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Minnesota SAF production coalition formed

A collection of private and public entities intend to make Minnesota, and in particular the Minneapolis-Saint Paul International Airport, an important SAF hub.

Bank of America, Delta Air Lines, Ecolab and Xcel Energy have established the Minnesota SAF Hub, the first large-scale SAF Hub in the US committed to scaling sustainable aviation fuel production, according to a news release.

Anchor members are joined by other institutions, including the State of Minnesota, to implement a shared strategy for decarbonizing the airline industry. It’s organized through the GREATER MSP Partnership.

The aim is to produce low-carbon SAF by developing an integrated value chain from production to use at Minneapolis-Saint Paul International Airport.

“After eight months of behind-the-scenes collaboration, the coalition will share its ambitious objectives today at the North American SAF Conference and Expo in Minneapolis,” the release states. “Progress to date includes establishing a shared, multi-phase strategy, securing nation-leading financial incentives from the State of Minnesota, and building a growing coalition of Minnesota-based organizations including the anchor companies, State of Minnesota, the Metropolitan Airports Commission, the University of Minnesota, and knowledge partner McKinsey & Company.”

As early as 2025, the coalition aims to bring commercial-scale volumes of SAF to the airport. Minnesota’s SAF tax credit makes the state attractive for production. It is working with existing and prospective SAF producers to increase production in Minnesota.

“The coalition will welcome additional SAF producers, investors, corporate partners, and broader value chain players,” the release states.

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CCUS developer closes 45Q direct transfer deal

A Mercuria Energy-backed CCUS developer has closed a 45Q direct transfer deal with assistance from Marathon Capital.

CapturePoint LLC has closed on a private Section 45Q direct transfer tax credit transaction for carbon dioxide (CO2) captured at the company’s Arkalon facility near Liberal, Kansas and utilized for Carbon Dioxide Enhanced Oil Recovery (CO2-EOR) operations in the panhandles of Oklahoma and Texas, according to a news release.

The CapturePoint Arkalon CO2 capture facility has the capacity to capture 250,000 metric tons of CO2 annually from nearby bio-ethanol production. CapturePoint transports the captured CO2 through its 170-mile regional network of dedicated CO2 pipelines to over 75 active CO2 injection wells the company uses for CO2-EOR operations. Once CO2-EOR operations cease, the CO2 is ultimately securely stored permanently underground.

The new Arkalon CO2 capture facility was placed in service in April 2023, generating Section 45Q tax credits for capturing and utilizing industrially sourced CO2 emissions. The Tax Credit Transfer Agreement between CapturePoint and the buyer includes placement of 100% of the 45Q tax credits generated by the Arkalon facility for a total of 12 years. At closing, CapturePoint will transfer all 2023-generated 45Q tax credits to the buyer.

“CapturePoint is at the leading edge of carbon management innovation in the United States,” said CEO Tracy Evans, “and our Arkalon CO2 capture facility and Panhandle CO2-EOR operations are helping the nation achieve important environmental and energy security goals. Our team is also developing expansive deep underground carbon storage sites – like our CPS Central Louisiana Regional Carbon Storage Hub — to permanently and safely sequester much larger volumes of CO2 currently released into the atmosphere by industrial emitters.”

The Section 45Q transaction announced today was placed privately by Marathon Capital. ReSource previously interviewed Evans last year about the company’s plans.

“We were honored to support CapturePoint on one of the industry’s first Section 45Q tax credit transfer transactions for their Arkalon CO2 capture facility,” said Matthew Shanahan, Managing Director at Marathon Capital. “We wish the CapturePoint team continued success as a leader in carbon management services.”

With both the Arkalon CO2 capture facility Section 45Q placement and an earlier transaction announced in January 2023 for CO2 captured at a nitrogen fertilizer facility in Coffeyville, Kansas, CapturePoint now has nearly one million metric tons per year of industrially sourced CO2 being utilized in CO2-EOR operations and generating 45Q tax credits.

CapturePoint LLC and its affiliate CapturePoint Solutions LLC offer a wide array of carbon management services and are pioneering the U.S. development of leading-edge carbon solutions including deep underground geologic carbon storage sites. The companies are privately held, with significant financial backing from prominent investors in clean energy innovation including an affiliate of Mercuria Energy, one of the world’s largest independent energy and commodity groups.

