Fuel for thought
Neste forges partnerships for sustainable jet and diesel fuel
On a windowsill in a Galleria office overlooking Houston’s ribbons of roads sit four jars: one filled with dark brown cooking oil, fried sediment sunk to the bottom, and another with creamy, sludgy tallow tinted a pale yellow.
Two smaller glass containers hold clear diesel and jet fuel — the products, after a complicated refining process, that could power commercial vehicles and airplanes.
The small amount of clear liquid is not enough to fuel a trip from Houston to the Permian Basin, but Neste, the Finnish energy company that produces it, says it’s on track to become the largest producer of sustainable aviation jet fuel in the world, with brand-name customers to boot.
Jeremy Baines, president of Neste U.S., said the company is sourcing $200 million of waste and feedstock from restaurants and manufacturers in the United States each year to create the potentially game-changing clean jet fuels. Neste currently produces up to 34 million gallons of jet fuel annually.
“Sustainable aviation fuel is an untapped market,” said Baines, who joined Neste’s London offices in 2004 and came to the U.S. in 2016 to lead the company’s North American sales. He became president of the company’s U.S. operations in September. “There is nobody else in that space today.”
To produce the fuels, Neste contracts with waste collection companies that take used cooking oil from restaurants and waste from animal and vegetable processing plants in the U.S. Those providers sell the used oils to Neste.
It stores the oils in a terminal in Houston before shipping it to one of its refineries in Finland, the Netherlands or Singapore for processing. It’s Galleria-area U.S. headquarters employs 65 people who focus on sales and managing its raw materials.
In September, the Environmental Protection Agency approved Neste U.S.’s petition, made in partnership with with Houston-based Texmark Chemicals Inc., for a new renewable fuel standard pathway to produce jet fuels in Texas. Texmark, a chemicals processing company, will purchase renewable diesel from Neste’s Finnish refineries and fractionate, or break down, the diesel at its Galena Park facility to create renewable jet fuels and renewable diesel “bottoms,” a fuel has a higher average energy density than renewable diesel.
Fuels produced by Texmark and Neste are expected to achieve a 77 percent reduction in greenhouse gas emissions, according to the EPA.
Fuels of the future
With international calls to cut
down on global greenhouse gas emissions from 36.2 gigatons of carbon dioxide in 2017 by half by 2030, companies are scrambling to figure out how to decarbonize their practices.
Airplane emissions are expected to triple by 2050 if current trends hold, according to the United Nations’ aviation agency. International researchers found that commercial aircraft emitted 918 million metric tons of carbon dioxide in 2018, making up 2.4 percent of global carbon dioxide emissions from fossil fuel use.
To tackle that, Neste is ramping up production of its sustainable jet fuels. The energy company is able to produce up to 34 million gallons of fuel a year, and it plans to produce 10 times that once it finishes the expansion of its Singapore facility. Meantime, batches of the sustainable aviation fuel have been sold in smaller quantities to major carriers to blend with their fossil fuel supply, creating a product that burns cleaner.
“The beauty of this is in those really hard to abate sectors, heavy-duty trucking, aviation fuels, there are no extension cords long enough to power an electric plane,” Baines said.
In November, Baines testified before the House Subcommittee on the Environment and Climate Change to discuss the impact of switching over to environmentally friendly fuels for air travel. The company has begun working with major air carriers such as Lufthansa and American Airlines, and has entered into memorandums of understanding with Dallas-Fort Worth International Airport and the Port Authority of New York & New Jersey, among other commercial transit hubs.
Lufthansa, has been testing Neste’s sustainable fuels since 2011, began blending the renewable jet fuel into fossil fuel tanks earlier this year on flights originating in Frankfurt.
American Airlines expects sustainable jet fuels to play a role in helping the airline go greener. The changes it’s made in recent years — switching to more fuel-efficient aircraft in 2014 and three years later investing in a partnership with Neste — are part of an overall effort that has seen it emit what it said were 6.4 million fewer metric tons of carbon dioxide than it would have by 2014’s fuel efficiency level.
“Our involvement with Neste and other like-minded organizations is aimed at clearing the way for more widespread production of sustainable aviation fuels, as well as ensuring their commercial viability, which we believe will bring us closer to achieving our renewable energy goals,” said Stacy Day, an American Airlines spokeswoman.
Sustainable aviation fuel remains a more expensive alternative to traditional fossil fuels — between two and three times the cost of traditional jet fuel — and Baines conceded that prices would remain high until the industry is able to benefit from greater economies of scale. Once the company completes its next refinery in Singapore, it expects to be able to produce 340 million gallons of sustainable aviation fuel per year, 10 times current levels.
West Coast promise
One area in which demand is great is on the West Coast, and Neste is particularly focused on trying to get customers in California, where clean air regulations have created the perfect environment for the company to sell diesel to distributors. It has four distributors in California and three in Oregon.
Transparency along the supply chain is a big selling point, Baines said. The company’s West Coast clients need the assurance of where the products go at every step of the supply chain; the California Air Resources Board must approve all feedstocks and fuel pathways to meet the state’s low carbon fuel standard.
“We want to be able to trace all of those feedstock as far back to the source as we possibly can,” he said, adding that Neste includes an accountability dashboard on its website to show where the feedstock comes from and where it goes in the process.
Among Neste’s diesel distributors in California is Van De Pol Enterprises Inc., a Stocktonbased fuel supplier that began working with Neste in 2017.
“Our customers appreciate that the product is 100 percent renewable (not a bio-blend), reduces NOX (NO2) emissions from their vehicles, extends the maintenance period of the particulate filters and can improve their fuel mileage,” company founder Ron Van De Pol said in an email.
Roughly 350 customers, including bus fleets, municipal truck fleets and private trucking companies, count themselves among Van De Pol’s Neste fuel clients. Van De Pol expects that more clients will jump on board as Neste ramps up production.
“Our sales of renewable diesel have grown each month,” he said.
In California, the City of Oakland’s Public Works Department partnered with Neste in 2019 to collect used cooking oil from restaurants and other businesses in the area. Neste converts it and redistributes it to the agency’s vehicles to be used in trash and maintenance trucks.
“Switching from petroleum diesel to renewable diesel automatically converts the city’s oldest and dirtiest polluting vehicles into alternative fuel vehicles overnight and with no additional costs,” Oakland Public Works Director Jason Mitchell said in a statement.
Neste is also accumulating other big-name patrons, providing renewable diesel to Salesforce and UPS.
Looking forward
It’s been a banner year for Neste, which has already made significant progress in veering away from fossil fuels. The company offset 8 million tons of carbon dioxide last year, Baines said, and Dutch chemical company LyondellBasell, which has its U.S. headquarters in Houston, announced in August that it was partnering with the Finnish energy company to produce bio-based plastics.
Neste, a public company whose shares are traded on the OTC Markets in the U.S., reported a third-quarter profit of 444 million euros ( just over $491 million) on revenue of more than 3.9 billion euros (more than $4.4 billion), its highest quarterly profit ever, Baines said.
Neste and other biofuel makers are calling on U.S. policymakers to push incentives that would make sustainable aviation fuels a viable decarbonization initiative. Some policies, such as the EPA’s Renewable Fuel Standard, are a good start, but Baines said there needs to be more comprehensive legislative structure to support sustainable fuels’ economic viability.
At his testimony on Capitol Hill in October, the energy executive underscored the possibility of sector-specific tax credits or excise tax exemptions to draw investors. A longer extension of the federal Renewable Fuel Standard would also help as companies worldwide seek to decarbonize.
“The clock is ticking,” Baines said.