Tyson Keeps Busy with Biofuels, Opposes Fight to Disallow Tax Credits

By Tina Caparella


Editor’s Note – With this issue of Render, we are changing the name of the “Biodiesel Bulletin” column to “Biofuels Bulletin” to allow news and information on all biofuels, including biodiesel, as they relate to the rendering industry.

First it was the venture with ConocoPhillips, an alliance where Tyson Foods, Inc., and the oil company will produce and market renewable diesel fuel using beef, pork, and poultry fat. Now, just months after that announcement, Tyson is taking another step in its quest to be a leader in renewable energy by forming Dynamic Fuels, LLC, with Syntroleum Corporation, a Tulsa, OK-based synthetic fuels technology company. The new business will produce synthetic fuels targeting the renewable diesel, jet, and military fuel markets.

The 50/50 venture intends to construct and operate multiple stand-alone commercial facilities capable of producing ultra-clean, high quality, next generation renewable synthetic fuels using Syntroleum’s patented “Biofining” process, a “flexible feed/flexible synthetic fuels” technology. Tyson, which produces about 300 million gallons (2.3 billion pounds) of animal fats per year, will supply 75 million gallons of feedstock primarily derived from animal fats, greases, and procured vegetable oils. By comparison, the renewable diesel venture with ConocoPhillips will use 175 million gallons of fats and oils from Tyson.

Construction of the first facility is expected to start in 2008 at a yet-to-be-determined site in the south central United States, and have an annual production of about 75 million gallons of synthetic fuel. Start-up is targeted for 2010. Tyson and Syntroleum will each contribute half of the estimated $150 million cost of the project over the next two-and-a-half years.

“Tyson’s venture with Syntroleum represents another significant step forward in our strategy of leveraging Tyson’s access to animal by-products, our trading skills, and industry relationships to become a premier player in renewable energy,” said Richard L. Bond, Tyson president and chief executive officer. “We believe this venture will add value to our business, give animal agriculture another opportunity to participate in the production of renewable fuels, and is also an environmentally sound way to contribute to America’s energy security.”

Dynamic Fuels will leverage Syntroleum’s proprietary work done in producing synthetic fuel and developing synthetic fuel standards for the U.S. Air Force and the Department of Defense (DOD). The fuel produced by the venture will offer the same benefits of synthetic fuels derived from coal or natural gas while providing substantial advantages over petroleum-based fuels, including higher cetane levels, significantly lower nitrogen oxides, or NOx, and near zero sulfur. The synthetic fuel can be used in existing diesel engines with no engine modifications required and is expected to be completely compatible with existing pipelines, storage facilities, and other conventional fuel infrastructures.

Shortly after the announcement in late June, Syntroleum strengthened and validated the new venture by signing a contract to provide 500 gallons of ultra-clean renewable synthetic jet fuel produced entirely from the fats supplied by Tyson to the DOD. The fuel will be used for research development and performance testing in military turbine applications as part of the DOD’s Assured Fuels Program, aimed at evaluating the possibility of utilizing renewable alternative jet fuel made from bio-feedstocks.

In 2006, Syntroleum supplied 100,000 gallons of synthetic Fischer-Tropsch jet fuel to the DOD, which used the fuel in a 50/50 blend with conventional jet fuel in several test flights of a B-52 bomber. The synthetic fuel blend was used to successfully power all eight engines of the aircraft in a final test flight December 15, 2006.

But Tyson’s biofuels adventures are not all smooth sailing. After announcing its renewable diesel venture with ConocoPhillips (see “Biodiesel Bulletin,” June 2007 Render), the National Biodiesel Board (NBB) went to work in getting legislation passed to prevent “large integrated oil companies from exploiting a federal tax incentive designed to stimulate biodiesel and renewable diesel production.” Representative Lloyd Doggett (D-TX) has introduced the Responsible Renewable Energy Tax Credit Act of 2007, a bill that would prevent oil companies from claiming a one dollar-per-gallon tax credit when using small amounts of biomass as an ingredient in making diesel fuel. Under the legislation, producers making renewable diesel solely from renewable sources, and as it was originally defined, would continue to be eligible for the credit. As of press time, the bill had over 60 cosponsors and was in the House Committee on Ways and Means.

