The US is the Saudi Arabia of garbage. And Illinois Clean Fuels is working to use our surplus of municipal waste as its primary input, turning trash into biofuel. This solves two problems at once, providing a sustainable source of energy through a process that captures and stores CO2 underground. So, how does it work?
Full Transcript
Alexsandra Guerra: You’re listening to the Reversing Climate Change podcast by the team at Nori, the carbon removal marketplace. This is a show about the innovators and entrepreneurs developing solutions to climate change.
Hello and welcome to the Reversing Climate Change podcast. I’m Alexsandra Guerra, co-founder of Nori. I’m stepping in for Ross today because he is celebrating his wife Kendra’s birthday. She deserves a day off. We are nothing, these Nori-nauts, without our loved ones and support systems. So happy birthday, Kendra! I’m really excited for today’s podcast. I kind of told our guests, because we’re going to talk about fuel. So, Christophe, you want to introduce our guests?
Christophe Jospe: Happily. And Alexsandra, I am so glad to be doing this podcast with you, and I wouldn’t— don’t throw yourself under the bus. You are way more prepared to talk about this podcast than Ross is. He doesn’t know anything about fuels. We love you, Ross. No offense. You’re actually the one with the engineering degree.
But, sitting across from us: they traveled all the way to the Nori office from various parts of the country, and are actually here for a conference. And we had met a couple of weeks ago through a mutual connection in the sort of carbon-to-value, carbon removal space. It’s important that entrepreneurs kind of know what the other is up to, and figure out ways that we can potentially sort of say one plus one equals three, and where those opportunities are. And hey, let’s change the world. Let’s reverse climate change. How are we going to do it? I don’t know. Maybe we’ll find out on this podcast.
We like to start with people’s story, and really the origins of how they got to where they are. And it’s another one of those where we sort of get the one-two punch. Because to my— I don’t know, what is it? What is diagonally across from the table? We’ve got Stephen Johnson, he is the founder and CEO of Illinois Clean Fuels. And then to my left we have Mark Fitz, who is an adviser to Illinois Clean Fuels and also president and CEO of a company called Star Oilco. And Stephen, we’re going to start with you. I’d love to sort of know the beginnings of how you got to where you are today, and then what led you to be here sitting on the podcast.
Stephen Johnson: Happy to be here. So I sometimes like to make the joke that I’m a recovering finance guy. I used to run a hedge fund for about five years before I started up the company. And what got me into the space originally was actually the supply side of oil. As I was running the fund, I was doing a bunch of research and found a really deep rabbit hole where you start looking at how much oil has been found out there in the world, how much are we producing, how much are we finding relative to how much we’re producing. And you quickly discover that we haven’t actually found more oil than we’ve used anywhere in the world in a given year since about 1983 or so.
And on an all-in basis, like last year, we pulled about 20 barrels out of the ground for every one barrel in new reserves that we discovered, which is obviously highly not sustainable. And given that everything about our entire modern economy runs on oil — well, obviously, if that supply is not going to be there, that— hence a rather large problem to everything in the portfolio. So the more research I started doing, the more I just confirmed that, wait a minute, there is a significant problem here. And that eventually got me into a strong focus on alternative fuels.
So I started off investing in a company that was working on their own version of the Fischer-Tropsch technology, which is one of the processes that’s available for production of alternative fuels, and it led me to learn a whole lot more and actually get to a point where I decided, you know what, I should found a company and actually try and do something about the problem. So we founded Illinois Clean Fuels in 2006, and the project actually originally started off as a coal-to-liquids project. We weren’t focusing on carbon at all; it was entirely about alternative fuel production and doing it in a way that’s cost effective compared to oil. And the best process that’s been proven at scale to really do that has been pioneered originally in Germany and was scaled up in South Africa, Qatar, Malaysia, China, for the conversion of coal or natural gas to alternative transportation fuel.
Alexsandra Guerra: And that’s the Fischer-Tropsch, where you’re basically taking carbon dioxide and turning it into carbon monoxide, carbon dioxide and hydrogen.
Stephen Johnson: Yeah. So you produce what’s called syngas, which is a mix of hydrogen and carbon monoxide, which is kind of a basic input building block that’s used in all sorts of interesting forms of, you know, organic chemistry. So whether you’re producing fuels, or fertilizers, or plastics, or other things, a lot of that all goes through syngas, basically.
