OTTAWA — Fuelled by U.S. private equity funds, a new management team is converting a former petroleum refinery on Newfoundland’s Avalon Peninsula to make greener diesel and airplane gas. The federal government’s flagship innovation fund is providing $49.5 million in financing to the $428-million project.

The Come by Chance refinery commenced production in December 1973. Built with provincial and federal loans, it passed through a series of owners over the following decades. The facility provided fuel for Newfoundland and Labrador as well as export markets, and grew to make up a significant portion of the tax base of the town, which had 208 residents as of last year’s census.  

But in March 2020, North Atlantic Refining idled the 130,000-barrel-per-day facility. “During COVID, petroleum demand globally fell substantially,” said Frank Almaraz in an interview last month; in February, the power-industry veteran was hired as CEO of Braya Renewable Fuels, the new name for the plant’s operating company. “Prices were low and put a real crunch on a variety of refiners.” 

In November 2021, Dallas-based Cresta Fund Management acquired a controlling stake in the facility, renaming it and announcing plans to convert it to produce renewable diesel and sustainable aviation fuel (SAF).

Braya plans to turn tallows and vegetable and used cooking oils into an initial 18,000 barrels per day of the greener fuels, with a goal of 24,000 barrels per day in two to three years, followed by further expansion. “It’s going to be very difficult to electrify long-haul trucking and aviation,” noted Almaraz; in the meantime, renewable diesel and SAF are “drop-in” fuels to keep supply chains going and decarbonize heavy transportation. 

The company originally hoped to have the updated facility in service by mid-2022, but now expects to begin production early next year. The conversion will employ 600 workers, with about 200 on site once production begins.

Renewable diesel is chemically identical to the regular kind and can work in the same engines, according to Almaraz. But he said it’s superior to traditional biodiesel—produced via a different process— because “it doesn’t have the same issues with becoming stale or gumming up when it gets cold.” That’s an asset in the domestic market. 

But the Come by Chance facility has long produced primarily for export, and Braya sees opportunity for its new offerings in California. The state’s fuel standard, launched in 2011, gives refiners salable credits for products that are less carbon-intensive than its targets. 

Braya also anticipates demand for SAF. The International Air Transport Association estimates that swapping it in for traditional jet fuel could get the sector 65 per cent of the way to its net-zero target by 2050, but only with major output increases. 

The domestic market remains nascent. “There is currently no meaningful Canadian production or consumption of SAF,” stated a memo that officials in Innovation, Science and Economic Development Canada’s (ISED) advanced manufacturing and industrial strategy branch sent to Innovation Minister François-Philippe Champagne in August. 

The propellant is expensive to produce and other fuels—including renewable diesel—are more profitable, according to the briefing note, which The Logic obtained via an access-to-information request. “Although more transformative technologies are being developed for the long-term, SAF represents a significant opportunity for reducing emissions from the aviation sector in the short and medium-term,” the memo said. The federal government is funding refiners looking to increase production and help adoption take off, the document noted.

Braya’s conversion of the Come by Chance facility was among the projects cited. In August, the firm secured a $49.5-million, fully-repayable contribution from Ottawa’s Strategic Innovation Fund, though the department has yet to announce the award. While the company declined to disclose the cost of the conversion, ISED lists the project value at $428 million in public disclosures. The province has also agreed to cover some site cleanup costs.

The project’s potential as a source of SAF wasn’t the primary reason it got backing, according to ISED. “The investment is focused on industrial transformation of a valuable regional asset, to support employment in a rural community, and support Canada’s transition to a low carbon economy,” said spokesperson Andréa Daigle. ISED declined to disclose the deadline for Braya to repay the funding, citing commercial confidentiality.

Braya is currently soliciting proposals for 35,000 metric tonnes a year of green hydrogen, which it will use in its renewable-diesel manufacturing process. Alvarez also sees opportunities to partner to convert the gas into ammonia for export, citing Newfoundland’s proximity to high-demand markets in Western Europe, South America and California.

The Come by Chance refinery was under a stop-work order for most of September, following an explosion that led to eight workers being hospitalized; one died of his injuries in October. The United Steelworkers union, which represents staff at the facility, has called for a provincial inquiry and a criminal investigation.

Braya has “completed a preliminary internal investigation and shared these findings with the families and our workers,” said Almaraz via email. “The exact nature and cause of the incident are under investigation by Occupational Health and Safety, so it would be premature to speak publicly on these aspects of the incident.”

Daigle said ISED is aware of the incident, and the department’s funding agreements require recipients to comply with health and safety laws.

Ottawa is rolling out other measures to incentivize greener power sources. Almaraz said Braya has applied to the Clean Fuels Fund—a $1.5-billion program to subsidize facility builds and conversions—although he declined to disclose how much it’s seeking. In November, Natural Resources Canada announced it had selected 60 projects to split $800 million; department spokesperson Michael MacDonald declined to identify the firms involved, citing ongoing negotiations.

Almaraz said he’s also encouraged by Ottawa’s pledge to introduce further incentives in response to the U.S. Inflation Reduction Act, a US$369-million package of green energy and cleantech incentives enacted in August. “We would be pleased to see a production tax credit [in Canada],” he said, noting that it “would be fantastic if domestic demand was a bigger customer than it is right this second.”