In a sign of development, an American oil refining company is converting one of its factories into a producer of clean fuel.
The HollyFrontier Corp. refinery Cheyenne will stop using crude oil and be re-used to pump renewable diesel, which is typically made from soybean oil, recycled cooking oil and animal fat. It was after processing margins dropped on the collapse in fuel demand due to the blockages associated with Covid-19. In addition, maintenance costs for the old facility were “uncompetitive” and the government is encouraging the production of cleaner fuels.
This is the latest example of how the traditional fossil fuel industry is evolving amid growing calls for environmental protection and increased demand for green energy sources. Cheaper renewable energy projects have already led to a decrease in coal production in the United States, and now – following the historic oil crash – some fuel producers are struggling with declining yields from transformation of crude oil into fuel.
“The demand for renewable diesel, as well as other low-carbon fuels, is growing and gaining market share based on both consumer preferences and the support of substantial federal and state incentive programs,” said Mike Jennings, CEO of HollyFrontier, in a statement. Monday.
The company plans to spend $ 125 million to $ 175 million to redefine Cheyenne to produce about 90 million gallons per year of renewable diesel by the first quarter of 2022. The plant will stop consuming crude oil in late July of this year, and 200 workers will dismissed, according to HollyFrontier.
The conversion plan comes in the form of dozens of small refineries nationwide for a sharp increase in costs to comply with the renewable fuels standard, which requires blending biofuel into gasoline or buying negotiable credits to comply. For years, many small refineries have been granted exemptions from this mandate, but by a decision of the Federal Court of Appeal in January, only refineries that have continually obtained exemptions can count on their obtaining the to come up.
HollyFrontier effectively removes the biofuel blending requirement from the Cheyenne refinery under the RFS and turns it into a plant that will benefit from the program.
By using the converted plant, HollyFrontier will be able to produce not only renewable diesel encouraged by the RFS, but also compliance credits which can be sold separately.
However, there are other costs associated with the transition, as fewer workers will be required to operate the converted plant. The RFS effectively forces the closing a plant that has generated tax revenue and jobs for Wyoming and whose replacement is expected to be a smaller plant that employs far fewer people to sell fuel in California, said a refining industry official who asked not to be named to discuss industry strategy.
Senator John Barrasso, a Republican from Wyoming, called the job cuts at the Cheyenne refinery “devastating.” Although the Covid-19 pandemic has hurt oil refineries, Barrasso also blamed the behavior of the Environmental Protection Agency regarding the standard on renewable fuels.
“The EPA has failed to protect small refineries from unreasonable compliance costs under the renewable fuels standard,” Barrasso said in an emailed statement. “Congress has mandated the agency to protect refineries under the Clean Air Act” and “relief from the RFS is essential for small refineries.”