Alexsandra Guerra: Things that make the economy work.
Stephen Johnson: Exactly. Yeah, the basic kind of raw materials that sort of sit under everything. And then, as we were going through the technology selection process and sort of figuring out, okay, specifically how do we want to build this — and I was blessed to, very early on in the arc of the process, my co-founder, Dr. Saliba, who’s our technical head, and he was the head of the chemical division at Sasol, which is the world’s largest synthetic fuel plant, in South Africa. It’s 160,000 barrels a day; it’s about five times the scale of what we’re looking to build. A massive, massive facility. But you know, he has an encyclopedic knowledge about all of the technologies.
So we were over in Europe at a technical conference looking at [unclear], and we found a way that we can actually use biomass as a major part of the process without stepping outside of a proven technology envelope, which previously I just sort of assumed was something that, you know, nobody’s invented a way to do yet. And as we came to discover, it is not a technology problem. This is something that has been done at scale, and it’s been proven. We just simply need to build the facility with the off-the-shelf parts that are already available.
Alexsandra Guerra: Wow, there’s so much that I want to talk about there, but we have another guest here. But I wrote some notes. So the reason why I was so excited about this podcast is because I worked for over two and a half years at the combustion and catalysis lab at Columbia University when I was an undergrad. I loved thermodynamics — shout out to my former CCL people, who we just had an email going around for the first time in a couple of years. Thanks. So, before we do that, because there’s so much I want to talk about when you’re saying it’s not an issue of technology, I mean, it’s a matter of putting together these parts — I want to dive deeper into that. But first, Mark, to you, and introduce yourself.
Mark Fitz: So my family owns an oil company, which I am now the primary owner and CEO and president of. One of the conditions to go to work there was they would indulge me to play with biodiesel back in 2000. Then we saw, while I was playing with that and they were indulging me, moving a little bit of B20, a little bit of B99 or B100 back then. This was before it was subsidized.
Alexsandra Guerra: So can you explain what those things mean?
Mark Fitz: So B99 is 99 percent biodiesel. The way the law works, the way it tends to work, is you blend a gallon of diesel and 100 gallons of biodiesel and you can get a blender’s credit, or realize a renewable identification number, which is an EPA market carve-out for biofuels. So under George Bush, and then Barack Obama, they expanded this Renewable Fuel Standard, which creates a value for ethanol, biodiesel, advanced biodiesel, renewable diesel — which Stephen’s talking, that would be in that category.
Alexsandra Guerra: Okay. I just keep derailing you. What’s the difference between ethanol and biodiesel?
Mark Fitz: Well, ethanol is alcohol, and it is a very simple chemical reaction. And Stephen and I disagree on this quite a bit. I’m a pretty big fan of ethanol for what it is. It’s not a future fuel, but it is definitely something that’s there. Biodiesel is taking vegetable oil, and you’re reacting vegetable oil in the presence of methanol, which is an alcohol, and a catalyst, and you make basically a product that on a bench looks a lot like diesel, which is biodiesel. Methyl ester is the molecule, essentially. It’s a very easy, low-energy process. It’s a high-energy fuel.
Waste vegetable oil, you can get 80, 90 percent reduction in CO2 emissions. Virgin soy, you know what you’re looking at. I realize there are a lot of people who criticize monocrops, food versus fuel, those types of debates. But we are a carbohydrate- and fat-rich world in a protein-poor world. The ability to take that oil out of soy, realize the protein, create a high-value fuel, especially for the lower-grade, non-food-grade stuff — it’s got a lot of value, it appeals to me. It also smells like popcorn out of the tailpipe, which is a pretty cool deal that renewable diesel has yet to figure out. But I’ll deal with that.
I’ll let him go. That’s more pleasant than, you know, walking by an idling car and just taking their exhaust gas. Dairy digesters — [unclear]. For those with the FT synthetic product, you get to kind of revisit your childhood, though, because if you pull up in the beaker and you take a smell of it, it kind of smells like Crayola crayons.
Alexsandra Guerra: Oh, interesting. So, linear paraffins. You just mentioned FT — that’s the Fischer-Tropsch process. And so I just want to back it up a little bit for our less science-literate listeners. You guys, I’m sure we’re all familiar with the different phases of matter: there’s gas, there’s liquids and there’s solids, and you guys are kind of touching on a couple of them. Which is, Mark, you were talking about liquid fuels, where biodiesel— yeah. And you two were talking about that from a roundabout way, which is we use biomass, we burn it or pyrolyze it or gasify it, we create syngas, and then that gas could then be used to create a more purified liquid version.
