In Washington state, Carbon War Room and SkyNRG have joined with the Port of Seattle to announce recommendations for long-term funding mechanisms that could supply all airlines at Seattle-Tacoma International Airport (Sea-Tac) with sustainable aviation biofuels.
The report, titled Innovative Funding for Sustainable Aviation Fuel at U.S. Airports: Explored at Seattle-Tacoma International, reveals the financial tools available to U.S. airports, and outlines legal constraints and financial impacts of each tool. The report found that no single tool could generate enough funding to cover the higher cost of biofuel, and recommended combining a number of funding tools.
The two biggest challenges facing broader adoption of sustainable aviation fuel at Sea-Tac are the higher cost compared with petroleum jet fuel, and the constraints imposed by state and federal regulations on use of airport funds.
AltAir Fuels, based in California, is the only facility in the world regularly producing aviation biofuels. The Port, as an economic development engine, is seeking ways to help grow the market. This initiative is one solution in the Port’s quest to find sustainable solutions that improve the health of our environment and community. Other Port successes include emissions reduction achieved by providing pre-heated and cooled air to aircraft parked at gates, use of electric ground support equipment, and conversion to green vehicles.
The key findings of the study are:
1. While a U.S. airport cannot pay for aircraft fuel, it could pay directly for SAF co-benefits. Public dollars cannot cover a commodity used by a for-profit private firm. However, SAF produces direct air quality benefits, reduces greenhouse gas emissions, and supports regional economic development—all of which are valued by airports. These characteristics are referred to as SAF “co-benefits” for this report.
2. There are numerous viable funding mechanisms with significant revenue potential. Two of the four recommended mechanisms require FAA approval as they are currently not considered an acceptable use of airport revenue. The most promising mechanisms that can be implemented at Sea-Tac are:
Corporate Support—corporations contribute to offset their flight emissions ($1 million to $2.5 million per year)
Port Taxing Authority—these funds support air quality benefits, similar to the Port’s Clean Truck Program (Funding amount is variable and dependent on Port Commission priorities)ii
Use of General Non-Aeronautical Revenue (requires FAA approval)—while there are several individual non-aeronautical fees and revenue sources that could be directed toward SAF co-benefits(such as parking or landside fees), offering non-source specific revenues only when the airport achieves a particular total revenue threshold could create a low-risk, non-targeted source for SAF co-benefit funds ($1.0 million to $4.0 million per year)
Airline Agreement (requires FAA approval)—implement a fund via the airline operating agreement that is not subject to revenue sharing, or create a new fee ($380,000 to $2.3 million per year)
3. Infrastructure investment could jump-start regional SAF production. The most promising approach to support infrastructure is indirect via the procurement of SAF co-benefits. The certainty of a medium-to-long-term commitment made by the Port reduces investment risks for private sector funders. A longer-term contract from Sea-Tac to procure SAF co-benefits is favorable over one from airlines which are subject to greater market risks and exposure. Most other mechanisms identified for financing infrastructure projects are outside the Port’s legal scope. Focusing on funding SAF’s co-benefits is a better fit with the Port’s activities and mission.
The authors recommend to the Port that it:
Establish a dedicated team to build the business case for a local supply chain asa critical next step. This likely involves identifying affordable and abundant feedstock sources, mapping production synergies, working with FAA and state authorities, and exploring partnership opportunities with other SAF demand centers. Creating an investable business case will require creative solutions and engagement with multiple stakeholders. The Port of Seattle is well positioned to facilitate this exercise given its active position at the intersection of airlines, fuel suppliers, governments, and the broader community.
The Port can also facilitate regional SAF production through the active promotion of policy and regulatory support at the state and regional levels, and by advancing the airport leadership model with international and national policy makers.
The Sea-Tac backstory
Seattle-Tacoma International Airport (SEA, KSEA) is ranked as the ninth busiest U.S. airport, serving nearly 45.7 million passengers and more than 366,000 metric tons of air cargo in 2016.
