Calumet Specialty Products gets hydrogen plant financing for Great Falls refinery RD project

Calumet Specialty Products Partners is moving forward with construction of the renewable hydrogen plant at its Great Falls, Montana, refinery, putting its renewable diesel project one step closer to completion, the company said in a Jan. 4 statement.

Calumet said in the statement it received $50 million in project financing toward the renewable hydrogen plant from private equity firm Stonebriar Commercial Finance, which focuses on the rail and aviation industries.

The Great Falls renewable hydrogen plant is expected to start up in the fourth quarter of 2022, increasing production of renewable diesel from 5,000 b/d in May 2022 to about 12,000 b/d.

"Once complete, the renewable hydrogen plant will allow increased production of renewable diesel and further reduce the carbon intensity of products from MRL," Calumet said in the Jan. 4 statement.

On Nov. 19, Calumet announced it created Montana Renewables, LLC (MRL) "as an unrestricted pure-play renewables subsidiary of Calumet."

Calumet's ability to produce renewable or green hydrogen will lower the carbon intensity of the RD project and increase the value of Low Carbon Fuel Standard credits from California and other local regional governments. Demand for renewable diesel and other renewable fuels continues to grow in these regions with the advent of carbon reduction legislation.

Calumet estimates that RD demand in the US and Canada will grow from 1 billion gal/year in 2020 to 1.9 billion gal/year in 2022 and 2.9 billion gal/year by 2025.

In addition to RD and renewable hydrogen, Calumet is considering producing sustainable aviation fuel – especially if a jet fuel blender's tax credit is passed -- renewable natural gas, renewable LPG and renewable gasoline blendstock.

However, much like the $1.25/gal jet-fuel blending tax credit proposed in US President Joe Biden's Build Back Better agenda, the proposed hydrogen production tax credit, or PTC, is also at risk due to the bill's delay, but will not impact the Great Falls project.

The House-passed bill included a PTC of $3/kg for hydrogen production with near-zero emissions, which would be advantage to green hydrogen, as well as less climate-friendly blue hydrogen. The price of green hydrogen in the Rockies averaged $6.66/Mcf in Q4 2021, compared with the $1.69/Mcf price of blue hydrogen, according to S&P Global Platts assessments.

Great Falls three phase conversion

Calumet's Great Falls conversion to add renewable production capacity to its petroleum production is divided into three phases.

First, following a turnaround at the plant to change out the catalyst in the hydrocracker to accommodate renewable feedstock, MRL is commissioning the 25,000 b/d hydrocracker to run local soy and tallow feedstock and first RD production of about 5,000 b/d is expected in May 2022.

The addition of the renewable hydrogen plant in the second half of 2022 is the second phase and will increase production to 12,000 b/d. Renewable, or green hydrogen, is produced using renewable fuels, while blue hydrogen is produced from fossil fuels like natural gas through carbon capture and storage.

Use of green hydrogen is being evaluated through several pilot programs to produce electricity as well as fuel for hard-to-decarbonize transportation sectors like rail and marine.

The start-up of the Great Falls pretreatment plant in November 2022 will allow MRL to expand its feedstock universe to include corn oil, cooking oil and canola and other oil seeds beginning in the fall of 2022 and increase production to around 14,000 b/d.

In 2024, MRL is planning a turnaround of the unit and will expand renewables production to around 18,000 b/d.

In addition to RD and renewable hydrogen, Calumet expects to produce sustainable aviation fuel – especially if a jet blender's tax credit is passed -- renewable natural gas, renewable LPG and renewable gasoline blendstock.

Besides easy access to feedstock, Calumet's Great Falls project has easy and cheap access to Low Carbon Fuel Standard markets in the California, the Pacific Northwest and Western Canada. This lowers transportation costs from the plant from between 8 cents/gal and 12 cents/gal, versus the 35-45 cents/gal for product shipped to the Pacific Northwest through the Panama Canal, according to a company presentation.

Calumet's Montana operations now consist of its renewables business through MRL and its conventional Canadian crude processing business, which has been reconfigured to run 12,000 b/d of Canadian crude and will focus on producing asphalt as well as meeting local demand for conventional fuels.