April 16, 2007

 

Conoco, Tyson to make diesel from animal fat
 

 

ConocoPhillips and Tyson Foods Inc. say they plan to make diesel fuel from animal fat, a sign of how traditional companies are trying to capitalise on rising interest in alternative energy.

 

The oil company and the food company are set to announce an agreement today under which Tyson will send beef, pork and chicken fat from a food-processing plant in Texas to a nearby ConocoPhillips refinery to make diesel.

 

The new brew, which the companies call "renewable diesel", will differ from the more familiar biodiesel, which is made in special factories, often from vegetable oils, in a process that more resembles winemaking than oil refining. Biodiesel is typically distributed by trucks to terminals, where it is added in small concentrations to regular diesel.

 

This animal-fat diesel to be made by Conoco and Tyson will be produced in existing oil refineries using much the same chemical process that turns crude oil into motor fuel. It will come out of the refinery as part of the regular diesel-fuel mix, distributed through existing pipelines and sold as regular diesel fuel.

 

The deal underscores how mounting public and political pressure for alternative fuels is affecting mainstream industries. Conoco and Tyson see renewable diesel as fitting into their traditional product lines much more closely than biodiesel or ethanol, a gasoline alternative that is made from corn. 

 

Conoco, like the rest of the oil industry, faces rising federal requirements for alternative-fuel production. It likes renewable diesel because it can make the fuel in the company's own refineries. "It goes right into our existing transport systems, unlike ethanol," says Jim Mulva, chief executive of the Houston oil company.

 

Tyson sees renewable diesel as its chance to cash in on the alternative-fuel boom. Biodiesel is typically made from vegetable oils, not the animal fat that Tyson's plants produce. Thus far, alternative fuels have only meant higher costs for the Springdale, Arkansas, company, as ethanol's recent popularity in the US has sent corn-feed prices soaring for animal producers.

 

With ethanol, "you have the corn farmer who is benefiting," Tyson Chief Executive Richard Bond said. "Here, you're going to have a broader audience" making money from alternative energy.

 

Tyson produces about 300 million gallons of beef, pork and chicken fat each year. About 58 percent of its fat production will go to the diesel deal once it is ramped up.

 

Currently, Tyson sells its fat for use in such products as cosmetics, soap and pet food. Producing one 42-gallon barrel of renewable diesel requires about one barrel of animal fat. And each barrel requires, on average, two steers, or 16 hogs or 1,300 chickens, Tyson officials say.

 

Turning animal fat into motor fuel is costlier than making conventional diesel. But this month, the federal government, responding to a request for tax-law clarification by Conoco's lawyers, said renewable diesel would qualify for an existing US$1-a-gallon biodiesel tax credit.

 

The fuel still needs Environmental Protection Agency approval. The companies plan to start production later this year and to ramp up over 18 months to a total of about 175 million gallons of renewable diesel annually across several Conoco refineries.

 

That would be a big slug of alternative fuel. A typical biodiesel plant produces about 40 million gallons of fuel a year. It is a tiny amount, though, by the standards of the oil market -- equal to only about 0.5 percent of all the refined fuels that Conoco produces in the US from crude oil each year.