Where Will All the Feedstock Come From?

April 17, 2019

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by Ron Kotrba (Biodiesel Magazine) As a new wave of large-scale biomass-based diesel projects develops, experts suggest market forces are ready to deliver the necessary fats, oils and greases. -- ...Many of these new biomass-based diesel projects intend to produce renewable diesel at a much larger scale than even the largest biodiesel plant. Two of them alone—the 400 million-gallon expansion of Diamond Green Diesel in Norco, Louisiana, and the 600 MMgy greenfield project in Port Westward, Oregon, by Next Renewable Fuels Inc.—would add a billion gallons of capacity to the U.S. market that absorbed less than 3 billion gallons last year. World Energy is behind another massive project with its quarter-billion-gallon expansion that will quintuple production in Paramount, California. Ryze Renewable Fuels has two renewable diesel projects fully under construction in Nevada totaling 150 MMgy. Renewable Energy Group Inc. announced an amorphous renewable diesel project with Phillips 66 in Ferndale, Washington. ReadiFuels, a subsidiary of Applied Research Associates and partner to Chevron-Lummus Global, also has plans for a renewable diesel facility in Iowa.

And then there is coprocessing. The Marathon petroleum refinery in Dickinson, North Dakota, has been coprocessing renewable diesel with petroleum crude oil since last summer. Sinclair, BP and several other oil refiners are also either currently coprocessing large volumes, or plan to soon. “It’s the quiet ones we have to keep track of, not the ones that have made the announcements,” says John Cusick, a senior analyst with The Jacobsen. “I see coprocessing as being significant. It could open up a huge realm of demand. They’re all gunning for it, but I don’t see the actual feedstock demand coming as quickly as the market seems to think it will. We’ll see renewable diesel conversions as refiners turn the lemons of their unprofitable oil refineries into the lemonade of renewable diesel.

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Greenfield biodiesel projects, which slowed to a crawl after the Great Recession, and the retooling of idled facilities, have also picked back up.

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Cusick says there are at least 60 programs in place around the world driving demand for biofuels.

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Unlike 15 years ago, Big Oil is now all in, whether it is through investment partnerships, coprocessing and refinery conversions, or signed offtake agreements for every gallon of renewable diesel to be produced. “We never had that in biodiesel,” Cusick says.

At important business gatherings like the recent National Biodiesel Conference & Expo in San Diego, obligated parties are holding fewer discussions with ag behemoths such as Archer Daniels Midland and Cargill about buying biodiesel volumes and more talks with them about buying refined feedstock, Cusick says. “It’s an interesting time,” he muses. “We’ve had a lot of inquiries in the past year or two here at The Jacobsen from regulated parties about demand from the California market. That is driving the decision-making process.”

In the biodiesel heyday of the 2000s, the main growth drivers were the $1 per gallon federal biodiesel tax credit and the Renewable Fuel Standard. “Now we’re way beyond RFS2 and the federal programs,” Cusick says. “It’s hard to grasp, to be honest with you. It’s kind of fascinating to understand the world in which decisions are now being made. RFS2 may swing back around in a year or two, but at the moment I don’t see anyone spending money around RFS2. What I see today is people making chief decisions based on California’s Low Carbon Fuel Standard.”

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With 80 percent renewable diesel and 20 percent biodiesel, the California Advanced Biofuels Association believes the state can achieve Newsom’s goal without eliminating the diesel engine.

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Therefore, when adjusted for inflation, today’s soybean oil price of 29 cents a pound is actually less than what prices were in 2005—despite massive U.S. and global growth in biodiesel production. Slightly less than half of all U.S. biodiesel production relies on soybean oil, about 46 percent, according to numbers shared by Don Scott, NBB’s sustainability director, at the 2019 National Biodiesel Conference & Expo in San Diego.

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It is important to keep in mind that protein demand—not biofuels—drives soybean planting. As more of the world’s economies grow and prosper, the more meat people will demand and, thus, the more protein meal will be required to feed livestock. In response to EPA, the RVO Working Group has looked at global demand for protein. “What we’ve found is that protein meal demand will increase from 300 million tons per year today to 400 million tons by 2030,” Weber (Alan Weber, a partner with Marc-IV and advisor to the National Biodiesel Board) says. “Three quarters of that will come from soybeans vs. other oilseeds. That means an additional 5.5 billion pounds of soybean oil per year, or 750 MMgy, above and beyond today’s demand for biofuels. That’s just the forecast for additional oil created by protein meal demand and doesn’t consider changes in technologies, innovations or yield increases.”

The U.S. is growing more food and fuel on fewer acres.

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U.S. farmland has shrunk by 23 million acres since the passage of RFS2 in 2007.

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Another critical aspect to remember about RFS2 is that the policy excludes palm oil from qualifying for biomass-based diesel production because it does not meet the 50 percent greenhouse gas emissions reductions threshold required when indirect land use change effects are calculated in.

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Sustainable intensification is a growing, global phenomenon. It leads to more production on fewer acres and healthier land management through practices like nutrient, water and soil retention.

CoverCress
Whether through California orchards and nut farms intercropping canola in the winter months, or Midwest farmers planting carinata or pennycress, winter cover crops are one of many valuable ways to improve soil while making existing farmland more productive. “These winter annuals fit into existing rotations,” Weber says. “They can utilize existing oilseed processing equipment and, on the production side, require no new equipment.”