So while it’s similar, there’s a different process here where you guys are working with, when it comes to ethanol and creation through corn — it’s a different process. And what— Steve’s pulling something out of the bag. What is that?
Stephen Johnson: It’s like a dusty pellet. It used to be municipal garbage, and that’s what actually will be the primary energy input into our process. So we’re taking waste that would otherwise be going to a landfill, and that’s what it looks like after you process it. You strip out the metals, the glass, the high-value recyclable stream. That’s essentially the non-recyclable fraction of garbage after it’s been pelletized and is ready to go in for energy use.
Alexsandra Guerra: And that’s before you burn it. It’s just like coal.
Stephen Johnson: Well, technically we don’t burn it, we chemically convert it. So we break it apart to hydrogen and carbon and then reassemble those molecules into something far more useful.
Christophe Jospe: To describe it, you basically burn it without oxygen, which changes what occurs with it. And then you have a usable stew of gas that you can then do wizardly stuff on, right? That, when you pyrolyze it, right?
Stephen Johnson: Yeah. Well, gasification, technically. Pyrolysis works slightly differently, but— so, in the absence of oxygen.
Alexsandra Guerra: So when you said technically you don’t burn them, like, what are you— what is the magic you’re using?
Stephen Johnson: But— yeah, okay. Gasification, meaning you have an absence of oxygen and you raise the heat, and the hydrocarbons are able to break down into carbon monoxide and hydrogen gas.
Christophe Jospe: Just for the listeners, just visualize like Doc Brown in the DeLorean, if the DeLorean was the size of an oil refinery. Sure. Amazing. Should we— should we let Mark finish his story?
Stephen Johnson: So I just wanted to change the name of the business to Flux Capacitor. Now that I know that’s on the table as an analogy, you need to take it up a notch.
Alexsandra Guerra: Wait, before we do that though, I have one thing. When we’re talking about this gasification process, and you mentioned this in your intro, like, it’s not a matter of technology — what do you do with the tars? That’s what I was doing research on. Was like, you’ve got all this tar when you burn things or gasify them, whichever one. You’ve got all this extra stuff. It’s not all hydrogen, it’s not all carbon. So there’s this really sticky stuff that gets in your pipeline and just ruins everything, so it makes it really, really expensive. What are you guys doing there?
Stephen Johnson: Yeah. So this actually kind of feeds into what Mark and I did just right on the way over here. So we were just a couple minutes early, and you’re conveniently located about 10 minutes from one of my very favorite places in Seattle, which is Gas Works Park, which is an old coal and oil gasifier that is kind of like an ancient early version of what sits on the front end of our process. So the modern gasifiers have figured out how to fix and eliminate a lot of these big environmental drawbacks. You’re entirely correct identifying the tars. It’s a major, major problem.
So the very early versions of gasifiers just took all the inconvenient bits and dumped them in the river, because— I’m going to guess that’s what we did back in, you know, the 1920s. And for that reason, both the harbor in downtown Portland and the area under Gas Works Park are Superfund sites, and there’s a lot of nasty stuff that’s in those tars as well. The modern gasifiers actually take those tars and they recycle them back into the process. So, you know, these are oxygen-blown gasifiers. So we have a giant air separation plant on the front end that produces pure oxygen that feeds into the process.
And at the heart of this gasifier, it’s running at something like 1,300 degrees, right? It’s extremely hot, and it’s hot enough that when we recycle those tars back in, it completely just disassembles the molecule into hydrogen and carbon. And the only thing that’s left coming out the bottom of the process is a slag that is basically glass. So anything that doesn’t get converted into gas is locked up in glass that comes out the bottom of this process, and that’s an inert, non-leachable material. You can use it for roadbeds, building material.
That was one of the things we were very specific about in our technology selection. We wanted to select a process that we were for sure wasn’t going to produce fly ash as a byproduct. So that’s another thing that commonly comes as a byproduct of combustion or gasification: you end up with a bunch of ash that then, if you don’t reuse it correctly, can become environmentally problematic. So there’s no fly ash as a byproduct of this either.