Also in support of the bill is the Soap and Detergent Association (SDA).

“The legislation is a critical first step in restoring a balance between biofuel production and other ‘green industries’ such as the domestic oleochemical industry, which have historically relied on some of the same raw materials,” said Dennis Griesing, vice president, Government Affairs for the Washington, DC-based SDA.

“While unintended, the current complex of biofuels subsidies is threatening the continued existence of the oleochemical industry in the United States,” Griesing continued. “The unintended consequences of the biofuel subsidies for ‘co-production’ renewable diesel, direct burning, and ethanol production have driven up the cost of tallow over 80 percent since the last quarter of 2006. From what we can determine, subsidized ‘co-production renewable diesel’ on the part of large oil companies poses the greatest issue because it directly threatens the availability of tallow, not just its price.”

But Tyson says it’s important to maintain incentives that will help spur expansion and availability of alternative fuels likes its renewable diesel.

“Our initiative is about increasing the supply of renewable fuels and contributing to U.S. energy security efforts,” Tyson spokesman Gary Mickelson told Meatingplace.com. “We believe our alliance qualifies for a federal production tax credit, which will be based on the number of gallons produced. It is not a jobs credit or an investment tax credit.

“It’s true the renewable diesel made from animal fat will be produced and distributed with existing refineries and fuel distribution systems,” Mickelson added. “However, ConocoPhillips has publicly stated it will spend $100 million in capital expenditures to enable it to produce the fuel. Tyson will also make capital improvements in order to begin pre-processing animal fat from some of its North American rendering facilities.”

Supporters of the tax credit for renewable diesel include the National Cattlemen’s Beef Association, National Pork Producers Council, National Chicken Council, and Texas Cattle Feeders Association, according to Tyson. Also in support is House Agriculture Chairman Collin Peterson (D-MN), an ardent biofuels supporter. While acknowledging the issue does not fall under his committee’s jurisdiction, Peterson told reporters during a weekly teleconference call in early July that he believes “as long as it’s a renewable resource that’s replacing foreign oil, I think that’s a good thing.”

BDI Develops Process, Acquires Lignosol

BioDiesel International AG (BDI), Grambach, Austria, has developed and is successfully applying another technology innovation in the biodiesel process – the RepCat-Process, which uses a reusable catalyst to further upgrade the fuel quality, reduce production costs, and produce higher quality glycerin.

BDI began developing the process in 2002 with financial support from the Austrian Research Promotion Agency, or FFG, and applied for a patent in 2005. The process is being applied at the newly expanded biodiesel plant in Arnoldstein, Austria, which has a yearly capacity of 7.5 million gallons. The new RepCat-Process has been designed for multi-feedstock plants.

In July, BDI acquired 70 percent of the shares in Lignosol Technolgie GmbH and Company KG, a Salzburg, Austria-based company that is making promising progress in the biomass to liquid (BTL) field. The purchase price is in the single-digit million Euro range.

Lignosol has developed a process for the production of biofuels that has also been financially supported by the FFG. Several applications for patent protection have been filed.

BTL involves the conversion of total plant material, straw, wood, or any other biomass into fuels that can substitute gasoline or diesel. Technologies in this field are known as “second generation” processes for the production of biofuels.

“All such technologies are still pretty much in their infancy,” explained Wilhelm Hammer, chief executive officer of BDI. “By acquiring the majority interest in Lignosol, we are combining our many years of experience in the development of technologies for the production of alternative fuels and our R&D skills with the innovative know-how of Lignosol. Our aim is to set standards in the BTL field too.”

