Blue Fuel Energy may be one of the best bets for meeting North America’s increasingly ambitious low-carbon fuel standards (LCFS). The problem is a lot of people just don’t get it.
Juergen Puetter built Blue Fuel around the idea of using renewable power to drive a relatively conventional refining process that converts natural gas into methanol and methanol into synthetic gasoline. It’s all proven technology, and Puetter even hired former Methanex executive Michael Macdonald—a 30-year methanol veteran—as Blue Fuel’s president to help gain investor confidence in the venture.
But it has been a tough sell. First, how is a fossil-fuel synthetic gasoline low carbon? How does Blue Fuel expect to build a $2.2-billion energy megaproject in the verdant hills of B.C., where so many others have failed? And how will it get its product to market from the northeastern corner of B.C.?
Puetter notes people generally don’t appreciate that biofuels aren’t always low carbon. It’s debatable that ethanol from U.S. Midwest corn even produces net energy after all the inputs of planting, irrigating, fertilizing, protecting from pests and processing into fuel are accounted for. No net energy means no net carbon intensity reduction.
While there are productive agricultural regions in California, Brazil and other places that yield an ethanol with a lower carbon intensity than gasoline, they have the “blend wall” to contend with. Most jurisdictions have adopted 10 per cent maximum biofuel blend to ensure that gasoline remains backward-compatible with existing vehicle engine technology. But that may not leave enough margin to achieve California and B.C.’s LCFS targets, which call for a reduction of at least 10 per cent in the transportation fuel carbon intensity by 2020.
“If you do the math for gasoline, which emits 93 grams [of carbon] per megajoule and add 10 per cent of something that emits 45 grams per megajoule [ethanol], you cannot get a 10 per cent reduction in carbon intensity,” Puetter says. “Interestingly enough, that simple calculation, which most grade three students can perform, has largely gone unrecognized.”
Puetter is primarily a wind developer. His company, Aeolis Wind Power, brought on the first fully operational wind farm in B.C. in 2009 and then sold the 102-megawatt project to AltaGas.
Currently Aeolis is sitting on a massive amount of potential wind energy in its northeastern B.C. land leases, approximately 5,000 megawatts. That energy, however, is essentially stranded for three reasons: BC Hydro does not have enough capacity to firm up this intermittent power, there is a lack of regional demand for the electricity and there are no transmission lines to export it.
Thinking creatively about these challenges, Puetter turned to the Holy Grail of renewable energy sources: storage.
“We concluded that the most efficient way to store energy on a large scale is by transforming it into a liquid fuel,” he says.
Blue Fuel was launched in 2008 based on a proposal to use wind energy to electrolyze water into hydrogen and oxygen and turn that into synthetic gasoline. The size of the emerging LCFS market in California and B.C., however, convinced Puetter’s team to abandon water electrolysis.
“We realized that the scale that is required is so massive that we couldn't possibly build enough electrolysis-derived gasoline at an economic rate,” he says.
Since Aeolis’ 2,000 hectares of leased land in the Chetwynd, B.C., area are not only endowed with wind but also a massive amount of Montney dry natural gas, the business plan changed to using BC Hydro renewable energy to convert dry natural gas into methanol and running the methanol over a catalyst produced by ExxonMobil to make DME.
“By doing nothing else but using a fossil fuel such as dry natural gas and using renewable energy for electric drive in your refining process, this yields you to 20 per cent reduction in carbon intensity,” Puetter says. “You end up with a fully compatible gasoline that meets [Federal Test Methods] standards. This is different than ethanol, which always has to be brought to a central location and blended into gasoline. We’re making stand-alone gasoline that you can fuel up with.”
Blue Fuel’s plan is for an initial plant producing 5,000 tons/d of methanol, dehydrated to produce 2,400 tons/d of gasoline. That volume is equal to about 20 per cent of B.C.’s gasoline consumption, two per cent of Canada’s consumption and 1.4 per cent of California’s.
Montney gas in the Chetwynd areas is virtually pure methane, which is ideal for Blue Fuel’s purposes. The oil and gas industry isn’t interested in it because the economics of the liquids-rich Montney are better. But for Blue Fuel, dry gas means it doesn’t require deep or shallow-cut processing. And eventually Aeolis wind farms would replace BC Hydro renewable power.
In shopping the project to potential investors, Puetter leads with Blue Fuel’s work with the government and First Nations to gain social licence.
“The idea of a refinery has been very well received in the area,” he says. “[The refining] process generates a lot of waste heat. Rather than just run it through a heat exchanger, we plan to provide this waste energy in the form of hot water to large-scale greenhouses that are fully owned by First Nations. We donated 100 acres of land for that.”
As for market access, Puetter started with the assumption that it is “virtually impossible” to build pipelines in B.C. The solution is CN’s railway.
“We have rail siding, and CN has enough capacity in existing rail for five plants like this,” he says.
The biggest hurdle, however, has been financing.
Blue Fuel has done the pre–front-end engineering design and calculated the heat balances, but it needs US$50 million for the detailed engineering to move forward. That first $50 million is the hardest. Puetter believes that raising the balance would not be difficult.
So far, though, the World Bank “didn’t get it.” Proponents of B.C. LNG didn’t want to hear about anything but LNG. And the big oil companies he’d approached weren’t interested.
“The conclusion that I personally derived is that the majority of the large oil companies are essentially relying on lobbying to change the regulations so they don’t have to deal with the carbon intensity reduction issue,” Puetter says.
So now Blue Fuel is looking for two or three strategic partners, companies that could be involved in some aspect of Blue Fuel’s business, whether upstream, midstream or downstream.
“It’s been incredibly more complicated and slower than we’d ever imagined,” Puetter says. “But we believe we’re very close to being able to announce something tangible.”