Portland Limits Diesel Sales

Just as Portland Limits Diesel Sales, a Finnish Oil Company Swoops In and Grabs Alternative Fuel

Neste of Finland bought a homegrown maker of biodiesel to feed a plant in California

By Anthony Effinger
Willamette Week
December 14, 2022

In Portland, grease is gold.

Last week, the City Council passed a resolution that will gradually ban the sale of petroleum-based diesel fuel within city limits starting in 2024, a national first. By 2030, the city will require stations to sell only diesel made from low-carbon, renewable sources, such as used cooking oil or animal tallow, aka grease.

It's a noble goal. Diesel burned in vehicles and construction equipment accounts for about 17% of Portland's carbon emissions, according to the city, and it creates black soot that coats Oregon's glaciers and causes them to melt faster.

And, unlike gasoline, diesel has substitutes: biodiesel and so-called renewable diesel, a similar fuel that can be made from all sorts of nonpetroleum feedstocks, such as waste from fish canneries. (Environmentalists prefer the term 'nonconventional" diesel because making the stuff requires the addition of hydrogen, which often comes from fracked methane.)

Unfortunately, just before the city took a big step forward in requiring the use of diesel alternatives, Oregon took a big step back in terms of supply.

Last month, Finnish oil giant Neste said it had agreed to buy the biggest source of biodiesel in the state: a plant in Salem that processes used cooking oil into biodiesel, and the system it has for collecting the oil from restaurants.

The plant was built by a Portland-based biodiesel company, SeQuential, which was bought by California-based Crimson Renewable Energy in 2018. The acquisition by Neste would be fine fuelwise—except the company says it plans to shut down the biodiesel plant.

"Neste does not produce biodiesel," says Satu Vapaakallio, a director at Neste, in a statement to WW. 'Therefore, Crimson will cease biodiesel production at its SeQuential Salem facility just prior to closing of the sale to Neste." The sale is scheduled to close next month.

Through acquisitions like SeQuential, Neste is building a supply system to feed its mammoth new renewable diesel refinery in Martinez, Calif., near San Francisco. That means Oregon, once a biodiesel producer, will become a grease colony for California, shipping used cooking oil south and likely receiving shipments of refined renewable diesel coming back north after value is added.

"They just want the grease collection piece," says one Oregon fuel supplier who declined to be named in print for fear of reprisals by Neste. 'They are in the business to make money."

With Neste closing the Salem refinery, and the city mandating a transition to cleaner fuels, businesses selling diesel fuel in Portland are feeling squeezed.

"Oregon has lost a critical local source of low-carbon biodiesel," says Mark Fitz, president of Portland-based Star Oilco. 'In time, we hope the market will adjust, but losing SeQuential as a supplier furthers our belief that the city's new mandate is not currently achievable."

When it comes to carbon pollution, locally made biodiesel is better than imported renewable diesel. To see why, one has to understand 'carbon intensity."

Believe it or not, it's possible to calculate how much carbon it takes to produce a fuel, ship it and burn it, down to how many miles it travels and whether it came on a ship, train or truck. This requires a vast spreadsheet developed by the Argonne National Laboratory near Chicago.

"It gives me Excel nightmares," says Cory-Ann Wind, manager of the Oregon Clean Fuels Program. 'You describe every step of what it takes to make, transfer and combust a fuel."

Wind had to hire someone with a Ph.D. to handle the spreadsheet. But it works, and Wind's department can compute the carbon intensity, or 'CI," for all the fuels used in Oregon. The state has its own rules for calculating CI. It keeps track of what's being burned, down to the gallon. Businesses that produce or sell fuels (like biodiesel) that exceed state standards get credits they can then sell for cash to businesses that make or peddle dirty fuels (like petroleum diesel).

Recycled fuels get the lowest scores because the spreadsheet doesn't count anything before it becomes waste. Virgin vegetable oils get clobbered because the spreadsheet accounts for all the fertilizer needed to grow the plants they come from, tractor gas to harvest them, and train power to ship them to Oregon from, say, Iowa. Biodiesel, meantime, starts at zero when it's used cooking oil sitting in a barrel outside Fire on the Mountain or Popeyes Louisiana Kitchen.

"There is only so much used cooking oil in the world," Wind says. 'It's gold."

Local used cooking oil is even better because it adds relatively little carbon intensity when it gets shipped to Salem, and then back to Portland as biodiesel.

CI is expressed as grams of carbon dioxide (or the equivalent) per megajoule of energy produced. Some of SeQuential's biodiesel has a CI as low as 11.6, according to the Oregon Department of Environmental Quality. By comparison, regular diesel has a CI of 100.7. Neste's renewable diesel, made from used cooking oil at a refinery in Singapore, goes as low as 24.3. But that's still more than double SeQuential's best score, so it's not a perfect substitute.

The city says all biodiesel and renewable diesel sold here will be required to have a carbon intensity equal to or less than 40 starting in 2024. In 2021, the biodiesel available in Oregon had an average CI of 41.84, according to DEQ estimates, just missing the city's threshold.

The renewable diesel did better, scoring an average of 37, but after imports and exports, only 19.3 million gallons stayed in the state in the first half of 2022, according to DEQ. That's compared with 42 million gallons of biodiesel and, for perspective, 378.5 million gallons of petroleum diesel.

In other words, an already-scarce resource is being shipped out of state—and won't come back with the same environmental value. Mileage matters.

"With SeQuential leaving, we're concerned there isn't enough low-carbon fuel to meet the city's low CI standard," says Greg Peden, a lobbyist for the Oregon Fuels Association. 'The average CI score on a quarterly basis is about 42. But that's an average, meaning that half is above."

The city says it will keep an eye on supply and demand and be ready to adapt.

"This transition will be managed through a technical advisory committee, which will meet regularly beginning next year and through 2030 to monitor supply, price and carbon intensity, and make recommendations to the Bureau of Planning and Sustainability," Commissioner Carmen Rubio said in a statement.

One big fuel seller got a well-cloaked reprieve.

Much of the city's new ordinance will not apply to any retailer who has "(1) a minimum of 120,000 gallons of on-site storage; and (2) a minimum of nine truck fueling lanes," according to the text the City Council passed last week.

Only one retailer fits that description: Jubitz Truck Stop, a 27-acre truckapalooza in North Portland. An Oregon institution, Jubitz has a hotel, a medical clinic, two restaurants and a movie theater. According to the ordinance, it won't have to meet any of the city's requirements until 2030, when it will have to sell 99% renewable diesel or biodiesel. How it gets there is up to Jubitz.

When it comes to transitioning to renewable fuels, size appears to matter. Smaller fuel sellers will have to endure the vice of new rules and less supply. Jubitz won't, at least until 2030.

"We are the largest retailer of biodiesel in Portland today," Jubitz executive vice president Matthew Jubitz tells WW. 'We continue to be committed to offering lower CI content fuel, including renewable diesel, when available and economically feasible at our nine truck fueling lanes."s low CI standard,ns to sell only diesel made from low-carbon, renewable sources, such as used cooking oil or animal tallow, aka grease.

(Sharkey says: "The big fish swallow the smaller fish")