A joint venture between independent refiner Phillips 66 and Renewable Energy Group (REG) to build a renewable diesel plant in Ferndale, Washington, has been scrapped.
The plant would have had capacity of 250 million gallons per year, or about 16,300 barrels per day. By the standards of biodiesel and renewable diesel facilities, that's a large plant. REG, in announcing the plant last year, cited a 100 million-gallon-per-year plant as one of the largest in its asset base.
"The project has been canceled due to permitting delays and uncertainties," the companies said in a statement.
That surprised government officials contacted by FreightWaves. The permitting process had only just begun in earnest for the plant, first announced in fall 2018, and there were no obvious issues so far.
"We were not aware of any permitting problems," said Tom Buroker, regional director with the state of Washington's Department of Ecology. However, he also noted that state permitting was only one part of the process.
But local officials said much the same thing: The local permitting process had just begun and was "really early," as one official said.
In a follow-up statement to FreightWaves, Phillips 66 (NYSE: PSX) said the process had become more complicated. "The permitting situation became uncertain with delays which made it very challenging to accurately forecast deadlines," spokesman Joe Gannon said in an email. "Once the decision was made to require supplementary environmental review, an additional two years was added for permitting, placing the project at risk of not being online until at least 2024. The extended deadline competitively disadvantaged the project."
Renewable diesel and biodiesel are not identical and are made through different processes. Renewable diesel is more complex and can be used in higher concentrations with standard diesel, or even as a standalone fuel.
Biodiesel is more of a blendstock, to be mixed with existing diesel products to produce a wider source of supply and to generate renewable fuel tax credits and similar environment benefits. Additionally, biodiesel is produced exclusively from lipids, like the grease generated in a restaurant, whereas renewable diesel can also be produced from certain plant matter.
Chris Barber, an analyst with the consulting firm ESAI and a refining and alternative fuels expert, said the market for renewable diesel has been strong. A lot of that is because of the healthy market for Low Carbon Fuel Standard credits in California, which have been near the legal limit of $200 per credit. (In 2011 and 2012, their price was measured in cents, not dollars.)
"There are refineries I know on the West Coast that are looking at other projects, just like Ferndale," Barber said.
Barber noted that refineries getting into renewable diesel or biodiesel often need a partner who is well-versed in gathering feedstocks for them, since it involves a wide range of activities not normally in the refiner's standard operations, like buying restaurant grease.
But Phillips 66 is continuing to look at investing in renewable diesel. Gannon in his email said the company has several other projects under development, including two at other Phillips 66 refineries. It also has supply and off-take agreements with two third-party projects being built in Nevada, Gannon said.
The news did not hit Renewable Energy's stock; it was up 0.75% on Tuesday. It is a $2.3 billion company. But a 250 million-gallon-per-year plant would have been a significant boost to its output, which was a little more than 500 million gallons in 2018.