Lignosol will remain an independent company. If the conditions are right, Hammer may consider relocation of the company to Styria.

Canada Grants Incentives

The Canadian government’s new ecoENERGY for Biofuels program will provide up to $1.5 billion (Canadian) in the form of incentives over nine years to Canadian producers of renewable fuels such as biodiesel and ethanol. Last December, Canada’s government developed a regulation requiring five percent renewable content in gasoline by 2010 and two percent renewable content in diesel and heating oil by 2012.

The ecoENERGY for Biofuels program will provide, among other things, producer payments to help bridge the cost differential on biofuels relative to convention fuels (20 cents per liter for biodiesel and 10 cents per liter for ethanol), and investment incentives to spur development of additional biofuels facilities in Canada.

Disneyland Railroad Goes Biodiesel

The famous steam locomotives on the Disneyland Railroad at the Anaheim, CA, Disneyland Resort began operating on 98 percent biodiesel and two percent petroleum diesel this spring. Until then, the steam locomotives were the largest user of diesel fuel at the resort. The switch to biodiesel saves up to 150,000 gallons of diesel fuel each year while greatly reducing emissions.

The locomotives are authentic 1880s steam trains that were retrofitted in the 1950s to run on diesel fuel.

Nebraska Provides Tax Credits

Nebraska Governor Dave Heineman has signed legislation creating a tax credit for individuals investing in the development of a biodiesel production facility in the state. Investments made in locally-owned facilities producing 100 percent biodiesel will be eligible for a tax credit of up to 30 percent. The bill was introduced to help encourage greater investment in biodiesel production.

Last year, Nebraska was the nation’s fifth largest producer of soybeans at more than 250 million bushels. Currently, there is only one biodiesel plant in operation with two additional facilities under construction. The Nebraska Energy Office estimates that biodiesel production will increase from 400,000 gallons in 2006, to 60 million gallons by the end of 2008 as these plants become fully operational.

McDonald’s UK Fleet to Use Biodiesel

Recycling at McDonald’s in the United Kingdom (UK) is taking a step forward as the company commits to running its delivery fleet on 100 percent biodiesel made with its own used cooking oil.

Oil from around 900 McDonald’s UK restaurants will be combined with pure rapeseed oil to make high-quality biodiesel to fuel the company’s delivery trucks in the United Kingdom. The carbon saving of the move will be 1,675 metric tons annually when the national roll-out is completed – the equivalent of removing 2,424 cars from the road each year.

The switch to biodiesel follows an extensive trial by McDonald’s and its distribution partner, Keystone Distribution UK, which began in August 2006. During this trial, 150,000 liters (39,625 gallons) of McDonald’s used cooking oil was collected and used to produce biodiesel meeting the European standard prEN 14214.

“We have been sending our used cooking oil for recycling for some time, but we are delighted to now have a practical, efficient use for it within our own business,” said Matthew Howe, McDonald’s senior vice president. Initially, the biodiesel used will be made from 85 percent used cooking oil and 15 percent rapeseed oil. The company will continue to work with suppliers in order to minimize the need for rapeseed oil in the manufacturing process.

Every vehicle in the 155-strong delivery fleet will be converted over to the alternative fuel, beginning in early July with half of the 45-vehicle fleet that operates from McDonald’s Basingstoke, UK, distribution center.

NGFA Establishes Biofuels Committee

The National Grain and Feed Association (NGFA) is establishing a new Biofuels Committee in response to the growing impact that the biofuels industry is having on U.S. agribusiness and NGFA-member companies. The committee will consist of industry leaders from NGFA-member biofuels manufacturing companies, marketers of biofuels and co-products, and grain and feed ingredient marketers and related service providers.