So the next step in the process that happens after gasification: we have this chemical soup that comes out, which is mostly hydrogen and carbon with a few other, you know, bits mixed into it, because, you know, if you’re feeding a garbage, it’s got everything that comes in garbage, which is everything. Part of the fundamental chemistry of synthetic fuel production, we have to clean up that gas down to the parts-per-billion level to ensure that there’s no impurities that make it downstream into the Fischer-Tropsch process, or it would poison the catalyst and shut the plant down, and we lose a whole lot of money.
So we go through a super-tight syngas cleanup step where we capture elements like sulfur, heavy metals, and, pertinent to today’s discussion, all the excess CO2 that we don’t need for fuel production. Because downstream we need two hydrogens to one carbon to make a diesel fuel molecule. Then once we have our pure hydrogen and carbon in the right ratio, it goes into the catalytic process that builds that back up into a diesel fuel molecule.
Alexsandra Guerra: And that’s how you make biodiesel.
Stephen Johnson: Technically what we’re producing is a synthetic product, so it would be branded as a renewable diesel or a sustainable jet fuel.
Alexsandra Guerra: Because your input is garbage.
Stephen Johnson: Yeah, it’s a branding thing.
Mark Fitz: Well, that’s the next-generation biofuel part, so it is a next-generation biofuel. His product is not like biodiesel — biodiesel has its own molecule. He’s creating diesel or jet fuel or kerosene, and it is ultra-pure, clean and consistent, which makes it superior to petroleum’s product that they were refining. It’s literally a step forward.
Alexsandra Guerra: Yeah, it’s renewable diesel. Is that what you called it?
Stephen Johnson: Yeah. So the fuel that comes as a result has zero sulfur, zero aromatics, and very high cetane rating, which means when it burns, it burns much more completely than conventional fuels. So you get a significant reduction across the board at the tailpipe and, you know, the conventional pollutants. And then what makes it really exciting relative to the climate side and decarbonization is the excess CO2 that’s left over in the process, we capture and lock underground in geologic storage. And so, in combination with the biomass fraction in waste, it allows us to completely eliminate the lifecycle footprint of the fuel and actually get down to a negative emission. So we actually physically pull more carbon out of the air and lock in the ground than is re-emitted when the fuel is burned. So it’s actually a climate solution.
Christophe Jospe: Hi, listener. If you didn’t know why we had these guys on, now you know: this is a form of carbon removal. And the word to throw around here is, this is kind of the purest circular economy, right? We talked about— oftentimes you hear about circular economy, but you’re taking carbon that would have gone into the atmosphere, and now you’re saying, we’re going to make another use of it. And also, by the way, we’re going to store it, and we can basically net out and create that negative emission.
And Stephen, what you’re doing is really cool. You’re totally on the bleeding edge of what seems like the best of the best fuels. Not all fuels are created equal, it seems. You sort of hinted at it, and so I’d love to take a step back. I think in terms of, like, I see some waste-to-energy plants vying for, you know, renewable energy portfolio standards that might allow them to get certain credits, and it seems like that’s fine if it is good, but it might create some local pollutants that your process has taken care of. And so I’m kind of curious: how do you position yourselves — and not to trash-talk others on the air, because we wouldn’t want to do that — but how do some of the other productions, where does some of the other fuel production fall short?
Stephen Johnson: So I guess there’s kind of two ways to look at that. Are you talking on the fuel side, or on, like, waste elimination? Because there are sort of waste-to-energy plays on both sides of that that use different processes and technologies.
Christophe Jospe: Maybe it’s— well, if you can distinguish all of it.
Stephen Johnson: Yeah. Well, so, waste-to— a lot of times when people talk about waste-to-energy, I would say 97% of the time they’re going to be talking about the production of electricity. If you look at what they’re doing in Europe, they’re doing some pretty remarkable things where they have functionally eliminated landfills in about seven countries over there, maybe more, where they’re down to less than 1% of their waste treatment actually goes to landfill. So they’re either recycling or converting to energy, you know, virtually the entire waste stream. In the US, we only recycle about 39 percent of our waste stream. And we also, of the portion that is technically recycled, we’ve got a crisis going on there too, because China stopped accepting our dirty commingled plastics.
