Soy’s Stake in Renewable Fuels

by Bethany Baratta (Iowa Soybean Association) ... As a feedstock used in producing biodiesel and renewable diesel, the soybean industry and its farmers stand to gain from this increased demand.

Panelists discussed this opportunity during a recent event at the Farm Progress Show in Boone, Iowa. Panelists included:

Grant Kimberley, soybean farmer, senior director of market development at Iowa Soybean Association (ISA), and executive director of the Iowa Biodiesel Board;

Kevin Lucke, president of the newly-formed Chevron Renewable Energy Group in Ames. An Iowa native, he was named the group's president after Chevron completed an over $3 billion acquisition in mid-June of the Ames-based Renewable Energy Group.

The panel was moderated by Dave Walton, farmer, ISA District 6 director, American Soybean Association (ASA) director and Clean Fuels Alliance America board member.

Lucke: Chevron believes that the future of energy is lower carbon, and we’ve been working in this space the past 3 to 4 years aggressively. We want to have the capacity to produce 100,000 barrels (4.2 million gallons) a day of renewable fuels by 2030. The acquisition of Renewable Energy Group brings Chevron to roughly one-third of the volume of that 100,000-barrel target. Renewable Energy Group has a large expansion underway at its plant in Geismar, Louisiana, that's due to be completed and delivering product at the end of 2023 or early 2024. Once fully online, that added production will bring us to over 50% of that 100,000-barrel target.

Kimberley: ... There are various policies across the country that will incentivize producers and states to absorb some of the extra production. There’s a policy in Minnesota, other incentives in Illinois and Missouri, and also policies in Northeast states that are starting to look at mandates in Bioheat®. The low carbon fuel standard (LCFS) on the west coast has driven demand for biodiesel and renewable diesel, which work well together.

Leeds: We welcome Chevron coming into renewable fuels in a big way. I think it’s a positive thing that Chevron is in this market space; they’re not the only large company in this space.

For farmers, it means recalculating how we think about “Big Oil.” “Big Oil” is now partner. We must figure out how we move forward. We haven’t always seen biodiesel in the same light, but now as we work in this new space, we’ll share the tank, so to speak. At the end of the day, ISA is committed to selling more soybeans. Anything we can do to work with Chevron and others to gain market share is a win for Iowa soybean farmers. It’s going to change the marketplace.

Lucke: While Chevron has been active with Renewable Energy Group, we’ve also formed a joint venture with Bunge. Through that venture, we share ownership in two crushing facilities in Cairo, Illinois, and Destrehan, Louisiana. We’ve expanded capacity—in fact, almost doubled our capacity—for the exact reason Kirk explained. The need for more soy oil to meet the renewable fuel demand that’s coming and that’s here today.

Leeds: We’re going to see money coming into the renewable fuels space and see changes coming to the soybean crush industry as well. Normally we see an annual increase in crush capacity of about 2, 3, and 4%. In the next 3 years, we’re expecting to see a 25% increase for domestic crush for U.S. soybeans. That is a game-changer in the marketplace.

Kimberley: We’re expecting to see an increase of crush capacity of around 600 million bushels of soybeans.

Leeds: We are not currently set up to move this amount of meal into the marketplace. We don’t have existing rail to pick this up, and we’re going to have to figure out how to move it out of existing ports.

Not only will we have to find additional markets, but we’re also going to have to move it efficiently. Soybean meal doesn’t transport as easily as whole beans.

Kimberley: They have pressure in the Northeast for electrification of heat pumps; historically they have utilized heating oil. The Bioheat market, depending on the winter, uses roughly 5 to 7 billion gallons of biodiesel a year. A shorter-term solution in their efforts to be greener is to incorporate biodiesel and Bioheat into that mix as an alternative to oil.

As states in the Northeast set goals to become greener, it’s an opportunity for biodiesel. However, it does present logistical challenges. A lot of their port terminals and bulk terminals are on the water, but you can’t just stage biodiesel out in the water. We need storage and infrastructure to move Midwestern products out to the coasts.

Lucke: We’re already seeing customers coming to us looking for that fuel today. It’s being driven by incentives like biodiesel requirements and carbon reduction targets in New York. Some of our plants don’t run at full capacity in the winter because fuel here in Midwest does have a high blend rate. We believe that we can use slack capacity to fill sales in the northeast. We’re excited for that market to open up further to us.

Lucke: Today, we’re seeing an 80% renewable diesel, 20% biodiesel (R80, B20) blend being heavily utilized in California. There’s a push by some of the customers we have, for example Union Pacific Railroad who is testing the products in their locomotives, pushing the envelope for higher blends.

Lucke: There are some areas in the world that you can’t electrify, the shipping or marine, airline and rail industries, for example. The future of those industries is renewable fuels. These companies are driven by shareholders forcing to have policies and programs to reduce their carbon footprints. Those won’t go away, but it will increase the speed to transition to biofuels.

Walton: Not long ago, the marine and rail industries weren’t supportive of using biofuels in their engines. What’s changed?

Kimberley: It’s their customer base telling them they want to reduce their carbon output. They can’t electrify heavy duty, high-horse applications easily, so the options are limited. They need to know what they can do with the technologies available now, and that’s where biodiesel fits in. It’s going to take the leadership of Chevron/REG, of supply chain logistics companies and others to work together to decarbonize.

Lucke: We’ve been working closely with several large brand owners, for example. Retailers are interested in the carbon footprint of moving a product from China, shipped to the west coast, and trucked to the warehouse in Iowa. They’re telling us, the fuel supplier, that we need to have a lower carbon score. That’s why biodiesel and renewable diesel are important to us. READ MORE