Calumet adding pretreatment plant to Montana renewable diesel project

Calumet Specialty Partners is adding a pretreatment plant to its renewable diesel project at its Great Falls, Montana, project as it continues to evaluate feedstock supply partners, the company's CFO said June 9.

Speaking at the virtual Bank of America Merrill Lynch 2021 Energy Credit Conference, Todd Borgman said as Calumet began evaluating prospective partners it became clear that adding a pretreatment plant to the project was the right move.

Part the reason why a pretreatment plant – which allows for a greater variety of renewable feedstocks to be used – wasn't included in the initial plan was because "it wasn't clear what a partner would want," Borgman said. "Now it is clear, it's pretty aligned is that pretreatment is positive," he said, adding the company was keeping "close" any further discussions on possible partners.

The pretreatment plant will also increase the feed rate to 14,000 b/d from the original 10,000 b/d to 12,000 b/d. It also allows the plant to run a greater variety of feedstocks, including beef tallow, soy bean oil, canola oil and camelina oil which are easily available geographically to the refinery.

"We are right in the middle of the feed supply and the market," Borgman said. "There are more feed sourcing opportunities regionally that we will be able take advantage with the pre-treater."

Hydrocracker conversion

The keystone of the renewable project at the 25,000 b/d Great Falls project is the conversion of a hydrocracker currently in service at the plant from hydrocarbons to renewable feed, making the project "the most compatible renewable diesel conversion in North America," Calumet CEO Steve Mawer said at the conference.

Once the project is complete, the plant will "maintain 50% of fossil fuel processing we have right now," he added.

First renewable production is expected in the second quarter of 2022 following a catalyst change, when 5,000 b/d of renewable diesel will be produced.

While the project will be focused on making renewable diesel, it will also be able to make sustainable aviation fuel, but it is not "our plan day one" because it doesn't generate as many RINs as renewable diesel, Borgman said.

Calumet has applied for a small refinery exemption for 2019 and 2020, which, if received, could negate any liability for the RINs credits required by the Environmental Protection Agency's Renewable Fuel Standard.

"We've received the exemptions [in previous years]. We believe we are still in a good spot to receive the exemptions," Mawer said.

The small refinery exemption is part of the RFS which provides an out for refineries of less than 75,000 b/d which can prove extreme hardship by complying with their annual renewable volume mandate under the RFS. On April 27, the Supreme Court heard the small refinery exemption case brought by HollyFrontier on appeal after it was denied the exemption by the Tenth District Court and have yet to render a decision.

Calumet does not see in the near future any cash outlay to buy RINs, where prices have been rapidly rising to record highs. Refiners have to buy RINs to meet their RVO if they can't make or blend enough renewable fuel into their transportation fuels.

So far in the second quarter 2021,Platts assessed D6 ethanol RINs are averaging $1.68/RIN compared with the 35 cents/RIN in the second quarter of 2020, rising on the SRE uncertainty and ahead of receiving the delayed 2021 renewable volume obligation from the EPA.

"With the Great Falls project, we are a year away from being 300% of our RIN obligation," Mawer said.