocks and make high-quality fuel products: the quality of the output becomes independent of the quality of the input.

The only thing that has changed in our business model is the feedstocks; we use renewable feedstocks in lieu of crude oil. Instead of processing food-grade soybean oil, we are processing lower-quality, lower-priced feedstocks, such as chicken fat, yellow grease, brown grease, flotation fat, processed food waste products, and a variety of other fats recovered in the Tyson manufacturing operations. What we call the ‘Tyson Target Blend’ is a combination of low-cost animal fats and greases that currently trades at 22 cents/lb (48 cents/kg), compared to refined soy oil that trades at 48 cents/lb (105 cents/kg), more than a 50% discount. This is equivalent to $71 per barrel versus $155 per barrel.’

As an added benefit, the fuels produced are not transportation limited, like ethanol and biodiesel, and can be shipped via existing infrastructure. ‘Right now, this is a really interesting value-chain story,’ says John Davies, vice president of green research for Boston-based AMR Research, a firm focused on the intersection of business processes with value chain and enterprise technologies. ‘Longer-term, when we look back, there is a good chance we will say, “What were we thinking in using corn to produce fuel?” When you look at something like the renewable diesel from animal fat, it provides a better price point than the other uses, so it makes a lot more sense,’ he says.

Fat and happy

The Dynamic Fuels project isn’t Tyson’s only new initiative to turn animal fat into renewable fuel. Tyson is also supplying ConocoPhillips with animal fat for similar purposes. While the Tyson/Syntroleum joint-venture will create stand-alone processing facilities, the ConocoPhillips arrangement will not lead to new refinery capacity. ConocoPhillips plans to distill fat supplied by Tyson in an existing refinery, producing a blended fuel product known as co-processed renewable diesel. Another key difference is that the ConocoPhillips renewable diesel refining process requires very clean, and consequently more expensive, animal fats. ConocoPhillips can make the co-processed renewable diesel out of both vegetable oil and animal fat, but animal fat is preferred because it uses less hydrogen in the manufacturing process.

Nonetheless, while desperately needed new refining capacity won’t result from this initiative, there are clear benefits from the arrangement for those interested in furthering the adoption of renewable fuels. According to DTF’s Schaeffer, an important benefit is quality control and ConocoPhillips has proven quality control techniques that are inherent in an existing refinery. ‘For people putting this stuff into their cars, quality is important,’ says Schaeffer, adding, ‘Additionally, for those of us trying to get people interested in buying diesel cars, it boils down to the need for everyone to have a positive experience. If people pump biodiesel into their vehicles that is not up to specifications, they’re likely to have a bad experience. Clogged fuel injectors or fuel freeze-ups do not bode well for future adoption. Therefore, getting quality right is critical, and Tyson is helping us move in that direction.’

Quality is a broad concept when it comes to renewable fuels. According to Schaeffer, the biodiesel industry did a study a few years ago and found that more than half of its members produced biodiesel that didn’t meet the BQ9000 quality specification for producing biofuels. ‘The BQ9000 is not the same spec that auto makers and the EPA look at for pumping fuel into cars – it’s even less stringent,’ he says. ‘The fact that the industry is having a hard time meeting its own quality standards is something that we should expect in a rapidly growing industry with a lot of small start-ups and very few large producers. To move the use of renewable fuel into the mainstream of society, there must be quality control. People need to have confidence that they are pumping good quality diesel at their local fuel station.’

‘This is how we envision people using the products from Tyson’s initiatives. It is a diesel fuel that will work in harmony with the diesel engine, that won’t cause a lot of issues, and is transparent to the consumer. That is the ultimate goal. Quality is a big deal, and certainly, the ConocoPhillips and Tyson efforts offer a lot of hope in the area of quality.’

Schaeffer adds, ‘Another thing this deal provides that isn’t currently available in the biodiesel industry is greater distribution on a widespread basis for this product. These initiatives are not limited to the economics of trucking a load of biodiesel around and splash-blending it at a mixing station with regular ultra-low sulphur diesel. Right now, that is the only way you can blend and transport biodiesel because of certain pipeline considerations. This second generation of renewable diesel can be piped and distributed broadly throughout the industry, which overcomes a major distribution barrier. The two big challenges for the adoption of renewable fuel are quality and distribution. Based on these issues, this initiative looks like it is going to overcome both of those hurdles.’

Once quality and distribution issues are addressed, the question becomes one of economics. ‘With all of the energy policy activity and concern about climate change and reliance on imported oil, Tyson certainly seems to be in an economic sweet spot for growth,’ says Schaeffer. ‘Renewable diesel, as a product, is something we hope to see on the market in the next few years, and it is something that the diesel industry is excited about.’ Schaeffer continues, ‘It’s a major plus to take what is effectively a waste product and convert it into energy. It doesn’t require the trade-off use of land like the planting of corn for fuel. People will gravitate toward the idea of a very low life-cycle cost and impact. Tyson is producing a waste product, but now they are able to put it to good use instead of disposing of it some other way. This is a good story. I don’t know what the negative impact would be, although I am sure someone can find one.’

That someone might be the NBB’s Jobe. According to Jobe, the NBB has a policy concern over ConocoPhillips’ decision to use animal fat resources to create co-processed diesel. ‘We agreed to disagree with ConocoPhillips on a policy issue’, says Jobe. ‘Tyson and ConocoPhillips lobbied aggressively to qualify for the biodiesel $1 per gallon (26 cents/litre) tax credit. We opposed that. ConocoPhillips is already eligible to receive 50 cents/gallon (13 cents/litre) under a transportation alternative fuel tax credit. It should not receive one dollar per gallon, because that would be a massive overcompensation of existing refinery capacity.’