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C2X invests in SunGas Renewables

The partnership with C2X will enable SunGas to develop projects based on its technology in the U.S., including the Beaver Lake Renewable Energy green methanol project in Central Louisiana.

SunGas Renewables Inc. and C2X LLC have formed a strategic partnership and announced an investment by C2X in convertible preferred stock issued by SunGas.

SunGas and C2X aim to develop, own, and operate multiple green methanol production facilities in North America to increase the supply of sustainable fuels and advance global decarbonization of hard to abate industries, according to a news release.

SunGas, a spin-out of GTI Energy, provides process technology and equipment for enabling the production of renewable fuels.  C2X is aiming to establish large-scale green methanol production for multiple industries around the globe. The partnership with C2X will enable SunGas to develop projects based on its technology in U.S. communities, and to sell its gasification equipment systems to customers who are building and operating renewable fuels production facilities around the world.

This investment will also support the continued development of SunGas’ Beaver Lake Renewable Energy (“BLRE”) green methanol project in Central Louisiana.  BLRE, expected to be fully operational as early as 2028, aims to produce green methanol at a capacity of more than 400,000 tons per year. It is planned to be the first of several renewable fuels facilities to be developed, owned, and operated by C2X and SunGas across North America.

C2X is majority owned by A.P. Moller Holding with A.P. Moller – Maersk as minority owner.

“C2X’s significant leadership, project implementation, and financial capabilities, complemented by SunGas’ extensive experience in design, development, and operation of renewable energy projects, will enable large-scale production of reliable, affordable, and sustainable fuels and advance global decarbonization,” said Robert Rigdon, CEO of SunGas Renewables. “We are grateful for GTI Energy’s expertise in decarbonization technologies and their role in our initial growth and spin-out, which enabled a partnership that will help us better serve customers relying on SunGas’ renewable technologies, products, and services.”

“SunGas’ leading biomass gasification technology platform and their highly capable team offers the fastest and lowest cost way to scale up the supply of green methanol that is so urgently needed to enable the marine, aviation, and chemicals sectors to reduce their fossil carbon emissions. Furthermore, we hope that our investment will also enable SunGas to advance the sale of their technology to other customers looking to produce renewable molecules for hard-to-abate industries,” says Brian Davis, Chief Executive Officer at C2X.

“GTI Energy believes disruptive innovation in technology and collaborative partnerships are key for creating sustainable, accessible, and secure options to meet the energy needs of economies around the globe,” said Paula Gant, President and CEO of GTI Energy.  “SunGas Renewables demonstrates the power of gathering deep expertise and a focused business model to leverage GTI Energy’s foundational U-GAS® technology to scale production of competitive low-carbon fuels that will positively impact communities, economies, and the environment.”

The pairing of C2X and SunGas’ skills and competencies will enable both companies to offer solutions for customers needing to source meaningful quantities of green fuels as well as technology and services for project development partners and owners.

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United, Tallgrass, and Green Plains form JV to develop SAF from ethanol

The JV – Blue Blade Energy – aims to develop and then commercialize a novel sustainable aviation fuel technology that uses ethanol as its feedstock.

United Airlines, Tallgrass, and Green Plains Inc. today announced a new joint venture – Blue Blade Energy – to develop and then commercialize a novel sustainable aviation fuel (SAF) technology that uses ethanol as its feedstock.

If the technology is successful, Blue Blade is expected to proceed with the construction of a pilot facility in 2024, followed by a full-scale facility that could begin commercial operations by 2028. The offtake agreement could provide for enough SAF to fly more than 50,000 flights annually between United’s hub airports in Chicago and Denver.*

Blue Blade’s new SAF technology was developed by researchers at the U.S. Department of Energy’s Pacific Northwest National Laboratory (PNNL), a leading center for technological innovation in sustainable energy. SAF, which uses non-petroleum feedstock, is a low-carbon alternative to traditional jet fuel that offers up to 85%** lower lifecycle greenhouse gas emissions.

“The production and use of SAF is the most effective and scalable tool the airline industry has to reduce carbon emissions and United continues to lead the way,” said United Airlines Ventures President Michael Leskinen. “This new joint venture includes two expert collaborators that have the experience to construct and operate large-scale infrastructure, as well as the feedstock supply necessary for success. Once operational, Blue Blade Energy has the potential to create United’s largest source of SAF providing up to 135 million gallons of fuel annually.”

