The Complex Dynamics of Coprocessing

November 06, 2018

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by Ron Kotrba (Biodiesel Magazine) While oil refiners adding a small percentage of renewable feedstock to their operations sounds simple, the political, economic, technical, societal and market consequences are anything but.

In 2007, at the height of the biodiesel boom, ConocoPhillips and Tyson Foods announced a partnership to coprocess animal fats with petroleum crude oil at a number of U.S. oil refineries. Such partnerships between Big Oil and agriculture stand to threaten years of investment, feedstock, public policy and market developments by biodiesel producers. The future was uncertain, particularly since at the time, coprocessed renewable diesel produced from recycled feedstock such as pork fat qualified for the blenders tax credit at the reduced rate of 50 cents per gallon, just like biodiesel made from those same feedstocks at a standalone plant.

In 2008, the National Biodiesel Board under the leadership of its former CEO Joe Jobe was successful in lobbying Congress to not only extend the tax credit for another year, but also in getting recycled feedstock to qualify for the full dollar. More importantly, Congress also closed the splash-and-dash loophole that was fleecing taxpayers, and it excluded coprocessed renewable diesel from qualifying for the blenders tax credit. Just months later, in 2009, the partnership between ConocoPhillips and Tyson was put on hold.

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Big Oil stepped up its campaign to discredit and undermine the RFS through any means necessary.

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One notable development that has taken root over the past decade, since the emergence and dissolution of the ConocoPhillips and Tyson partnership, has been oil companies’ investment in renewable diesel. Finland-based Neste Corp. has become a major worldwide player, exporting hundreds of millions of gallons to the U.S. alone each year. Valero and Darling Ingredients developed a large, greenfield, standalone renewable diesel plant in Louisiana, which is expanding. Less-profitable oil refineries, such as those in France, Italy and the U.S., have undergone or are undergoing complete conversion from processing crude oil to lipids. And, once again, oil companies have begun, or have announced plans to coprocess fats, oils and greases. These include BP, Chevron, Andeavor (recently acquired by Marathon Petroleum Corp.), Sinclair and others.

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Biodiesel is a diesel fuel substitute consisting of mono alkyl esters that is similar to but different than petroleum diesel fuel. Renewable diesel is a hydroprocessed fuel that is chemically indistinguishable from and fungible with petroleum diesel fuel. Both can be made from the same pool of renewable feedstocks of fats, oils and greases, and both are considered by the EPA to be biomass-based diesel for purposes of administering the RFS. As a result, both can generate D4 RINs in the biomass-based diesel category of RFS.

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“The first important thing is how we define what coprocessing is,” says Scott Fenwick, NBB’s technical director. Fenwick says there are a couple of different ways an oil refiner could coprocess renewable diesel. One route, he says, is to blend a small percentage of renewable feedstock such as soybean oil with crude petroleum oil and move it through the entire refining process. “This is the least likely choice,” Fenwick says, as pushing renewable feedstock through the distillation process followed by a fluid catalytic cracker (FCC) or hydrocracker could cause catalyst fouling, increased product loss and other technical issues. A more likely route is blending a small percentage of renewable feedstock into middle distillate cuts after distillation and cracking, prior to the diesel hydrotreater. “That’s the least severe option,” Fenwick says. “That’s what a refinery would put diesel through to remove sulfur. With renewable feedstock, hydrotreating would convert the oxygen and glycerin into water and propane, and make everything else into a hydrocarbon while maintaining the length of the molecule.”

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Fenwick says if PADD 5 (West Coast) oil refiners were to coprocess just 1 percent vegetable oil, this would create an additional annual feedstock demand of 482 million gallons. “That’s a huge volume,” Fenwick says. “It’s certainly not going to happen overnight, but it would create a significant demand of renewable feedstock.”