The Biofuels Committee will function as a steering committee to:

• identify and monitor trends in the biofuels industry significant to NGFA members of all types;

• survey the needs of biofuels companies as they relate to the grain, feed, and grain processing industry;

• develop a plan for attracting biofuels companies as members, and respond to their needs related to grain availability at competitive prices; co-product utilization; transportation and logistics; and safety, health, and environment compliance.

About 35 biofuels-producing companies and related businesses are currently members of the NGFA.

Oregon is Biofuels Friendly

Oregon Governor Ted Kulongoski kicked off the state’s Energy Independence Month on July 3, 2007, at a biofuels facility in Eugene, OR, where he signed House Bill (H.B.) 2210, which creates a Renewable Fuel Standard and tax incentives for both consumers and producers of biofuels.

The major components of H.B. 2210 include:

• A Renewable Fuels Standard that requires all diesel fuel sold in the state be blended with two percent biodiesel when biodiesel production in Oregon reaches at least five million gallons per year. Current production in the state is one million gallons with expansion plans in place to increase that level to nearly five million gallons by spring 2008. The biodiesel blending requirement increases to five percent when annual production reaches at least 15 million gallons per year. All gasoline sold in the state must be blended with 10 percent ethanol after Oregon production of ethanol reaches 40 million gallons per year.

• Tax incentives for producers or collectors of biofuels feedstocks, including animal rendering by-products, forest or agriculture-sourced biomass, oil seed crops, grain crops (excluding corn), grass, or wheat straw. The tax credit varies depending on the feedstock; for used cooking oil or waste grease, the credit is 10-cents per gallon. Oregonians who purchase biodiesel blended with a 99 percent concentration or gasoline blended with an 85 percent ethanol concentration qualify for a 50-cent per gallon tax credit, not to exceed $200 per year per vehicle. Additionally, Oregonians who use agriculture or forest waste pellets for home heating containing 100 percent biofuel also qualify. These are in addition to the business energy tax credits available for biofuels refineries and farm-based equipment.

To further Oregon’s commitment to renewable and alternative energy, Kulongoski signed Senate Bill 838 into law just three days later, creating a renewable energy standard that requires the state’s largest utilities to meet 25 percent of their electric load with new renewable energy sources by 2025. The legislation creates interim targets of five percent by 2011; 15 percent by 2015; 20 percent by 2020; and 25 percent by 2025. To meet the standard, electricity must come from a new renewable energy source that was in operation on or after January 1, 1995. Sources of energy that count toward the standard include wind, solar, wave, geothermal, biomass, new hydro, or efficiency upgrades to existing hydro facilities. The bill contains protections for ratepayers and modifies percentage targets for utilities that contribute less than three percent to the total state energy load.

Besides the state’s commitment, the city of Portland, OR, has also put forth a renewable fuels standard that requires a minimum of five percent biodiesel in all diesel fuel sold within the city limits as of July 1, 2007. The biodiesel blend increases to 10 percent on July 1, 2010. One stipulation in Portland’s standard is that palm oil not be used as a feedstock for the city’s biodiesel due to Portland’s climate, the high temperature of palm oil’s gel point, and the “negative impacts on the environment that results from its harvest in some parts of the world.” The standard specifies recycled cooking oil as being one of several favorable feedstocks.

On March 1, 2007, all Portland residential garbage and recycling haulers began using 20 percent biodiesel blended with ultra-low sulfur diesel fuel.

Wisconsin Forms Group

After meeting for over a year to discuss the future of Wisconsin’s biodiesel industry, a group of biodiesel advocates have joined together to form the Wisconsin Biodiesel Association (WBA). The group is comprised of producers, educators, and distributors, as well as agribusiness and other industry leaders. The association grew from a biodiesel roundtable formed by the Wisconsin Department of Agriculture, Trade, and Consumer Protection.

Jeff Pieterick, vice president of North Prairie Productions, a 45 million gallon per year biodiesel project in Evansville, WI, will serve as WBA president. The group currently has 16 members.


Biofuels Bulletin – August 2007 RENDER | back