United, Tallgrass, and Green Plains will each provide their unique industry expertise to help develop the joint venture. Under this collaborative approach:

  • Tallgrass will manage research and development of the technology, including pilot plant development, and will manage the construction of the production facility.
  • Green Plains will supply the low-carbon ethanol feedstock, and use its ethanol industry expertise to manage operations once the pilot facility is constructed.
  • United Airlines will assist with SAF development, fuel certification and into-wing logistics, and has also agreed to purchase up to 2.7 billion gallons of SAF produced from the joint venture.

“At Tallgrass, we are striving to innovate how we deliver the energy that powers our nation and enables our quality of life,” said Alison Nelson, Vice President, Business Development at Tallgrass. “Air travel uniquely connects people and improves lives, and the advancement of this novel SAF technology presents a meaningful opportunity to reduce emissions from aviation.  We are excited to partner with industry leaders United Airlines and Green Plains on this initiative.”

If the technology is commercialized, the location of Blue Blade’s initial plant would allow easy access to low-carbon feedstock from Green Plains’ Midwest ethanol production facilities. While the initial SAF facility intends to use ethanol, the technology has the capability to work with any alcohol-based feedstock as its fuel source.

“Our transformation to a true decarbonized biorefinery model has positioned Green Plains to help our customers and partners reduce the carbon intensity of their products by producing low-carbon proteins, oils, sugars and now decarbonized ethanol to be used in SAF,” said Todd Becker, President and CEO of Green Plains. “This partnership with world class organizations like United Airlines and Tallgrass, shows the value creation that is possible with our low-carbon platform. The potential impact of this project is a gamechanger for US agriculture, aligning a strong farm economy and a robust aviation transport industry focused on decarbonizing our skies.”

Blue Blade Energy marks one of the largest direct investments from United Airlines Ventures (UAV), United’s corporate venture arm, into SAF. Launched in 2021, UAV targets startups, upcoming technologies, and sustainability concepts that will complement United’s goal of net zero emissions by 2050 without relying on traditional carbon offsets. United has aggressively pursued strategic investments in SAF producers and revolutionary technologies including carbon capture, hydrogen-electric engines, electric regional aircraft and air taxis.

*Assuming current regulations requiring SAF to be blended with conventional jet fuel are removed to allow for the use of unblended SAF.
**Based on United’s current SAF supply

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Exclusive: Green hydrogen developer planning capital raises for distributed portfolio

A developer of US green hydrogen projects will need to access the project equity, debt and tax equity markets in the near term for a pipeline of distributed assets nationwide.

NovoHydrogen, the Colorado-based renewable hydrogen developer, will be in the market for project financing for a portfolio of distributed green hydrogen projects in 2024, CEO Matt McMonagle said.

The company, which recently agreed to a $20m capital raise with Modern Energy, is aiming to attract additional private equity and infrastructure investors for the projects it is developing, the executive said.

“The opportunity is really there for attractive risk-adjusted returns at the project level based on how we’re structuring these projects with long-term contracted revenue,” he said.

The company plans to bring its first projects online in late 2024 or 2025.

“We don’t have the project financing set at the point that we can announce, but that’s something myself and my team have done in our careers,” McMonagle said, adding that he’s focused on bankability since founding the company. “We wanted to be as easy for the lenders to underwrite as possible.”

No financial advisors have been attached to the project financings, McMonagle said. A recently announced Series A, first reported by ReSource in February, gave the company exposure to investors that want to participate in project financings, he said.

“We’ll really be ramping that process up, likely after the new year,” McMonagle added, declining to say how much the company would need to raise in 2024.

NovoHydrogen doesn’t have a timeline on a Series B, he said.

Distributed pipeline

The company looks to do onsite projects adjacent to consumption, McMonagle said. The first projects that will go online will be 10 MW and smaller.

“Typically the permitting is straightforward in that we’re adding equipment to an already impacted industrial site,” McMonagle said. He declined to elaborate on where these projects are located or what customers they will serve.

The company also has off-site, or near-site projects, where production is decoupled from consumption. But the company still calls those distributed because they are being developed with a targeted customer in mind.

“We want to be as close as possible to that customer,” he said. Those off-site projects typically are larger and will begin coming online in 2026 and 2027.  

