Alternative energy company Syntroleum Corp. and agricultural company Tyson Foods are expected to announce plans for a $150 million plant at which fat provided by Tyson will be converted into fuel, the Wall Street Journal reported Monday. The plant is forecast to produce an annual 75 million gallons of fat-based fuel, or about 5% of the output of an average oil refinery. Syntroleum has spent about twenty years trying to turn natural gas into liquid transportation fuel. It is now turning its sights toward chicken fat, pizza grease and other such renewable resources. In April, Tyson inked a pact with ConocoPhillips by which Tyson fat will be run through Conoco refineries and turned into renewable diesel. The Conoco process requires relatively clean fat, and the product is mixed with regular, oil-based diesel in low concentrations. The Syntroleum process uses "the dirtiest, and thus cheapest, fats" to make petroleum-free fuel. The U.S. government is encouraging oil companies to pursue alternative fuels by providing subsidies, including a $1-a-gallon federal tax break originally intended solely for biodiesel companies (much to the dismay of the biodiesel lobby). A week ago, Syntroleum signed a contract to provide 500 gallons of fat-based jet fuel to the Air Force for testing. "Lord knows," said Air Force official Paul Bollinger, "there's no shortage of chicken or hog fat in this country."
Sources: Wall Street Journal, Reuters
Commentary: ConocoPhillips, Tyson to Manufacture Diesel Fuel from Animal Fat • Syntroleum Corp: Tremendous Technology, Tremendous Risk
Stocks/ETFs to watch: Syntroleum Corp. (SYNM), Tyson Foods, Inc. (TSN). Competitors: Rentech, Inc. (RTK), Sasol Ltd. (SSL), Pilgrim's Pride Corp. (PPC), Smithfield Foods Inc. (SFD). ETFs: PowerShares WilderHill Clean Energy ETF (PBW), PowerShares WilderHill Progressive Energy ETF (PUW), Rydex S&P Equal Weight Consumer Staples (RHS), Rydex S&P 500 Pure Value (RPV)
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