An long-delayed project to convert a Bakersfield, California, oil refinery to produce renewable diesel (RD) has been given another extension for start up.
Global Clean Energy Holdings, working to open a 15,000 b/d RD refinery, and trading house Vitol agreed last week to adjust the terms of a supply and offtake deal singed in June. The initial agreement said that Vitol could exit the agreement if the refinery was not producing at least 5,000 b/d of renewable diesel by the end of October, but that deadline has now been moved to 15 December.
Global Clean Energy told Argus last month that it still has "plans in place to complete the remaining work and start up the facility" despite recently cancelling an agreement with its principal contractor.
Vitol, after an initial three-year term, can now request up to three one-year extensions of the contract, up from two in the initial deal. The agreement, which cleared the way for former business partner ExxonMobil to exit, stipulates that Vitol will be the exclusive supplier of feedstocks to the plant and exclusive marketer of all fuel and environmental attributes.
The revised agreement also says that if Global Clean Energy modifies its credit agreement to allow for more than $330mn in debt financing, then the renewable fuels producer will have to pay Vitol an additional fee that increases as more funds are borrowed. Global Clean Energy declined to clarify whether it had already triggered the obligation to pay Vitol the excess fee, saying that it could not provide more information ahead of filing its quarterly investor report "in the near future."
If the plant begins operations as planned, it will have to contend with a challenging investment environment for biorefineries given recently low environmental credit prices and uncertainty around how president-elect Donald Trump will enforce a new federal clean fuels tax credit.
At the same time, California regulators agreed last week to update the state low-carbon fuel standard, including by setting stricter carbon intensity targets that start next year. The regulatory updates lifted the prices of credits used for program compliance, which are a crucial source of revenue for companies bringing lower-carbon fuels like renewable diesel into the state.
