Many Canadian motorists might not know it, but they are likely to soon be pumping some fraction of their gasoline or diesel made from animal fat, restaurant grease or agricultural and forest residue into their vehicles at every fill-up. And that level is set to grow ever higher, thanks to incoming Clean Fuel Standard (CFS) to replace volumetric-based requirements with a carbon intensity-based approach.
While adding biofuels like ethanol generated from corn or wheat crops at relatively small concentrations to the fuel supply has long been part of the equation, new methods are under development to expand the feedstock mix and blend it into the fuel stream earlier, at the refinery.
And in some respects Canadian refineries are leading the way in blending of new feedstocks to create the next-generation renewable biofuels needed for the future. Parkland’s Burnaby Refinery, for example, has been piloting canola oil and animal tallow since 2017 and is actively investigating the blending of other next-generation feedstocks like wood and agricultural waste and municipal sewage sludge.
In a process known as co-processing, a portion of the crude oil feedstock is substituted with a renewable source of feedstock to produce lower carbon intensity fuel. The process can make use of existing infrastructure, like refineries (with some modifications), pipelines and storage facilities, and the resulting product can be safely used in vehicles without modification.
As the so-called “drop-in” biofuels are functionally equivalent to petroleum fuels, they can, unlike ethanol addition, range up to 100 per cent fuel content. And they could lead to material near term reductions in greenhouse gas (GHG) emissions from the transportation sector, which is responsible for about a quarter of Canada’s total emissions.
Lowest compliance costs
The innovation into new pathways to produce lower emission intensity gasoline, diesel and jet fuel is made possible by the move away from prescriptive volumetric mandates — which require minimum levels of renewable fuel blending — to the Clean Fuel Standard, which allows companies to meet carbon intensity targets by means of their choosing.
Prescriptive renewable fuel mandates can constrain innovation by regulating exactly what fuels can be added, explained Brian Ahearn, the Canadian Fuels Association’s vice-president, Western Canada. The association took a proactive position when it saw new GHG limiting regulations on the horizon.
“The fuel mix is changing in the future and our members know that,” said Ahearn. “We know that action is required, particularly around climate change. And we've been working with [the federal government] to work toward that environmental outcome that they're looking for, at the same time trying to balance competitiveness for our industry.”
The industry is supportive of the CFS, said Ahearn. When designed well, such regulations do drive innovation, he said. “We believe it is a better regulation to get greenhouse gas reductions with the lowest compliance costs. Because it’s technology-neutral, that allows us to look at a suite of technologies and solutions to achieve the same objective.
“Our main request has been for the federal government to set a feasible CFS target and to be supported by achievable compliance pathways. Now, finding compliance pathways means we as the obligated party need to come up with innovative solutions in terms of that fuel switching in order to meet the GHG targets that the government has put forward.”
The predominant drop-in fuels used today are made by converting conventional oleochemical feedstocks such as vegetable oils, used cooking oils, tallow and other lipids to fully saturated products via hydrotreatment, according to the International Energy Agency, which published a report on drop-in biofuels in January.
However, economically sourcing large enough quantities of oleochemical feedstocks remains a challenge. “Consequently, it is likely that ‘advanced’ thermochemical technologies such as gasification, pyrolysis or hydrothermal liquefaction based on more widely available biomass feedstocks [like lignocellulosic-based sources] will provide much of the long-term supply of drop-in biofuels in the future.”
And refinery co-processing will likely be key to the future expansion of drop-in biofuels, it said. “It is probable that this will eventually become the predominant route to decarbonizing drop-in transportation fuels, with the ‘green molecules’ supplied by the bio-intermediates ending up in each of the refinery’s major product fractions,” it concludes.
Numerous jurisdictions are ramping up low carbon intensity requirements and more companies are responding. Finnish petroleum refiner Neste Oyj, the world’s leading producer of renewable diesel and other renewable products, earned a quarter of its revenues from biofuel production in 2018 and targets 50 per cent next year. Its renewable diesel offers 50–90 per cent lower GHG emissions compared to fossil diesel. While ethanol addition is generally limited to 15-20 per cent maximum content, Neste’s biorefineries are technically capable of running on 100 per cent waste and residue raw materials.
The U.S. also has a growing co-processing sector, where refiners are growing concentrations of materials such as animal fat and leftover grease from restaurants to expand renewable fuel output, using new techniques that process at much higher temperatures in specialized equipment.
