The effects of rising fuel costs, increased energy demands and environmental considerations have pushed the issue of renewable fuel sources in the past decade. Amid this turmoil the world of synthetic fuel production has flourished and continues to evolve.
That has been great news for one of Louisiana’s newest establishments, Dynamic Fuels, LLC, a Geismar-based business which was a 50/50 joint venture between Arkansas conglomerate Tyson Foods, Inc., and Syntroleum Corporation out of Tulsa, Oklahoma.
The two parties forged a partnership to build upon the growing area of renewable synthetic fuels that aims to produce energy in a manner that reduces life cycle greenhouse gas emissions, while building forwards-compatible renewable fuels infrastructure and the site currently being built will represent North America’s first renewable, synthetic fuels plant.
Synthetic fuels are one of the few economically viable and industrially scalable alternatives to petroleum capable of providing a major source of the liquid transportation fuels required to run the economy, and the only known non-petroleum source of aviation fuel.
However, change was in the air and in June of 2014, Renewable Energy Group, Inc. (NASDAQ: REGI) announced that its wholly-owned subsidiary, REG Synthetic Fuels, LLC, had completed its acquisition of the remaining 50 per cent ownership interest in Dynamic Fuels, LLC, previously owned by Tyson Foods, Inc. (NYSE: TSN).
REG has now taken full ownership of Dynamic Fuels’ 75 million gallon nameplate capacity renewable diesel biorefinery in Geismar, Louisiana.
Tyson and Syntroleum formed Dynamic Fuels in 2007 as a 50/50 joint venture. Completed in 2010, the facility is the first large-scale renewable diesel biorefinery built in the U.S. and will now be known as REG Geismar, LLC.
“Closing these transactions enables our entry into the renewable diesel market in a significant way,” said Daniel J. Oh, Renewable Energy Group, Inc. President and Chief Executive Officer. “We are excited about the opportunity to offer new products to our customers, while building on our core competencies in research, engineering, production, and distribution of advanced biofuels. We look forward to bringing the Geismar biorefinery online and work to do so has begun.”
REG paid Tyson approximately $16.5 million in cash at closing and retired approximately $13.5 million of Dynamic Fuels’ indebtedness to Tyson. REG has also agreed to make up to $35 million in future payments to Tyson tied to product volumes at the Geismar biorefinery over a period of up to eleven and a half years. REG intends to use proceeds from its recent $143,750,000 convertible senior notes offering to either replace the letter of credit that Tyson Foods obtained to support the biorefinery’s $100 million in Gulf Opportunity Zone Bonds, issued through the Louisiana Public Facilities Authority, or to redeem these bonds.
Renewable Energy Group, Inc. is a leading North American advanced biofuels producer and developer of renewable chemicals. REG utilizes a nationwide production, distribution and logistics system as part of an integrated value chain model to focus on converting natural fats, oils and greases into advanced biofuels and converting diverse feedstocks into renewable chemicals. With 10 active biorefineries across the country, research and development capabilities, and a diverse and growing intellectual property portfolio, REG is committed to being a long-term leader in bio-based fuels and chemicals.
At the time the transaction was announced, most of the employees at the former Dynamic Fuels, LLC were expected to join the company as part of the renamed REG Geismar, LLC.
And it is a skilled workforce, with so many ethanol plants and refineries located in this area of the Mississippi, the company was able to hire a team of experts with most individuals bringing at least 10 years of petrochemical knowledge to the fledgling operation.
Developing the fuel is a 3-step process, requiring lots of hydrogen, which is conveniently close to hand at nearby Praxair – indeed proximity to suppliers was a primary consideration in the joint venture selecting Geismar as the base for its $158 million project.
“We use a mixture of low-cost feedstocks delivered to the plant by a combination of rail and truck and react it with hydrogen to restructure the molecule; the second step is to produce a normal paroffin and to then convert this into an isoparaffin,” Plant Manager Doug Duga explained back in 2009.
“The primary product is diesel fuel which can be sold as blend for refineries or can be used neat, but we also produce naphtha and Liquid Petroleum Gas (LPG). As non-fossil fuels, our products are so much cleaner burning fuels and contain less than one-part-per-million sulphur. Our fuel generates 74 per cent less greenhouse gas than burning a gallon of petroleum-based diesel.”
“The pioneering technology we use was devised by Syntroleum and is known as Bio-Synfining™; a couple of years ago they were talking to suppliers of animal fats as they commercialized their technology and Tyson (who already had a renewable division) decided they would rather be partners than just a supplier.”
With the environment high on everyone’s agenda in the 21st Century, REG Geismar LLC is well placed to play a significant role in producing cleaner energies.