Koch Industries unit’s $100 million investment in ‘fixer-upper’ Beatrice plant is producing renewable fuels

Source: By Russell Hubbard, Omaha World Herald • Posted: Tuesday, November 29, 2016

A renewable fuels plant in Beatrice, Nebraska, has begun production of biodiesel after a long-dormant period and heavy capital investment.

Flint Hills Resources, a unit of Koch Industries, began operations at the Duonix Beatrice biodiesel plant in September. The plant is capable of producing 50 million gallons a year of biodiesel, a motor fuel that can be made from sources such as corn oil, soybean oil and recycled cooking oil.

The plant has a long history. Construction started in 2008 under the ownership of an investment partnership, but the work never finished and the plant never operated. Built at a cost of $50 million, it was purchased by Flint Hills in 2011 for $5 million at auction. Since, Flint Hills and partner Benefuel have invested about $100 million in the plant, which employs about 50 people in a town of 13,000.

“It’s a big-time thing for a rural economy,” said Walker Zulkoski, executive director of Beatrice-based Gage Area Growth Enterprise, Gage County’s economic development authority, “and it’s perfectly situated, right in the middle of corn and soybean country.”

A lot of the capital investment was for the installation of Benefuel’s proprietary systems, which were added to the existing plant that had been abandoned. Some of the chemistry is a little complex, but it involves making molecular changes to the lipids in oils and then removing impurities, which keeps the end product from gumming up at low temperatures. It is all done in steel tanks; the plant looks much like any refinery or distillation installation.

“It was definitely a fixer-upper,” said Michael Harris, biofuels ventures manager for Flint Hills Resources. Harris also said Beatrice officials and residents were enthusiastic about getting the plant going after so many years of delay.

“From the minute we walked in, they were very receptive.”

Flint Hills says biodiesel can be blended with traditional diesel and used in most diesel engines. Beef tallow is another source for biodiesel production. But for now, the Beatrice plant is relying on corn oil, which is a byproduct of ethanol production. And there is plenty of it around Beatrice: Nebraska is the nation’s second-largest ethanol producer; Iowa is the largest.

The corn oil arrives in train tanker cars and the biodiesel goes out the same way, a lot to California, where it is in high demand because of aggressive clean air policies.

Nebraska is now home to three biodiesel plants, although the two other than Duonix Beatrice are no longer producing. Iowa has nine producing plants, part of the 95-strong U.S. fleet. U.S. production of biofuel, touted as a clean-burning and homegrown energy source, has skyrocketed with the federal Renewable Fuels Standard, which requires certain amounts of biofuel to be used in the nation’s gas tanks.

Production has risen from about 25 million gallons in the early 2000s to about 2.1 billion gallons of advanced biofuel last year. U.S. on-road diesel vehicles use about 40 billion gallons of the fuel a year. Proponents cite that biodiesel has 92 percent of the energy content of traditional diesel — a better rate than sister renewable motor fuel ethanol, which has only about two-thirds of the energy of clear gasoline.

At the retail level there are hundreds of biodiesel pumps in the country, including more than a dozen in Nebraska, according to the National Biodiesel Board. In July, diesel blended with 20 percent biodiesel sold for $2.54 a gallon, versus $2.46 a gallon for straight diesel, the U.S. Department of Energy said in its latest available survey of alternative fuels prices.

Advocates say the price difference is compensated for with better gas mileage. And many users cite cleaner vehicle emissions and independence from fossil fuels as motivation.

Pump prices aside, the industry has attracted plenty of players, big and small, spurred by the federal clean fuels laws. Wichita-based Koch, which has annual revenue of about $100 billion, counts among the big. Neither Nebraska nor Iowa is new to Koch, whose business is too vast to quantify, spanning energy, manufacturing, pipelines, beef cattle ranching and many other commercial endeavors. Ranked the second-largest private company in the nation by Forbes, Koch operates five ethanol plants in Iowa and one in Nebraska, at Fairmont.

The company is run by brothers Charles and David Koch, who are advocates of what they describe as a free-market economic and political model; they are often ranked among the top donors to what are commonly described as conservative political causes and candidates. Part of their platform has been criticism of “corporate welfare” and government subsidies.

Such topics are always contentious when it comes to alternative fuels, with detractors citing lower energy content and government aid in the form of blending requirements and tax credits. But Flint Hills says it is in for good, regardless of the incentives, requirements and subsidies its owners have criticized, but at the same time, used.

“We built the Duonix Beatrice plant because we believe it will produce a good product demanded by consumers,” said spokeswoman Rachel Ryan. “We believe biofuels can be competitive” without government blending requirements.