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CoverCress crops are being grown at six research locations, with 1,000 to 2,000 5-acre plots per farmer.

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With conventional breeding, natural mutation and gene editing, CoverCress has been able to favorably modify both the oil and meal of pennycress. The seeds are naturally small, about the size of camelina seeds, but less round and more disc-shaped. “The most important change was in the meal,” Steiner (Jerry Steiner, the CEO of CoverCress) says. “Native pennycress meal was not useful—it had way too much fiber in it.” Native pennycress has a dark, blackish-colored seed whereas CoverCress seed is golden-colored. This is because the modifications have removed the fibrous coating, thereby reducing the fiber. In addition to reducing fiber, CoverCress also has been able to lower the content of a key antinutrient called glucosinolate. “Glucosinolate is similar to what gives horse radish its peppery pop, which reduces animals’ desire for intake because it’s less palatable,” Steiner says.

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Come May, the crop is ready for harvest followed by immediate soybean planting. Not only does CoverCress provide three crops in two years, but it also helps soil and ecosystem health. “Cover crops play an important role,” Steiner says. “I understand it’s difficult for farmers to invest in things that have slow returns. That’s a problem we aim to solve. Our cover crop will not only provide soil benefits but also the side benefit of making money along the way. In the Midwest, there’s a lot of drain tile and water just flows right through. Farmers need something to hold on to those nutrients and protect the soil.”

The company is targeting 30 to 32 million acres of farmland south of Interstate 80 in corn and soybean rotation.

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Waste Oils
While 46 percent of U.S. biodiesel comes from soybean oil, another 46 percent is derived from waste oils and fats, according to Scott: 14 percent from animal fats; 17 percent from used cooking oil (UCO); and 15 percent from distillers corn oil (DCO). “That diversity is a real strength,” Weber says. “It allows producers to alter their use based on regional and global dynamics.”

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“The higher price incentivized more collection, innovation and efficiencies.” Kaffka says it’s quite possible there is still a fair amount of unrecovered waste oils in the economy not served by the rendering industry. “As the value of that material increases, through carbon and fuel policies, society becomes more efficient,” he says. “There is also discussion about recovery of lipids from wastewater treatment facilities, and progress is being made in that area. None of these things are bad—they’re all good. High-value uses will prevail, and other uses will fade.”

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“Now, because of biodiesel demand, almost all dry mills have the capability to extract DCO from thin stillage,” Weber says. “But yet we’re still not pulling all the potential oil out, as we’re extracting less than a pound per bushel.”

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As renewable diesel production demands more refined feedstock, Weber says biodiesel producers will continue to look at interceptor, or trap, grease. While it’s not easy to work with, demand will necessitate innovation.

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Biodiesel Opportunities
Although the rise of renewable diesel may, on the surface, seem threatening to biodiesel in terms of competition for feedstock and end-use markets, most experts agree that the two fuels are—or certainly can be—complimentary to each other. For instance, biodiesel-blended renewable diesel can provide a 100 percent renewable product that provides the lubricity diesel engines need in an ultra-low sulfur world. Used together, they can reduce emissions significantly and, as Kaffka says, keep diesel in the picture.

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“And I think we’ll begin to see them gel around New York Harbor to supply heating oil markets in the vacuum of Argentine imports.” In addition, low-sulfur demands from marine fuels can be a huge draw for biodiesel.

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The biggest challenge for coprocessing is feedstock, Cusick says. “They need a highly refined biomass feedstock that doesn’t aggravate the beast of the refinery. What they’ll want is a highly refined feedstock with no metals. Perhaps the smartest thing to do is position methyl esters as a refined feedstock for coprocessing.

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The big message is that markets became too dependent on RFS2, Cusick says. “The biodiesel industry needs to focus on initiatives the way it did with Bioheat,” he explains. “Apply that same mentality to marine fuel development. Really understand where biodiesel fits in the next 10 to 15 years. This is coming. Not because biodiesel did a bad job. Biodiesel paved the way for this. The reality that refiners are doing this with their own infrastructure, it’s just smart business and logical. It’s a question now of beginning to adapt. We need to understand creatively once again where this industry can participate. The idea of the biodiesel industry providing the correct refined product for coprocessing sounds crazy, but making diesel out of UCO sounded crazy too.” READ MORE

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biodiesel Renewable Diesel/Green Diesel/HVO/Paraffinic Diesel co-processing FOG (Fats/Oils/Grease) Louisiana Oregon California Nevada BioRefineries/Renewable Fuel Production oil refineries Washington Iowa North Dakota Kansas Ontario British Columbia Canada Minnesota South Carolina food and fuel food vs fuel Sustainability ILUC (Indirect/Induced Land Use Change) land use land use change energy crops Biofuel Crops harvesting aggregation used cooking oil (UCO) corn oil/distillers corn oil (DCO) soy meal soybeans soybean prices pennycress/stinkweed LCFS (Low Carbon Fuel Standard) Renewable Fuel Standard (RFS and RFS2) environmental policy Transportation Fuels Policy palm oil markets/sales protein biodiesel tax credit animal feed cover crops winter crops soil health animal fat food processing waste heating oil/fuel New York Marine/Maritime Bio and Renewable/Sustainable Fuel (SMF) Regulations-Federal Regulations-State Investing history

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