In Texas NovoHydrogen has two large-scale green hydrogen developments in production, co-located with greenfield renewables projects, McMonagle said. Partners, including EPC, are in place for those efforts. The company also has projects in West Virginia, Pennsylvania, New Jersey and along the west coast.

“Where can we add the most value and have the biggest competitive advantage?” McMonagle said of the company’s geographic strategy. “We have very specific go-to-markets in each of those regions which we feel play to our strengths.”

NovoHydrogen is a member of the Pacific Northwest Hydrogen Hub and is involved with the Appalachian Regional Clean Hydrogen Hub (ARCH2), though not in line to receive DOE funding through that hub.

Post-IRA, green hydrogen projects will look much like renewables deals from the equity, tax equity and debt perspectives, he said.

“We’re structuring and setting up our projects to take advantage of that existing infrastructure and knowledge base of how to finance deals,” he said. New options on transferability will enable additional financing options as well.

No flipping

NovoHydrogen does not plan to flip projects before COD, McMonagle said.

“We are planning to deploy hundreds of millions if not billions of dollars in capex for these projects, and we’ll certainly need to partner with folks to deploy that capital,” McMonagle said. “But we will remain in deals with our customers because that relationship is really the fundamental value that we bring in our business.”

Hydrogen projects are different from renewables in that the customers need greater assurances of resiliency, security of supply and performance, than in a space like solar, he said.

Flipping projects before COD would be inconsistent with the trust required to attract offtakers.

“We don’t believe doing a flip reflects that level of importance and support and, frankly, incentive, behavioral incentive, that we have to show to our customers,” he said.

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Buckeye Partners closes acquisition of Bear Head Energy

Buckeye Partners has closed on the acquisition of Bear Head Energy.

Buckeye Partners has closed on the acquisition of Bear Head Energy, Inc., according to a news release.

Bear Head is developing a large-scale green hydrogen and ammonia production, storage and export project in Point Tupper, Nova Scotia with hydrogen electrolyzer capacity of more than 2 GW.

As part of the project’s phased development, Buckeye plans to partner with on-shore and off-shore renewable energy developers to build out a large-scale green hydrogen hub for Atlantic Canada.

Buckeye established its Alternative Energy operating segment as a clean energy business that focuses on the development, construction, and operation of alternative energy projects, including hydrogen, wind, and solar-powered energy solutions.

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Interview: Vinson & Elkins’ Alan Alexander on the emerging hydrogen project development landscape

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

In the meantime, a number of novel legal and commercial issues facing hydrogen project developers have come to the forefront, as outlined in a paper from the law firm this week, which serves as a guide for thinking through major development questions that can snag projects.

In an interview, Alexander, a Houston-based project development and finance lawyer, says that, although some of the issues are unique – like the potential for a clean fuels pricing premium, ownership of environmental attributes, or carbon leaking from a sequestration site – addressing them is built on decades of practice.

“The way I like to put it is, yes, there are new issues being addressed using traditional tools, but there’s not yet a consensus around what constitutes ‘market terms’ for a number of them, so we are having to figure that out as we go,” he says.

Green hydrogen projects, for example, are “quite possibly” the most complex project type he has seen, given that they sit at the nexus between renewable electricity and downstream fuels applications, subjecting them to the commercial and permitting issues inherent in both verticals.

But even given the challenges, Alexander believes the market has reached commercial take-off for certain types of projects.

“When the hydrogen rush started, first it was renewables developers who knew a lot about how to develop renewables but nothing about how to market and sell hydrogen,” he says. “Then you got the people who were very enthusiastic about developing hydrogen projects but didn’t know exactly what to do with it. And now we’re beginning to see end-use cases develop and actionable projects that are very exciting, in some cases where renewables developers and hydrogen developers have teamed up to focus on their core competencies.”

A pricing premium?

In the article, Vinson & Elkins lawyers note that commodities pricing indices are not yet distinguishing between low-carbon and traditional fuels, even though a clean fuel has more value due to its low-carbon attributes. The observation echoes the conclusion of a group of offtakers who viewed the prospect of paying a premium for clean fuels as unrealistic, as they would need to pass on the higher costs to customers.