As we reported in June 2015, the Port of Seattle wants Sea-Tac airport to become the first bioport in the US offering aviation biofuels to all airlines, following in the footsteps of Oslo and Amsterdam. The port commissioners are developing a framework that it expects to publish by the end of the year in an effort to help the port and airlines go bio.
As we reported in January 2016, Alaska Airlines purchased 1,000 gallons of Gevo’s alcohol-based jet fuel for commercial flights set to begin later this year. It hasn’t yet decided how many flights will use the fuel or at what blend rate. Already the airline has run successful demo flights with the fuel. Alaska is Gevo’s first commercial customer. The use of Gevo’s fuel ties in with the airline’s plan it rolled out in December with Boeing and the Port of Sea-Tac to create a biojet hub.
In January 2017 we reported that the Port of Seattle, Boeing and Alaska Airlines released a first-of-its-kind study that identifies the best infrastructure options for delivering aviation biofuel to Seattle-Tacoma International Airport. In pursuit of its goal to power every flight at Sea-Tac with sustainable aviation biofuel, Sea-Tac is among the first airports in North America to work with aviation, energy and research partners to systematically evaluate all aspects to developing a commercial-scale program from scratch.
The study found that a small biofuel receiving and blending facility at the Sea-Tac Airport Fuel Farm is the most cost-effective solution in the short term, and that the Anacortes-area refineries are the most cost-effective options for large volumes of aviation biofuel over the long term due to their access to marine, rail, truck, and the Olympic Pipeline; and the Phillips 66/Olympic Pipeline Company sites in Renton also showed potential to accommodate receipt and blending facilities for moderate-to-large biofuel volumes over the long term.
The study evaluated more than 30 sites around Washington State that could potentially support the receipt, blending, storage, and delivery infrastructure required to supply Sea-Tac Airport with up to 50 million gallons per year of sustainable alternative aviation fuel (also referred to as aviation biofuel). Potential sites were evaluated both for the ability to accommodate near-term (12-18 months) supplies of five million gallons per year and long-term (2-10 years) supplies of more than 50 million gallons per year.
Reaction from the stakeholders
“The information contained in this study will help us take the next steps toward our goal of making Sea-Tac the biofuel available, cost-effective and practical for all airlines at Sea-Tac,” said Port of Seattle Commissioner John Creighton. “It wouldn’t have been possible to get to this point without the momentum provided by our partners, industry leaders and community innovators.”
“Until we reach fossil-price parity, we need co-funding mechanisms to close the price gap between conventional jet fuel and sustainable aviation biofuels. Sea-Tac demonstrates that airports can play a key role in helping to find the right partners to cover the premium and accelerate the transition to secure a sustainable future for the aviation industry,” said Theye Veen, Chief Financial Officer of SkyNRG.
“We congratulate Sea-Tac on its leadership in showing that airport authorities are critical to the success of the aviation biofuel industry,” said Adam Klauber, Director of CWR’s Sustainable Aviation program. “We’ve proven that there are viable funding mechanisms for the widespread uptake of sustainable aviation fuel at Sea-Tac, and we hope that the study provides tools and ideas for other ambitious airports to consider in their sustainability initiatives.”
The complete report can be found here.
The Bottom Line
Reminds us of the old theme song for the TV dramedy Here Come the Brides:
The bluest skies you’ve ever seen are in Seattle,
and the hills the greenest green are in Seattle
Those Anacortes refineries are, respectively, Tesoro and Shell operations — and small refineries, too. Perfect in so many ways to support the expansion of production. BP’s Olympic pipeline connects directly to Sea-Tac from there.
Right now, those refineries generally source petroleum from Alaska’s North Slope by tanker, Bakken crude by rail, and Canadian crude by pipeline. Meaning that there’s a fairly robust oil delivery infrastructure in Washington state. Which was the home of the first gasoline station, to add some historical context — and one of the first markets to convert shipping from coal to oil. Put that together with the storied aviation and innovation history of Seattle-based Alaska Airlines and Boeing — not to mention the huge in-state commitment to advanced environmental thinking — and you have all the ingredients for something special. A spark is needed to start the engine and it could be that this group of stakeholders have found a way to supply the flame.