And so we’re having to really rapidly rejuggle the way the entire waste system is running just to process the material we’re already capturing. So I always like to say, you know, the US is the Saudi Arabia of garbage. Yeah, we have a tremendous amount of energy potential feedstock here, just waiting to be used. But— [unclear] analogy. Yeah, but, you know, there are clean and dirty ways to do that.
So most of the waste-to-energy that’s been done in Europe essentially takes something that’s kind of a slightly higher-tech but retrofitted coal-fired power plant, and feeds in the waste, similar to those pellets sitting on the table in front of us, burns that and produces electricity. What we’re doing is fundamentally different. Gasification, as we discussed: we’re not doing combustion, we’re not fully oxidizing the molecule, we’re disassembling and reassembling it. And particularly in combination with the syngas cleanup, the fact that we don’t have fly ash in our process, and critically the combination with carbon capture and storage, we believe this is absolutely the best available control technology in the world for disposing of waste and recapturing the energy in it with no environmental side effects.
Alexsandra Guerra: So there’s a lot there, and I want to bring it back out a little bit to the high level of, like, the landscape, the ecosystem. When we were talking about fuels, whether they’re these renewable waste-to-energy fuels or biodiesel, biofuels — so, Mark, I have a question for you. Why aren’t we using biodiesel or bio-jet fuel in our planes and our ships nowadays?
Mark Fitz: So biodiesel gels at temperatures like what we have outside, so you’ve got a real concern at 30,000 feet how it’s going to perform. But the feedstock that makes biodiesel can be made into renewable diesel, and the largest renewable diesel plant in the world is in Singapore. It’s a hydrogenation plant and they’re using palm oil. Which, Pacific Northwest is not a fan of palm oil, and not a fan of vegetable oil. First time I met him, Portland was proposing a 20% biodiesel mandate, and Imperium Renewables, who’s a Seattle company — actually, I believe their offices used to be at the Starbucks building before Starbucks took it — said, we’re going to build this hundred-million-gallon biodiesel plant.
What will be the feedstock? That’s the big question, that’s the question he answers that others don’t: what will be the feedstock? And they said palm oil. Because of that, a month later — because of their fundraising — a month later, National Geographic had an article about deforestation in Indonesia with palm plantations, you know? And it became a hot-button issue. So you can make renewable jet fuel from vegetable oil. The question is, where does that come from, and what are the pressures you’re pushing? Because, you know, first law of thermodynamics, right? You’ve got to basically take energy from someplace to make it. Something cast-off: garbage has value, agricultural waste has value that’s being lost right now.
So that’s where he’s at, versus let’s grow more vegetable oil, because it has a limit. Like right now, California, with their cap-and-trade and low carbon fuel standard system — 2017, they took a quarter of a billion, 250 million gallons, of renewable diesel product, primarily from two plants: Neste’s plant in Singapore and Renewable Energy Group’s plant in Louisiana, right? That was the source. There’s more coming on, but all of them are chasing typically a very narrow waste stream, where he’s seeking to actually monetize garbage, which we have far more of.
Alexsandra Guerra: So we wouldn’t be competing with food crops.
Stephen Johnson: Exactly. The food versus fuel was one of those things that we were sort of watching acutely, and Mark and I have had more than a few evenings where we — well, I particularly — evangelized over beer about, you know, how corn ethanol wasn’t such a wonderful idea because of land-use change and all of these things. You know, I’m perhaps less sold by the protein argument than he is. But when you’re looking at the environmental impact of what you’re doing in anything in the energy space, or perhaps any space, there is no such thing as a battery limit in nature, right? If you’re looking at a life cycle impact of something, you have to look all the way upstream, downstream, midstream, you know, what you’re doing through the whole process to really actually do the math of, is this smart or not.
And when it comes to biofuels, there’s definitely been some complicated and highly political math that has gone on around how do you draw that assessment of climate impact — for instance, of corn ethanol that was produced in Illinois and is distributed in California. Do you factor in the fact that the corn that you didn’t grow for human consumption resulted in deforestation in the Amazon rainforest to grow more soybeans? That’s a part of the calculus. And with such an abundant and available waste stream in municipal garbage, I view that as sort of the starting point for where we should really be going for alternative fuels, because we have this enormous energy resource that is presently literally being wasted in a hole in the ground, where we just hope it doesn’t leak too much methane into the atmosphere and pollute the aquifer.
Christophe Jospe: He’s crossing his fingers, for the podcast listeners, just to mention.
