Biofuel trade groups and major U.S. airlines applauded the tax-credit rules, which allow producers to subtract from their overall emissions if they do things like use renewable electricity, deploy carbon capture and storage, and source crops from farmers who use so-called “climate-smart” agricultural practices. Gevo, the potential loan-guarantee recipient, says it’s planning to adopt all three strategies for its plant in South Dakota.
But climate groups have questioned Treasury’s methodology for analyzing total CO2 emissions from crop-based fuels. They’re concerned that it risks undercounting the full life-cycle impacts of biofuels, which could result in making SAF that is just as polluting, or worse than, the fossil jet fuel it’s meant to replace.
The DOE’s big SAF bet
Gevo, for its part, has said the SAF tax-credit changes could be a boon for the company’s financial prospects.
The company currently produces renewable natural gas in Iowa by collecting manure from dairy farms. It also makes corn ethanol and isobutanol, a chemical building block, from a facility in Minnesota. Gevo is now angling to expand into SAF production with its Net-Zero 1 project, which will deploy an alcohol-to-jet process that uses grid electricity, fossil gas, and hydrogen to transform ethanol into aviation fuel.
Gevo said its SAF facility “will reduce life-cycle emissions compared to fossil jet fuel, enabling the avoidance of over 600,000 metric tons of CO2-equivalent annually,” according to a Wednesday news release. Construction is expected to begin in 2025 and with ramp-up of the facility is slated for 2027, the company said.
Yet even with the conditional loan-guarantee commitment, the project faces uncertainty.
Gevo executives have said that Net-Zero 1 can’t pencil out economically without access to the Summit pipeline, the news outlet South Dakota Spotlight reported in May. The company needs to capture and sequester CO2 from the SAF facility in order to meet emissions-reduction thresholds for the federal tax credits. But regulators in both North Dakota and South Dakota recently denied permits for the pipeline.
The $8 billion Summit pipeline project would funnel CO2 from nearly 60 ethanol plants in five states, then pipe the gas into an underground storage site in North Dakota. Landowners and neighbors of the proposed pipeline have expressed concerns about the conduit’s safety, while environmentalists oppose the project in part because it furthers the country’s reliance on crop-based fuels.
To hedge its bets, Gevo in September announced a $210 million deal to acquire an existing ethanol plant in Richardton, North Dakota, that already captures CO2 and stores it onsite in an underground rock formation. Gevo said the investment is “synergistic” with its South Dakota plant and will “mitigate risk around carbon sequestration” by potentially providing an alternative way to sequester CO2 beyond the Summit pipeline— though the company didn’t elaborate on plans to integrate the projects.
The other potential loan-guarantee winner, Montana Renewables, likely won’t face such challenges with its planned expansion in the northwestern U.S. state.
The company has been producing biofuels in Great Falls since late 2022, using a process called hydroprocessed esters and fatty acids, or HEFA. The vast majority of the world’s SAF is made this way, with feedstocks such as used cooking oil, pork fat, beef tallow, as well as oily seeds like canola, mustard, and soybean.
Montana Renewables primarily makes HEFA for road transportation, though the company is steadily shifting production to make more aviation fuel. At present, the Montana facility is the largest SAF refinery in the United States, though the competition hasn’t been particularly fierce. Only one other U.S. facility was producing SAF at the start of this year: World Energy’s refinery in Paramount, California.
To be sure, the HEFA process is energy-intensive, and most facilities use fossil-derived hydrogen to drive chemical reactions. But fuels made from waste oils and fats can still be potentially cleaner than conventional fuels, and they likely don’t need carbon capture to meet tax-credit targets. In Great Falls, Montana Renewables’ owner started making clean hydrogen last year using waste gas from an existing biorefinery; it then reuses the hydrogen to make SAF and renewable diesel.
Although it didn’t give a specific number, Montana Renewables said its expanded facility “will produce fuels with significantly lower greenhouse gas emissions” on a life-cycle basis when compared to conventional jet fuel. The company expects about half of its expanded SAF capacity to be online by 2026.
Meeting the Biden administration’s 3-billion-gallon SAF goal will require quickly scaling up facilities that can process HEFA feedstocks and even ethanol, industry observers say. However, such materials are expected to become less available and more expensive over time as U.S. biofuel production soars for planes, trucks, and ships. In the long run, next-generation fuels made from hydrogen and CO2 — which have the potential to be even cleaner — could wind up fueling the bulk of the country’s fleet.