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Gene Gebolys, founder, president and CEO of World Energy, has chaired the NBB’s RFS working group for a number of years. “There are indeed ample supplies of lipid feedstock for robust growth in the D4 and D5 categories,” Gebolys says. “Over its 10-year life, the RFS has driven biomass-based diesel production from about half a billion gallons to approaching 3 billion gallons, or 5 percent of the distillate supply. The U.S. has become the leading biomass-based diesel producer in the world, yet feedstock prices are as low as they’ve been since RFS implementation 10 years ago. And with a bumper crop of oilseeds being harvested as we speak, availability of feedstock has never been stronger.”

For Gebolys, the issue with coprocessing is less about which process will outcompete the other for feedstock and more about which process will outcompete the other to fill D5 volumes—the undifferentiated advanced biofuel volumes above specified biomass-based diesel (D4) and cellulosic biofuel (D3, D7) volumes in annual RFS quotas. Coprocessed renewable diesel cannot generate D4 biomass-based diesel RINs, but it can produce D5s.

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Gebolys adds that coprocessed renewable diesel will soon be able to generate LCFS credits in California.

Another real concern is Big Oil’s perceived lack of commitment to renewable fuels.

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The problem, however, is that even though some oil companies are investing in renewables, many of those same firms—and certainly the associations representing them, including the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers—want to dismantle the RFS and thereby destroy demand for renewable fuels.

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Biomass-based diesel is one of the most heavily regulated set of fuels. “It is regulated by robust compliance measures to meet precise specifications of the finished fuel and must be tracked through the supply chain to make sure it is not exported or used in nonqualifying applications,” Gebolys says. “Biodiesel gets no credit for its byproducts such as glycerin, only credit for the finished product. Coprocessed renewable diesel advocates are trying to persuade regulators that when they blend off small percentages of lipids into their crude oil feedstock, that they be allowed to use a mass-balance approach. In other words, they want to be able to get credit for a full gallon of finished fuel for every gallon of lipid they blend into the frontend of their process. They don’t want the finished fuel to be tracked through the supply chain, which would allow it to end up in exports and nonqualifying applications. They also don’t want to have their finished product tested for renewable content or to meet a renewable fuel specification.”

Lipids are 11 percent oxygen and 10 percent glycerin. Through coprocessing, those compounds end up as what Gebolys calls “nonqualifying, nontransportation fuel byproducts” including propane, water and other chemicals. “Yet they want to receive full credit for their finished fuel based on the amount of feedstock in rather than the finished fuel out,” Gebolys says.

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One option, however, would be to subtract out the average losses. “But that wouldn’t be fair,” Fenwick says, “since no two refineries are the same.” He adds that NBB has commissioned a study of the ASTM D6866 test method for radio carbon dating, which can identify the biogenic content of fuel.

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Gebolys says not only can coprocessed renewable diesel and its D5 RINs unfairly squeeze out biomass-based diesel from fulfilling those volumes, but “refiners could begin these projects with little investment in their existing refineries and no long-term commitment to renewables,” he says. “This translates to little economic or public-policy benefit.”

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Renewable feedstock can offer new challenges that were not considered when oil refineries were originally built. “Issues like corrosion,” Fenwick says. “They’ll need to take into account the metallurgy, as the oxygen molecules in renewable feedstock are converted into water, which can be corrosive. And there are significant losses depending on the process technology.” A biodiesel producer cleaves the glycerin backbone of triglycerides and coproduces crude glycerin. A refiner turns that into C3, or propane, so whether they have the ability to capture it or send it straight to the flare as a loss, or recover it for heat and power in cogeneration, has to be taken into account. For these reasons, Fenwick says, some refiners may not want to jump into coprocessing with both feet.

Beyond actual volume output of renewable fuel content from coprocessing, the carbon and emissions benefits, if any, are less than clear. “People are not talking about emissions benefits of coprocessing,” Bardon says. “Do you get the same benefits through coprocessing as through blending?”

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Biodiesel advocates say there is room in the market for both renewable diesel and biodiesel, and perhaps a harmonious blend is some concoction of the two in which biodiesel can add much needed lubricity to renewable diesel. READ MORE

What’s the Difference between Biodiesel and Renewable (Green) Diesel? 2020 revision (Advanced Biofuels USA)

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