US DOE approves Gevo, Montana Renewables SAF project loans

Gevo, Inc. and Calumet's Montana Renewables segment both received US Department of Energy loans to fund the construction and expansion of large sustainable aviation fuel production projects.

"This conditional commitment supports the Biden-Harris Administration’s goal of increasing US production of SAF to 3 billion gallons per year by 2030 and 35 billion gallons per year by 2050," DOE's Loan Programs Office said in a release Oct. 16. "Other low-carbon alternatives to traditional jet fuel such as hydrogen- and battery-powered aircraft technologies are still early in their development, leaving the aviation industry reliant on sustainable 'drop-in' fuels from renewable feedstocks."

Both Gevo and Calumet's projects are products of the DOE's SAF Grand Challenge, which aims to decarbonize the aviation industry and boost the production of fuel that reduces lifecycle emissions by at least 50% compared to jet fuel made from petroleum. The aviation industry is responsible for 11% of the US transportation sector's emissions and 3.3% of total US emissions.

SAF is a catch-all term for various biofuels and synthetic fuels that have been proposed as substitutes for jet fuel. The fuels still have tailpipe emissions, but these are offset by a carbon-negative production process.

Gevo plant to double US SAF capacity

Gevo secured $1.46 billion in conditional financing from the US DOE's Loan Programs Office, which it will use to build its Net-Zero 1 project in Lake Preston, S.D. In a release, Gevo said NZ1 will use 100% US-sourced feedstocks to produce about 60 million gallons of SAF per year.

The company said the facility -- which is the first large-scale corn starch-to-jet project to receive an LPO loan, and the first of its kind in the US, DOE said -- will produce SAF with a net-zero carbon footprint even after the fuel is burned and will use renewable power and carbon capture technology to be carbon-neutral, if not carbon-negative.

DOE said Gevo's facility, once at full capacity, would more than double total 2023 SAF production in the US. It will also produce renewable diesel and renewable naphtha.

In an Oct. 17 conference call, Gevo executives said they expected the deal to close in 2025. "I'd reiterate that we expect third-party project equity will constitute most of [Net-Zero 1's] project-level equity stack," Chief Financial Officer Lynn Smull said. With capitalized interest during construction, the DOE's loan guarantee would have a borrowing capacity of $1.63 billion, Gevo said.

Once the plant is built, Gevo has hired Summit Carbon Solutions LLC to pipe the plant's CO2 emissions to a permanent storage site in North Dakota. Summit has yet to secure all the necessary permits for its five-state CO2 pipeline, however, and last month Gevo struck a deal to acquire Red Trail Energy LLC's ethanol plant and carbon capture assets for $210 million.

Gevo said it plans to use Red Trail Energy's ethanol plant in North Dakota to eventually produce SAF, and in the meantime, provide additional feedstock for Net-Zero 1. The deal also provides Gevo an already permitted CO2 storage facility in North Dakota, in case Summit's project is delayed, the company said on Sept. 12.

MaxSAF's next phase

As part of the same LPO program, Calumet subsidiary Montana Renewables received a $1.44 billion loan guarantee to build out the next phase of its previously planned MaxSAF facility in Great Falls, Mont. The company said the project will increase Montana Renewables' production capacity to 300 million gallons by 2026 and make it one of the largest SAF producers in the world.

Unlike Net-Zero 1, that facility would make its SAF out of vegetable oils, fats and greases.

"Once the facility reaches full capacity, MRL will be a leading global SAF producer, with its output alone representing 10% of the SAF Grand Challenge goal of 3 billion gallons annually by 2030," the Loan Programs Office said in its release.

In September, Montana Renewables made the first-ever SAF delivery to Minneapolis airport. The 7,000 gallons it shipped were used by Delta Air Lines in the airport's first SAF-fueled flight, which landed at New York LaGuardia in honor of NYC Climate Week.

"Our MaxSAF planned expansion is fully aligned with strategic national interest in low-emission sustainable alternatives," Montana Renewables CEO Bruce Fleming said in a statement. "The expansion will directly replace fossil jet and diesel; reduce MRL's carbon footprint by producing more renewable hydrogen and electricity; and contribute to regional economic development."

Both deals must be repaid with interest, and both companies must satisfy a variety of technical, legal, environmental and financial conditions before DOE will finalize and fully fund the loans, the Loan Programs Office added.