Houston’s NEXT heads to Oregon
With a merger later this year, the refinery should ready in 2026
Why put a refinery in Oregon? It’s a question that Houston-based NEXT Renewable Fuels CEO Christopher Efird hears a lot.
While there are surely more hospitable places closer to his Houston home, Efird said he saw untapped potential along the Columbia River, the natural boundary between Oregon and Washington — two states offering incentives for the renewable diesel and sustainable aviation fuel he plans to produce. It’s also an area devoid of competing refineries.
“We wanted to be on the West Coast,” Efird said. “We wanted to be on deep water; we knew that trying to go on the coast in California was going to be very, very difficult, and we were going to be competing head-to-head with some very large companies.”
NEXT, scheduled to go public through a merger with a blank-check company later this year, has caught the attention of major players such as BP, Shell and United Airlines, which have each struck deals to support the facility. The refinery, which aims to process waste oils and animal fats into fuel, is expected to cost as much as $3 billion to develop and could produce 750 million gallons per year of fossil fuel alternatives, or around 50,000 barrels per day — nearly enough diesel to fuel the entire state of Oregon.
Renewable diesel is quickly growing as an alternative to fossil fuels that is otherwise chemically identical to petroleum-based diesel, meaning it can be used in existing pipelines and engines without modifications. Its meteoric rise is helped by a shortage of petroleum diesel and tight oil refining capacity exacerbated by the pandemic and the war in Ukraine.
Renewable diesel production capacity more than tripled to 170,000 barrels per day in 2022 from around 50,000 barrels per day in 2020, the Energy Department said in a report earlier this month, noting production could reach 384,000 barrels per day in 2025 if projects such as NEXT’s continue as planned.
“This has made renewable diesel the fastest-growing segment within biofuels,” Beatriz Pupo, global biofuels manager for S&P Global Commodity Insights, said, “as strong incentives in low-carbon fuel markets are enticing investments and boosting demand.” The NEXT facility, scheduled to come online in 2026, is the second-largest renewable diesel project under development in the U.S.
The largest, being developed by Houston-based Fidelis Infrastructure, is in Baton Rouge, La., Pupo said.
In addition to displacing oil, renewable diesel burns more cleanly than standard diesel, giving it high marks for greenhouse gas reduction in low-carbon fuel incentive programs available federally and through state programs in Oregon, Washington and California. Under California’s low-carbon fuels standards program, for example, renewable diesel can earn as much as $1.75 per gallon in incentives alone, Pupo said.
Federal and state subsidies for renewable diesel can stack up to around $5 a gallon, or more than 80 percent of a facility’s manufacturing costs, said David Hackett, chairman of Stillwater Associates, an energy consulting firm.
The fuel’s manufacturing cost is generally around $6 a gallon and it sells for around $3 a gallon — math that puts makers of renewable diesel in the red without government help, he said.
“The problem with it in general is the feedstock is more expensive than the products,” he said, “so it takes government support to make the economics work.”
NEXT was founded as a side project for Efird, whose role originally was to be responsible for navigating Oregon politics and other back-office functions. It became a full-time job after its former president, Louis Soumas, was arrested under alleged sex abuse charges in 2020 — an issue Efird said was unrelated to the company. Court records show Soumas’ case remains active in Fort Bend County District Court and is scheduled for a jury trial in May.
Efird, 58, who calls himself a serial entrepreneur, has helped launch dozens of companies in the technology, telecommunications and energy industries and co-founded and managed two private equity funds. He has taken heat from opponents of the NEXT project for one of his failed former investments, a biodiesel facility outside Spokane, Wash., called TransMessis, which left behind some of its hazardous materials after the facility abruptly shuttered in 2014. The facility was in working order when his colleagues were locked out of the facility, Efird said, but after nearly a year without maintenance, equipment had fallen into disrepair and began to leak.
The unsuccessful TransMessis deal was ultimately a learning experience that taught him to scrutinize equipment sellers more carefully, he said. “Once operators got in there, they
discovered a lot of the equipment was not as it had been presented.”
It was a lesson that helped him as he founded NEXT, he said, and is an example of the kind of industry experience concentrated in Houston — an industrial hub he said is crucial to developing the energy of the future.
“I really do think Houston is going to lead a lot of this energy transition,” he said, “because this is where the expertise is.”
Fueling the future
That expertise faces a daunting challenge. Access to low-carbon feedstocks is a hurdle for the growing industry and a sticking point for environmentalists, as biofuels makers often are forced to take in soybean oil, which is plentiful but has a high carbon-intensity, to sustain their operations. NEXT’s facility is designed to be “feedstockagnostic,”
meaning it can swap out feedstocks from day to day depending on what is most available and has the lowest-possible carbon intensity, whether it be used cooking oil from Asia or fish tallow or animal fats and other tallows from South America.
Once up and running, the refinery could need as much as 2 million tons of feedstock per year.
“That’s a lot of grease,” Efird said. “We need to be able to bring it in at volume. And we want to bring in the material that will allow us to have the lowest possible carbon intensity.”
That was another reason for choosing the Oregon site. NEXT needed access to a deep-water channel capable of delivering massive loads of waste fats from other continents. The site at Port Westward, about 65 miles north of Portland,
Ore., is on water that is 72 feet deep. “You never have to dredge that location. That was very important for us, because we wanted to be able to source feedstock from everywhere,” Efird said.
The goal is to have no more than 10 percent of its feedstock come from dirtier soybean oils, he said.
To that end, Efird said his company is working with BP on developing pathways to get fish grease and used cooking oils onto tankers and to the West Coast, which also could be sold to other regional refiners. “It allows us to lock in, if you will, or to establish proprietary access,” Efird said. “We won’t need that material ourselves until the facility comes online, but the industry overall is growing.”
Not everyone is sold on the project.
Environmental advocates in Oregon criticize the instability of available feedstocks, NEXT’s plans to use natural gas to power the facility as well as the project’s wetlands destruction.
“Simply put, NEXT’s proposal is neither renewable nor sustainable,” said Dan Serres, conservation director for the Columbia Riverkeeper in a statement.
Building green
The facility would be built on roughly 100 acres of protected wetlands along the Columbia River, which under Oregon rules requires NEXT to restore 400 acres of wetlands to compensate for the habitats that would be displaced. Efird said that plan remains under regulatory review.
The merger that will take the company public will inject cash into its coffers and give it access to public markets to raise funds. Houston-based special-purpose acquisition company Industrial Tech Acquisitions II, which raised $172.5 million after its initial public offering in January 2022, will merge with NEXT in a deal valuing the company at $666 million.
“Renewable diesel and sustainable aviation fuel are the most desired liquid fuels in the world, and there is an urgent global need for more,” ITAQ CEO Scott Crist, a partner at Texas Ventures, said in a statement.
The merger is expected to close during the second quarter, giving NEXT a cash boost as it prepares to move into the construction phase of the project next year, assuming the company clears the last of its permits. The facility is expected to come online in 2026.
United Airlines has also committed up to $37.5 million in investments in the facility in exchange for an equity stake in the company, and Shell has signed an agreement to buy a portion of the resulting fuels.