Long/Short Equity, Special Situations
Contributor Since 2006
Elevance Renewable Sciences (private) is launching a pilot project to turn it and plant oils into jet fuel. Elevance is getting $2.5 million from the Department of Energy’s stimulus funds to complete a preliminary engineering design for a renewable fuel facility in Newton, Iowa. The company is putting up $625,000 of its own money for the design.
Elevance claims to be the first company to “successfully bridge the renewables and chemicals industries.” The company says it is trying to turn natural renewable plant-based oils like soybean, canola, corn and sunflower into specialty chemical products. Elevance claims to have Nobel Prize-winning catalysts and other proprietary technology at its disposal to synthesize natural oils with greater efficiency.
Alright, for $2.5 million I guess we can see if Elevance really has built a better mouse trap. However, I am skeptical that the company can come up with anything significantly different than the processes used by any number of other players which have already been using chicken fat for jet fuel.
For example, Tyson Foods, Inc. (TSN: NYSE) teamed up with Syntroleum Corp. (SYNM: Nasdaq) to build a facility that is expected to produce 75 million gallons of renewable diesel and jet fuel from Tyson’s chicken fats and other oils in Syntroleum’s patented Biofining process. Syntroleum uses a version of the well-known Fischer Tropsch process. Syntroleum already tested 100,000 galls of synthetic jet fuel with the U.S. Air Force in 2006. The joint venture is already started construction on a refining facility in Geismar, Louisiana. It is expected to begin production in 2010 and turn out about 75 million gallons of fuel a year.
Darling International, Inc. (DAR: NYSE) has also formed an alliance with Valero Energy Corp. (VLO: NSYE) to produce renewable diesel from used cooking grease and other animal by-products collected by Darling. Darling and Valero have applied for a DOE loan guarantee but no new science and no seed money for engineering designs are needed to bring this project to commercial stage.
Furthermore, chicken fat is not the only contender in the feedstock race. Sapphire Energy in California successfully tested algae-produced renewable jet fuel on a Continental flight. Bill Gates put $100 million into Sapphire, probably because he and his advisors can see that algae-based renewable diesel shows great promise. Given that algae can produce a finished product in two weeks means that one acre of algae can deliver more fuel than one acre of just about any plant and could far surpass chicken and other animal by-products in terms of volume. The National Algae Association estimates current algae technology could produce up to 3,000 gallons of biocrude per acre per year and that the cost of algae-crude could drop to $10.00.
My hat is off to the Corn Belt congressional delegation. They seem to get what they want when it comes to their “pork” and chicken projects.
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has a Buy rating on DAR shares.