Mark Fitz: Something to that you’re leaving out — [unclear] — there is no silver bullet. There’s only silver buckshot, right? Absurd argument. Yeah. And when you look at all these different biofuels, people are expecting one to be a dominant solution. We have this Gilligan’s Island policy: ten years, ethanol is the solution, then it isn’t. Twenty years passed. In ten years, biodiesel’s the solution, then it isn’t. Now EVs are this panacea, though, you know — you lose a lot of power transmitting electricity to sit in a battery, and it also dissipates, right?
Christophe Jospe: Well, yeah, you could have some DC transmission lines that are being developed and could cut those losses.
Mark Fitz: You’re going back, you’re back. You’re back to the silver bullet, though. I’ve got all these— in reality, these are dynamic things where dominant technologies begin to take traction in ways that no one could predict. What I’ve looked at a lot — and I’ve been talking to Stephen for [unclear] over 10 years — like, and where it is, is you have these logical arguments, like you just presented. Like, well, then we look at DC, and then you have your next thing, and then you have battery tech to follow Moore’s Law, and, you know, you move step by step and you still don’t have a solution. You’re 20 years away from what you want tomorrow, right?
But when you look at renewable fuels: where do I get a feedstock to then harvest energy to reform it into a liquid fuel, which is very energy dense, easy to transfer around, we have systems to handle it? When you talk vegetable oil, which is the most popular one, you’ve got an establishment providing biodiesel, you know, hundreds of millions of gallons, but it’s kind of tapped out and it’s hugely subsidized to get there. You know, so the plants that are seeking food waste as the next step, or agricultural waste, still have this: it’s super light and hard to move around. The logical one going to garbage — you move from being a 10-million-gallon plant that you hope you can get a million out of, because a lot of these biodiesel plants that are built for 20 million, 30 million aren’t hitting even close to that.
You know, to where the scale can step up for the money and you actually have a next-generation refinery with offtake that literally impacts the market. That’s a pretty big deal. When the market’s tight and there’s not diesel fuel, having a refinery of his size may actually move the whole country, you know, tenths of a cent, you know, for capacity. It’s a different scale and idea.
Christophe Jospe: That’s incredible. Yeah, so there’s a huge opportunity in here. We’re convinced. You guys are convincing us right now on the air. I also love the way that you’re framing this, because I think even if we disagree on the bones behind most of everything, we agree on the tack and where the market’s going to be, and there’s no silver bullet. And I think from a very carbon-centric focus, you know, we say, if you mobilize fossil carbon, or really any carbon that’s staying in the atmosphere, you need to remove an equal or greater amount to balance the atmospheric books. And also, if you don’t want to mobilize that carbon, then find ways to make use of carbon by recycling out of the air. That’s just a comment. There’s no question.
The question I really wanted to go to is in the opportunity space. So you have a very promising technology. Based on the name of your company, let me guess, you’re in Illinois.
Stephen Johnson: Yeah. So the plant site will be about three hours south of Chicago, in the wonderful small town of Mattoon, Illinois.
Christophe Jospe: And so it starts with one, it starts with one plant to prove it. So what can we expect from IC Fuels, and what’s it going to take for the world to see, wow, this is really setting a standard that we just want to replicate globally?
Stephen Johnson: Well, I would say the beauty of the way we’re putting this together is that individually any of the components of what we’re doing has already been done at scale, right? I mean, we’re one-fifth the size of the synthetic fuel plant in South Africa that’s doing coal to liquids. But, you know, the fundamental process chemistry has been proven and scaled. It’s in the integration of, you know, synthetic fuel processes that have, you know, been pioneered for 70 years now, carbon capture and storage which has been demonstrated at scale, and the use of biomass in the feedstock material in the recaptured waste. You combine those three things together — and, you know, we were talking earlier about sort of one plus one equals three, right? We start to kind of kill a lot of birds with one stone.
So what’s held back biofuel adoption? The reason it hasn’t really gone all the way to scale is because it simply can’t compete on cost. We’re going to a symposium here for the next two days talking about how do we scale up sustainable jet fuel production. I’ve been working with the Commercial Aviation Alternative Fuels Initiative since 2006 and, you know, the aviation community and airlines spent a lot of money trying to push us forward — testing, certification, all of that. But yeah, I mean, as Mark can attest, the product simply isn’t available in the market right now, right? And the reason for that is airlines can’t afford to pay a $5-a-gallon premium for product.