Tax credits designed to promote use of the environmentally friendly alternative fuels are expected to lead to a multibillion-dollar industry in the coming years. Valero Energy Corp., the second-biggest maker of renewable diesel after Neste, has invested about US$1 billion in developing and producing the fuel. The Washington-based National Biodiesel Board forecasts biodiesels production to grow roughly five per cent a year in the U.S. for the near future.
With residues from Canada’s substantial agriculture and forestry sectors as potential sources of feedstock, combined with its petroleum expertise and the right policy environment, Canada possesses the key ingredients to be a pioneer in production of drop-in biofuels.
Parkland has been a leader in the transition in part due to B.C.’s early renewable and low carbon fuel standards, which have been in place for about a decade. Those rules have been superseded by the qualitative low carbon fuel standard that requires a 10 per cent reduction in carbon intensity from a 2010 baseline by 2020 and an additional 10 per cent reduction to 2030. The federal CFS comes into force for liquid fuels in 2022.
Parkland’s 55,000 bbls per day capacity refinery, built in 1936 and acquired from Chevron in 2017, supplies 25 per cent of the province’s transportation fuels. Beyond the technical challenges it faces, it must deal with sourcing feedstock volumes at viable economics, creating reliable supply chains, and logistics and storage challenges, according to Dave Schick, former Parkland director of Policy & External Relations.
As of this month, Schick has taken a position with the Canadian Fuels Association, where he will serve as vice-president, Western Canada. The CFA is also a member of the Clean Resource Innovation Network (CRIN) an industry-led network that levers the oil and gas industry’s strengths in large-scale innovation collaboration.
Among other things CRIN aligns research and technology priorities, addressing gaps and incenting innovation. The associations share the goal of making Canada a global leader in producing clean hydrocarbon energy from source to end-use.
Parkland is designing for feedstock flexibility, examining multiple processing methods and refinery insertion points — such as at the hydrotreater or fluid catalytic cracker, said Schick.
Parkland successfully trialed tallow last year and canola oil in 2017. It is now producing low carbon gasoline and diesel on a commercial scale and is set to increase its renewable feedstock substantially in 2020.
The company is continuing to add volumes and monitoring yields to figure out how much feedstock can be run through the processing units.
Parkland is also actively working with and screening other second-generation feedstock options beyond lipids, such as municipal sewage sludge and forest residuals, which remain in the R&D phase. “Trials build understanding of downstream impacts to equipment, yields and economic impacts,” Schick said.
The company is looking at four methods of production: thermal pyrolysis, catalytic pyrolysis, hydrothermal liquefaction, and gasification and recombination (Fischer-Tropsch).
Benefits of co-processing include no required change to the fuel distribution system, consumer behaviour or customer-facing infrastructure, and the ability to bring new feedstocks on stream as they become available.
Expanding co-processing also reduces the impact and increases the value of forestry and agricultural residuals and municipal wastes. For refiners, it allows for evolving existing infrastructure for commercial production of renewable fuels while maintaining utilization and leveraging existing technical expertise and innovation. And it “demonstrates the petroleum industry is a constructive partner in meeting climate policy goals,” Schick said.
In Canada, Ahearn said he expects each refinery to look at the pros and cons of different strategies to meet CFS requirements. “If the refineries can use their assets and optimize and increase utilization rates of their existing assets and infrastructure, it just makes a stronger business case than going to the market and buying somebody else's fuels such as ethanol or biodiesel.”
Since 2012 Canada has had to import renewable fuels to meet existing blending requirements. Producing them locally will provide additional economic benefits. Government studies suggest the CFS will stimulate economic activity and employment in the clean fuel sector by up to $5.6 billion and 31,000 people by 2030. The CFS aims to reduce emissions by 30 megatonnes annually by 2030.
“Since we now have regulations that are helping to move things forward, I think we’re going to see a lot more interest from a Canadian perspective and a lot more opportunities for Canada to get on board with co-processing. And if we’re doing this research and development, that gives us a bit of competitive advantage too because we’ll be blending these new feedstocks and perfecting their use,” Ahearn said.
“So we're excited actually about the opportunity — it both allows us in the refining industry to leverage our own assets and technology, and it provides the opportunity to bring Canadian produced biofeedstock into our refineries. We think it’s a pretty innovative solution.”