Japanese firm to partner on newly revised Louisiana renewables fuel project
Sumitomo Corp. of Americas (SCOA), a subsidiary of Tokyo-based Sumitomo Corp., has signed on as a project partner for joint development of Strategic Biofuels LLC subsidiary Louisiana Green Fuels LLC’s (LGF) previously announced grassroots biorefinery and adjacent bioenergy with CCS (BECCS) power plant under way at the Port of Columbia in northeast Louisiana’s Caldwell Parish, about 25 miles south of Monroe (OGJ Online, Sept. 4, 2023).
As part of the Feb. 7 agreement, SCOA will take an anchor position and lead the formation of a Japanese-based investment consortium aimed at funding most of the development capital Strategic Biofuels needs to carry the project to financial investment decision (FID) and start of construction in early 2025, the companies said.
At the time of taking FID, SCOA said it will also acquire rights to participate for a portion of the full project equity requirement.
Upon announcing the partnership, Strategic Biofuels revealed it will shift LGF’s primary renewable fuel product to sustainable aviation fuel (SAF) from an originally planned mix of renewable diesel and renewable naphtha to help meet rising demand from the commercial aviation industry on its path to decarbonization.
"The shift to SAF is an exciting moment for us and our partners, for the energy landscape in Louisiana, and for the greater global energy transition overall," said Dr. Paul Schubert, Strategic Biofuels’ chief executive officer.
As part of the partnership agreement, SCOA said it intends to provide a 20-year offtake for the nearly 640 million gal/year of renewable fuels LGF produces, as well as all state and federal renewable fuel credits.
Alongside enabling lower emissions from the aviation sector, LGF’s shift to SAF production will also further reduce the operator’s carbon footprint.
"Although we have a lot of work ahead of us, our team is fully prepared to advance the project to FID and supply SCOA with SAF," Schubert said.
To achieve anticipated carbon reductions scheduled to begin in 2029, the LGF plant will use:
- About 1 million tonnes/year (tpy) of regionally sourced forestry waste as the biorefinery’s feedstock.
- Green energy from an integrated biomass-fired power plant that will take nearly 1 million tpy of sawmill waste annually to produce 86 Mw of power.
- Geologic carbon sequestration of 1.36 million tpy of carbon dioxide (CO2) produced from the combined BECC to create an SAF product that will equate to removing nearly 300,000 passenger cars from the road.
Announcement of the newly formed partnership for LGF follows the US Environmental Protection Agency’s (EPA) late-December 2023 conveyance to the Louisiana Department of Natural Resources (LDNR) of the right to issue Class VI permits for CO2 geologic sequestration, making Louisiana one of only three states to be granted this authority.
The partners said they expect LDNR’s primacy on the matter will accelerate the schedule for regulatory review and Class VI-permit issuance for the LGF project.
"Our partnership with Strategic Biofuels is just another example of our commitment to support the energy transition within the Americas," said Sandro Hasegawa, general manager of SCOA’s Energy Innovation Initiative Americas. “We look forward to leading the investment with our partners in Japan and demonstrating what can be accomplished when global players work together."
Previous project contracts
In late June 2023, Strategic Biofuels revealed SLB will provide site derisking and front-end engineering and design (FEED) services for LGF’s carbon capture and sequestration (CCS) complex, to be built on and around the biofuel refinery and adjacent BECCS power plant. SLB’s scope of work also covers provisions for future services, including injection operations and long-term CO2 monitoring.
The mid-2023 contract follows LGF’s April 2022 agreement with Koch Engineered Solutions subsidiary Koch Project Solutions for construction of the renewable fuels plant on a lump-sum turnkey basis with parent-company backed guarantees, including liquidated damages for any performance and schedule delays. As part of the contract, KPS will deliver engineering, procurement, construction, commissioning, and startup services for the biorefinery.
Strategic Biofuels previously selected Hatch Ltd. to deliver engineering for the LGF project.
In early 2023, Strategic Biofuels let a contract to Johnson Matthey (JM) and bp PLC to license their jointly developed Fischer Tropsch (FT) CANS technology for LGF’s biorefinery, which will use the technology to convert synthesis gas (syngas) generated from its 1 million tonnes/year (tpy) of biomass feedstock into an initial 31.8 million gal/year of biofuels, as well as future production of SAF.
Project incentivizing
Strategic Biofuels, which initially received a $200-million tax-free bond allocation from the state of Louisiana to help advance the estimated $700-million development, has received ongoing financial and legislative support from the state to advance it as part of Louisiana’s broader commitment to reach state-wide net-zero emissions by 2050.
In February 2022, Louisiana Governor John Bel Edwards awarded the LGF project a $250-million bond allocation designed to form an integral part of debt financing for construction costs. For the 2021 private-activity bond allocation year, LGF received $250 million of the $393 million that was available from the state. The allocation provided the right to issue tax-free bonds to finance the project, which is qualified to receive them because it is a waste-to-fuels project.
As a result of positive financial impacts stemming from the US Inflation Reduction Act with respect to tax credits for sequestration projects, the Louisiana Community Development Authority’s (LCDA) executive committee in September 2022 voted unanimously to adopt a resolution granting final approval for up to $1.1 billion of tax-exempt revenue bonds to finance a portion of the LGF project.
A statewide conduit issuer of revenue bonds, the LCDA is authorized to issue bonds to finance economic development, industrial, and manufacturing projects on behalf of local governmental entities throughout Louisiana. In addition to bond allocations to date, Strategic Biofuels said it expects to receive substantial additional allocations during the next 2 years.
Louisiana also enacted Caldwell Parish-specific legislation on Aug. 1, 2022, that extended the eminent domain acquisition of pore rights for underground CO2 storage, prohibiting third-party drilling through Strategic Biofuels’ storage reservoir. The drilling ban in the law aligns the LGF project with the carbon sequestration requirements of the California Air Resources Board’s Low Carbon Fuel Standard (LCFS) and enables qualification for credits for fuel delivered to that state. These credits, together with the credits under the federal Renewable Fuel Standard and federal sequestration tax credits, aim to further contribute to the project’s future revenues.
Robert Brelsford | Downstream Editor
Robert Brelsford joined Oil & Gas Journal in October 2013 as downstream technology editor after 8 years as a crude oil price and news reporter on spot crude transactions at the US Gulf Coast, West Coast, Canadian, and Latin American markets. He holds a BA (2000) in English from Rice University and an MS (2003) in education and social policy from Northwestern University.
