Boom! US DOE Loan Program Office drops $2.9B in conditional loan guarantee commits to Gevo, Montana Renewables

In Washington, the US Department of Energy Loan Programs Office revealed two conditional loan guarantee commitments, up to $1.44 billion to Montana Renewables for its Montana Renewables project, and $1.48 billion to Gevo for its Net-Zero 1 project in South Dakota. 

The Gevo project

The NZ1 facility is being built in Lake Preston, South Dakota. It will use 100-percent U.S.-sourced feedstocks and is designed to produce approximately 60 million gallons of sustainable aviation fuel (“SAF”), approximately 1.3 billion pounds of protein and animal feed products, and approximately 30 million pounds of corn oil per year. The design capability of the NZ1 facility, when combined with the Gevo business system, is expected to yield SAF with a net-zero carbon footprint on a lifecycle basis, including through the burning of the fuel. Gevo net-zero SAF projects are expected to catalyze the accelerated adoption of climate smart agricultural practices, support rural jobs and economic development, and reinforce domestic energy security.

According to a recent report from Charles River Associates (“CRA”), Net-Zero 1 is projected to generate significant economic and climate benefits. Specifically, the plant is expected to create more than 1,300 indirect jobs during its construction phase and 100 permanent jobs at the plant itself. This is in addition to hundreds of local indirect jobs created across the agricultural, manufacturing, and transportation industries, generating an annual economic impact of over $100 million.

The Montana Renewables project

The MRL facility has been in operation since late 2022, currently producing about 140 million gallons per year of biofuels, most of which is renewable diesel. If finalized, the loan guarantee would fund facility expansion to produce about 315 million gallons per year of biofuels, most of which will be SAF. 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 SAF Grand Challenge is a joint initiative of the DOE, Department of Transportation, and U.S. Department of Agriculture to increase SAF production, lower costs, and encourage commercialization. MRL will produce fuels with significantly lower greenhouse gas emissions, on a life cycle basis, when compared to the production and consumption of conventional co-products, including jet fuel.

Reaction from the stakeholders

“This marks a watershed moment for the Net-Zero 1 project and a critical step forward in Gevo’s mission to transform the aviation industry by providing a scalable, sustainable, and economical renewable-carbon-based jet fuel—SAF,” said Gevo CEO Dr. Patrick Gruber. “This valuable commitment to help finance NZ1, if finalized, should also attract other capital investments to unlock SAF commercialization given the robust due diligence conducted by the agency. The due diligence work by the DOE has been incredibly detailed and thorough, and the benefit is a substantially reduced execution risk profile for the project. We are grateful for the support from the Department of Energy’s Loan Programs Office.”

“NZ1 is the largest economic development project in South Dakota history,” said Gevo’s Senior Vice President of Public Affairs, Lindsay Fitzgerald. “We expect that NZ1 will kickstart new growth in the economy, create jobs, and present additional opportunities for the agricultural community in the region around Lake Preston, across South Dakota, and even reaching other states.”

Montana Governor Greg Gianforte said “In Montana, we embrace an all-of-the-above approach to energy, whether it be coal, gas, or renewables. I congratulate Montana Renewables for securing this funding, which will further expand Montana’s diverse energy portfolio. I’ll always work to promote more American-made energy to provide affordable and reliable energy to Montana consumers.”

U.S. Sen. Jon Tester said, “Montana has a long, proud history of powering the nation — and I believe that we can continue to lead the way in energy production. That’s why I was proud to go to bat for this loan so the hard-working folks in Great Falls can continue to power the nation, and I look forward to seeing energy production in Montana continue to grow and thrive for years to come,” Tester said.

U.S. Sen. Steve Daines said, “Montana Renewables and the Calumet Refinery are important energy producers for Montana and provide high-paying jobs for the Great Falls community. They have long fought to keep and build jobs in Montana and as they take their next step and launch Montana to the forefront of renewable fuel production I will continue to fight for Montana energy producers like Calumet by advocating for policies that put Montana’s energy producers first, not Iran or Venezuela.”

The Bottom Line

Boom! Two massive loan guarantees one on top of the other. Cynics might sense a panic to get long-studied projects out the door, others might breathe a sigh of relief that these two conditional commitments made it through the process.

Gevo’s Net-Zero 1 is the first-ever large-scale alcohol-to-jet project to receive a DOE LPO conditional commitment and is expected to provide critical new opportunities for South Dakota workers, farmers, and residents. We believe Gevo’s proprietary ATJ plant design represents the lowest cost-per-ton of carbon abatement among all of the current SAF production technologies.

This conditional commitment supports the Biden-Harris Administration’s goal of increasing U.S. production of SAF to 3 billion gallons per year by 2030 and 35 billion gallons per year by 2050. SAF is the only viable near-term option to decarbonize the airline industry, which is responsible for 11% of U.S. transportation emissions or 3.3% of total U.S. emissions. 

Welcome? Yes. Overdue? Some say. Enough? No.  There are more in the hopper at the LPO, let’s see how many get through the long wait, which remind many of the opening hour at a prized sale of Taylor Swift tickets. Many are called, few are chosen, fewer still can survive the wait. For these two, it’s on to finalization of the guarantee — so, not out of the woods, but good to see.