Mark Fitz: The rumor is that the AltAir plant in California is over 10 bucks a gallon.
Stephen Johnson: Yeah, I guarantee you that the couple of large buyers that I know, a couple of airlines, would not pass go on that one. So to bring it to scale, you have to get your production cost down to where you can go directly toe-to-toe with the incremental barrel of oil on the market, which today is fracked oil from the Permian Basin in Texas. You know, that’s where the overwhelming majority of new oil production in the world has come from, is fracking in the US over the last three, four years.
So you have to meet that price point on an unsubsidized basis if you want something that’s going to actually be able to be applicable to people globally, because most places don’t have renewable fuel standards, low carbon fuel standards, all of this Christmas tree of subsidies that have supported the larger science experiment around biofuels that we’ve been working through. So once you’ve got that production cost down, you’ve got a model that can be copied everywhere in the world where you have people and garbage and ideally the ability to store carbon geologically.
Alexsandra Guerra: That’s the Catch-22, though, right? Because you’re saying we need to have a good price point, but how do you get a good price point? You fight that learning curve by doing, to get those resources. So we don’t have enough resources when it comes to, or access to, these fuels because there’s no good price, and it just feeds into itself. So how do you overcome that?
Stephen Johnson: Well, the key answer there is scale, right. If you want to do a small thousand-barrels-a-day plant, your cost per daily barrel of capacity is going to be double, you know, what it is if you’re going for a 30,000-barrels-a-day plant, that is more akin to a typical oil refinery. And that’s just the physics of, you know, the only thing that changes from a chemistry perspective is the diameter of the pipes, right? I mean, there’s a reason that a big wind turbine makes a lot of money and a small wind turbine is a science experiment, right? So, you know, scale is a major piece of that.
There are other elements. If you look at, in a broader sense of, you know, what’s your feedstock, where did it come from, how far do you have to transport it, what’s your downstream distribution logistics, et cetera, et cetera, et cetera. So it’s a little more complicated than just sort of a broad brush stroke. You have to be smart where you deploy it. But you know what we aim to demonstrate with this facility is, it is possible to produce fuel that is toe-to-toe competitive with conventional fuel without any reliance on subsidy, and that this is a model that can then be copied all over the world.
Alexsandra Guerra: So I want to go back to something that you touched on earlier, which was airlines. Christophe and I had the pleasure of meeting Aaron Stash from United Airlines, and I actually ran into him last week at GreenBiz, and I love what they’re doing at United. So all of their flights out of LAX and SFO are fueled by bio-jet. But one of the things that Aaron has presented to us and to the groups is, there’s a limit to access to these refineries. There’s no biorefineries to run our planes and run— have this be more than SFO and be more than LAX. So just back to this scale point: organizations, businesses, we are looking for stuff like this, but it’s a matter of how do we get to that scale that can meet their business needs, that they can continue to run their operations. It’s a tricky point.
Christophe Jospe: Also, if I can tag on the theme here with airlines: so CORSIA is the international carbon offset reduction scheme. So, for — you know, I forget these acronyms all the time — but CORSIA and ICAO is something that we’re looking at here at Nori, and CORSIA is currently under development. And another thing Aaron from United was telling us, which is not news, is that they’re in a holding pattern when it comes to offsetting, because they’re trying to— they’re waiting to see what CORSIA is going to end up being, what it’s going to require from airlines.
So it’s really interesting now to hear you talk about, okay, you’ve got these — whatever you call them — renewable fuels or biofuels, and then this carbon sequestration and storage piece. I think that’s, like, where airlines need to start thinking about this, right? Where it’s not only a way of providing services to fly people without a carbon input, but also to sequester carbon well. And some of the airlines are really leading on this and have been for some time. I mean, United’s CEO just came out and made a very bold declaration that they’re going to reduce the carbon footprint of their airline by 50%.
Alexsandra Guerra: That’s ambitious. Was it, what, 2030?
Christophe Jospe: Counting on you, Stephen. We should talk.
Stephen Johnson: And United is not the only one. There are many airlines, and major international oil companies are now starting to get really serious about this. We’ve been working closely with one group, which is the Oil and Gas Climate Initiative, which is a major fund that was created by the world’s 13 largest oil companies to drive forward carbon capture and storage technology. And they’re backing some of the critical innovation in this space. But yeah, it’s going to be a coalition of everyone involved in the entire value chain required to make this happen.
