Covenant Energy prepares to meet new demand for renewable diesel

Covenant Energy, a Saskatchewan-based renewable fuel company, continues to make progress with its planned renewable diesel facility. 

In a press release issued Thursday morning, Covenant Energy said this renewable fuel processing plant would be built in southern Saskatchewan. It would produce 6,500 barrels a day and have 300-325 million litres per year of production capacity.

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Finished fuels would include renewable diesel, arctic-grade renewable diesel and sustainable aviation fuel. Greenhouse gas emission reductions would be in the range of 80-85 per cent when compared to fossil fuel diesel, and there would be a low carbon footprint, as recycled hydrogen would be utilized in the production process. 

It would be the first stand-alone hydrogenation-derived renewable diesel (HDRD) production plant in Canada.

The facility would also create the demand for 35 million bushels of canola seed (worth roughly $500 million) to produce 325,000-350,000 tonnes of canola oil feedstock per year.  

Covenant said in the news release that current estimates of local labour market impact include up to 60 permanent full-time positions, plus hundreds of thousands of hours of employment throughout the project construction. 

The company has completed initial pre-front end engineering and design (FEED) studies, as well as a marketing, demand, and pricing study. Provided the project receives all the necessary approvals, it is slated to start production in the second half of 2023. 

Covenant Energy president and CEO Josh Gustafson, who hails from Macoun, noted that the majority of canola products are exported out of the country. 

“In 2019, when the price was at $9.40 per bushel for canola, it was really hard for farmers to make any money growing canola,” said Gustafson. “And so we thought ‘Man, there has to be something that we can do that adds some value-adding processing to our canola, something we can do in Canada to not have to rely so heavily on exports.” 

He researched value-added processing options for canola, and came across renewable diesel. 

“At that point, the Lord gave me the idea for the company and for the opportunity, all pretty much within a week’s time, and since then we’ve been going hard at it,” said Gustafson.  

Covenant Energy started with the purpose of bringing this facility forward.  

In a news release, the City of Estevan said it is looking forward to a new partnership with Covenant Energy,

City manager Jeff Ward says it’s exciting to see diverse business opportunities coming to the Energy City.

“Our economic development board has been working hard to foster an environment that encourages new and unique businesses to open in Estevan. Projects like this will play an integral part of our economy's success in the future,” said Ward.

While this project is advancing, Covenant said in the news release that it is important to restate that the right demand signal for clean fuels is imperative for the approval of this renewable diesel facility. The federal government’s Clean Fuel Regulations, published as a draft in December 2020, would be the key driver of demand for this project and is critical for its success. 

Planned with the future in mind, the current design would enable Covenant Energy to invest in doubling the facility’s production capacity at a later time. 

This renewable fuel processing plant would drive demand for approximately 80 per cent of the oil production capacity of a new one million tonne per year canola crushing site, creating the opportunity for a new crush facility to co-locate with Covenant Energy. 

While the ambition is to use predominantly Canadian canola oil as the feedstock and send renewable fuels throughout Canada and Canada’s northern communities, Covenant’s proposed location would be situated on a Class 1 railway, giving the ultimate flexibility to access feedstock from across Canada and the U.S., as well as providing the potential to sell product into the U.S. market. 

Gustafson said the response to the project has been positive. There would be thousands of man-hours on construction, and there would be jobs once it’s completed.

“There’s lots of this product that has to be moved, so you’re looking at lots of logistics support, trucking, rail movement, lots of infrastructure that has to be put in place. It’s just really good for the Saskatchewan economy.”  

It would be a significant project for the agriculture sector, because it would increase demand for canola oil, but it would increase crush capacity for the processors in Canada. 

“It should help warrant the increase of acres and the increase of canola production in general in the country,” said Gustafson.  

There would also be benefits for the oil and gas industry, he said. Since the market will develop through the fuel-blending mandates being issued by the federal government, fuel producers will have to blend a certain percentage of their fuels to renewable options in their fossil fuels.

It already takes place, since there are blend mandates already in place. Saskatchewan has a two per cent blend mandate for diesel. 

“That’s the big partnership. We’re going to be working closely with the fuel producers because they need a good product like this to meet these blend mandates. So this product, renewable diesel, is a premium biofuel, and because it is processed differently than conventional bio-diesel, it’s a much easier product to blend,” said Gustafson. 

One of the biggest misconceptions out there is the difference between biodiesel and renewable diesel, he said. Both are made from canola oil. The technology for renewable diesel has been around for 10 or 11 years, while biodiesel technology has been around much longer.

“Biodiesel has a much higher oxygen content, and that’s really the limiting factor on it, because the oxygen content causes it to have a limited shelf life. It makes it not a very good product in the winter because it gets sludgy and gels up, whereas renewable diesel, when you process it, to really simplify, what you’re essentially doings is pulling the oxygen out of the product.”  

It leaves a drop-in product, so you can run renewable diesel in any fossil diesel engine without any modifications or alterations.

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