Eventually, Alexander says, the offtake market should price in a premium for clean products, but that might depend in the near term on incentives for clean fuels demand, such as carbon offsets and levies, like the EU’s Carbon Border Adjustment Mechanism.

“Ultimately what we need is for the market to say, ‘I will pay more for low-carbon products,’” he says. “The mindset of being willing to pay more for low-carbon products is going to need to begin to permeate into other sectors. 30 or 40 years ago the notion of paying a premium for an organic food didn’t exist. But today there are whole grocery store chains built around the idea. When the consumer is willing to pay a premium for low-carbon food, that will incentivize a farmer to pay a premium for low carbon fertilizer and ammonia, which will ultimately incentivize the payment of a premium for low-carbon hydrogen. The same needs to repeat itself across other sectors, such as fuels and anything made from steel.”

The law firm writes that US projects seeking to export to Europe or Asia need to take into account the greenhouse gas emissions and other requirements of the destination market when designing projects.

In the agreements that V&E is working on, for example, clients were first focused on structuring to make sure they met requirements for IRA tax credits and other domestic incentives, Alexander says. Meanwhile, as those clean fuels made their way to export markets, customers were coming back with a long list of requirements, “so what we’re seeing is this very interesting influx” of sustainability considerations into the hydrogen space, many of which are driven by requirements of the end-use market, such as the EU or Japan.

The more stringent requirements have existed for products like biofuels for some time, he adds, “but we’re beginning to see it in hydrogen and non-biogenic fuels.”

Sharing risk

Hydrogen projects are encountering other novel commercial and legal issues for which a “market” has not yet been developed, the law firm says, especially given the entry of a raft of new players and the recent passage of the Inflation Reduction Act.

In the case of a blue hydrogen or ammonia project where carbon is captured and sequestered but eventually leaks from a geological formation, for example, no one knows what the risk truly is, and the market is waiting for an insurance product to provide protection, Alexander says. But until it does, project parties can implement a risk-sharing mechanism in the form of a cap on liabilities – a traditional project development tool.

“If you’re a sequestration party you say, ‘Yeah, I get it, there is a risk of recapture and you’re relying on me to make sure that it doesn’t happen. But if something catastrophic does happen and the government were to reclaim your tax credits, it would bankrupt me if I were to fully indemnify you. So I simply can’t take the full amount of that risk.’”

What ends up getting negotiated is a cap on the liability, Alexander says, or the limit up to which the sequestration party is willing to absorb the liability through an indemnity.

The market is also evolving to take into account project-on-project risk for hydrogen, where an electrolyzer facility depends on the availability of, for example, clean electricity from a newly built wind farm.

“For most of my career, having a project up and reaching commercial operations by a certain date is addressed through no-fault termination rights,” he says. “But given the number of players in the hydrogen space and the amount of dollars involved, you’re beginning to see delay liquidated damages – which are typically an EPC concept – creep into supply and offtake agreements.”

If a developer is building an electrolyzer facility, and the renewables partner doesn’t have the wind farm up and running on time, it’s not in the hydrogen developer’s interest to terminate through a no-fault clause, given that they would then have a stranded asset and need to start over with another renewable power provider. Instead, Alexander says, the renewables partner can offset the losses by paying liquidated damages.

Commercial watch list

In terms of interesting commercial models for hydrogen, Alexander says he is watching the onsite modular hydrogen development space as well as power-to-fuels (natural gas, diesel, SAF), ammonia and methanol, given the challenges of transporting hydrogen.

“If you’re going to produce hydrogen, you need to produce it close to the place where it’s going to be consumed, because transporting it is hard. Or you need to turn it into something else that we already know how to transport – natural gas, renewable diesel, naphtha, ammonia.”

Alexander believes power-to-fuels projects and developers that are focused on smaller, on-site modular low-carbon hydrogen production are some of the most interesting to watch right now. Emitters are starting to realize they can lower their overall carbon footprint, he says, with a relatively small amount of low-carbon fuels and inputs.

“The argument there is to not completely replace an industrial gas supplier but to displace a little bit of it.”

At the same time, the mobility market may take off with help from US government incentives for hydrogen production and the growing realization that EVs might not provide a silver-bullet solution for decarbonizing transport, Alexander adds. However, hydrogen project developers targeting the mobility market are still competing with the cost of diesel, the current “bogey” for the hydrogen heavy mobility space, Alexander says.

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