Christophe Jospe: Yeah, absolutely. I think the Oil and Gas Climate Initiative is meeting this week or next week at the CERA event — C-E-R-A — if people are interested in looking it up. And they are going to have a few different startups and not-so-startups pitching innovations in this space, and how do we address some of these issues so that they can incorporate it into their business, which will have happened by the time this podcast airs. So you, listener, can go check it out and check out all those amazing startups.
I just want to comment — what was it? It’s the oil and gas. You know, here we are, environmentalists who are trying to reverse climate change, not single-handedly, but by building a voluntary market to draw CO2 out of the atmosphere. But we’re not saying, oil and gas, you have no seat at this table. We’re actually saying, oil and gas, you have a central seat at this table. It’s only with collaborating with the [unclear] and engineers who have been, quite frankly, part of creating this problem, to empower them to be part of the solution. So, Mark, I want to pass it to you as an oil and gas guy: how do you see mindset shifting?
Mark Fitz: In terms of, actually, some of the greatest environmentalists are these industrialists. So, John Rockefeller, when he had a monopoly, said that he focused on the value running with the crude. So the feedstock, making the fuels, is where the value’s at. He’s changing feedstock. Now, if your business is built completely upon inventories below the ground being realized, you’re never going to think about a different feedstock. What you’re seeing, though, is there are others that— [unclear] — kind of changes in development. It’s changing, you’re seeing an interest. And then you also have the carbon regulations, like California. He described them as a subsidy, but there are markets where they’re attaching a value to carbon.
So here in the Pacific Northwest, Phillips 66 — you know, a major refinery — announced a joint project with Renewable Energy Group to build a renewable diesel plant at similar scale to what Stephen’s talking about, next to a refinery. I believe it’s Sinclair — is a large, privately… I believe they’re privately held. Well, the company, they’re definitely closely held. If they’re public, you know, I mean, somebody has the majority of the stock. But they’ve got a number of plants that are far smaller that have all their product being taken off, and it’s being sold at a huge premium over oil.
So my expectation is, looking at that, and then you go one other step, it’s superior technology. So when you talk about, you know, emissions and closing the loop on CO2, you’re thinking about this CO2 as it mixes into the atmosphere. Take it even further and think the tailpipe and the pollution that comes out of an internal combustion engine. I believe EVs are going to penetrate deeply into gasoline, and we’re going to see that market change, but I don’t think diesel’s going away for a good 10 or 20 years. You’re not going to find a battery that pushes 105,000 pounds down the road as reliably as diesel does. You know, the joke is, when people complain about diesel prices, push your truck a block and tell me it’s not worth 5 bucks a gallon, right?
You know, looking at that, so his product is dry, clean and very, very consistent coming out of his process. Petroleum, they’re distilling, they’re doing a similar process where they’re cracking and rebuilding a molecule, but they’re mixing that product based on what they get out of the stew that is crude, in that you’ve got various volatile organic compounds, you’ve got dirt, you’ve got water, that when it combusts in the engine comes out through that tailpipe. Even through a particulate trap, you have things that are being created. He’s reducing those emissions with the stack. So as they look ahead, the fact that this is a [unclear], and you have regulators looking at the fact that you can have a cleaner tailpipe — I think that’s what’s going to drive the tech. But it won’t drive it now. It’s going to take Stephen to build this plant for them to say, this makes total sense.
Christophe Jospe: Well, this has been great. We’re getting to the top of the hour and probably time to start wrapping things up. So, any final words? Where can people go to learn more about this project? What do you want our listeners to do?
Stephen Johnson: Yeah. So our website is icfuels.com — I-C-F-U-E-L-S — and I’ve got a little bit of content up there where we talk about some of the process and what it is and how it works. Obviously invite the listeners, if they’re interested in learning more, please don’t hesitate to reach out. I believe my email address is up on the website, and we’ve got far more detailed stuff that isn’t out on the public facing. So yeah, love to work with anybody that’s interested in helping advance the cause here.
Alexsandra Guerra: Great. Well, thank you guys for joining us and for taking the road trip up here — and, well, you are at a conference anyways. But it was good to have you here. I really enjoyed this conversation.
Should be fun. See you next time. Thanks so much. All right.