Jobe’s concerns over the tax credit issue dovetail with concerns over refinery capacity. ‘If you look at the United States’ fuel supply, one of the major bottlenecks for that supply is refinery capacity,’ says Jobe. ‘US refiners are concentrated in the Gulf of Mexico, which is where the imported crude oil enters in large measure. That area is also subject to hurricanes, and other things. It is a very concentrated area. We saw what that concentration could do to disrupt the flow of fuel during the hurricanes of Katrina and Rita. Those disasters had an inordinate impact on diesel fuel because there is a smaller volume of diesel fuel. That is why cost of diesel fuel shot up so high after the hurricanes. The US petroleum industry has not built a new refinery in more than 30 years, but the biodiesel tax credit has resulted in more than 150 biodiesel plants being built in the past three years, scattered all over the country. The building of these biodiesel plants has resulted in renewable refinery capacity being added to the nation’s fuel supply.’

Jobe adds: ‘Traditional refineries are at maximum capacity, and we believe that giving co-processed renewable diesel a $1 a gallon credit (26 cents/litre), in a way that does not add refinery capacity, is not good public policy, energy policy, or fiscal policy. In many ways, it is actually bad fiscal and energy policy. It is taking taxpayer dollars and giving them to some of the wealthiest private companies in the world. This has a perverse impact: it actually reduces our renewable refinery capacity for biodiesel because it bids up the price for renewable fats and oils, and basically gobbles up the available raw material that could be used by biodiesel producers to add to refinery capacity. While we are supportive of co-processed renewable biodiesel, we believe $1 per gallon is way too much subsidization for existing capacity. Our position is that co-processed renewable diesel should get 50 cents, whereas renewable diesel should get $1. As with the biodiesel credit, there are two levels of tax incentive. Biodiesel gets 50 cents, but agro-biodiesel gets $1. We think it should be the same for renewable diesel.’

Growing fatter

Jobes’ policy concern aside, DTF’s Schaeffer bears witness to a growing, although cautious, bullishness toward initiatives such as Tyson’s. ‘Most people believe, and I would concur, that renewable diesel fuel offers only a sliver of a percentage to reduce our reliance on imported oil. At the current volumes of production and utilization, it is very small in the grand scheme of things.’ Could it get bigger? ‘It absolutely has lots of room to grow,’ he says.

According to Schaeffer, the answer depends on economics and government policy. ‘US government policy is pushing us to a 20% penetration of renewable fuels by the year 2020. It is a very significant challenge. The big questions people are asking are “Will people buy it?” and “Can you make money at it?”’

Companies such as Tyson, Syntroleum, and ConocoPhillips have the ability to ride the profitability horse longer than other entities because they already have the infrastructure for refining and they have the waste stream for animal production. ‘In terms of Tyson’s chance of success,’ Schaeffer concludes, ‘the company is much better positioned than the average mid-western farmer out there squashing soybeans.’

Marty Weil is a freelance journalist based in Asheville, North Carolina, USA.
e-mail: [email protected]

Pioneering biodiesel in the UK

Argent Energy began large-scale commercial production of biodiesel from tallow and used cooking oil in the UK when its plant, near Motherwell in Scotland, opened in 2005. It is currently producing over 950 tonnes of biodiesel a week, equivalent to 45,000 tonnes a year, or more than 50 million litres.

The technology behind the plant was developed by the Austrian firm BioDiesel International, and gives the flexibility to use a wide variety of raw materials, although Argent feedstocks are exclusively tallow and used cooking oil – both by-products of other industries which have relatively few alternative uses. A sophisticated laboratory at the heart of the plant helps ensure that all output is consistent with the EN 14214 standard and that biodiesel can be produced to precise specifications.

Plans are in hand to expand Argent’s operations in the UK and overseas. Planning permission has been granted for a second plant at Ellesmere Port in Cheshire with an annual production capacity of 170 million litres – more than three times the capacity of the existing plant. The company is also investigating the feasibility of establishing a plant in New Zealand, where the country’s huge livestock industry means that there is a plentiful supply of tallow.

Jim Walker, Argent Energy’s managing director, tells REW: ‘A lot of our current output goes to customers such as Shell, Petroplus and Greenergy to be blended with mineral diesel and generally ends up as B5. But there is increasing interest in higher percentage blends and in the use of B100. There’s interest, too, from other companies seeking to reduce their carbon footprint. We’re working on a trial with Stagecoach, one of the UK’s biggest bus and coach operators, where eight of their vehicles are running on our B100.

In a link-up between Stagecoach and the local East Ayrshire council, passengers are being encouraged to recycle their domestic used cooking oil in return for discounted bus travel. We’re also working with Robert Wiseman Dairies, one of the leading liquid milk companies in Britain. They currently run many of their vehicles on a B5 blend and started trialling the use of higher percentage blends last summer. Once this trial is complete we hope to be able to extend the use of higher blends across a larger number of vehicles in the Wiseman fleet.’

Walker adds: ‘Progress on these depends on a number of factors, the most notable being a significant distortion in the market caused by rapid expansion in biodiesel shipments from the United States which benefit from substantial subsidies if they are blended with mineral diesel in the US. This is depressing prices in the markets where it is accepted.’