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Transportation & Fuel Source Technology

Tyson Foods and Syntroleum Launch Renewable Fuels Venture

Tyson Foods, Inc is taking another strategic step in its quest to be a leader in renewable energy. Tyson and Syntroleum Corporation, a Tulsa-based synthetic fuels technology company, will today announce the formation of Dynamic Fuels LLC, which will produce synthetic fuels targeting the renewable diesel, jet, and military fuel markets.

The two companies will hold a 1:30 p.m. (CDT) news conference today at Tyson World Headquarters in Springdale.

The 50/50 venture intends to construct and operate multiple stand-alone commercial facilities capable of producing ultra-clean, high quality, next generation renewable synthetic fuels using Syntroleum's patented Biofining process, a "flexible feed/flexible synthetic fuels" technology. Feedstock primarily derived from animal fats, greases, and vegetable oils will be supplied by Tyson.

The first facility will produce about 75 million gallons of synthetic fuel annually. Construction of this initial facility is expected to start in 2008 at a yet-to-be-determined site in the south central United States, with production targeted for 2010. The $150 million project will generate approximately 250 short-term construction jobs and 65 highly skilled permanent jobs.

Dynamic Fuels will leverage Syntroleum's proprietary work done in producing synthetic fuel and developing synthetic fuel standards for the U.S. Air Force and the Department of Defense. The fuel produced by the venture will offer the same benefits of synthetic fuels derived from coal or natural gas while providing substantial advantages over petroleum-based fuels. These benefits include higher cetane levels, which are a measure of combustion quality; significantly lower Nitrogen Oxides (NOx) and near zero sulfur. In addition, it will provide superior thermal stability, making it effective for advanced military applications.

The fuel will offer the additional benefits of higher energy content, better cold flow properties enabling it to function effectively in cold weather and reduced carbon dioxide emissions. The unblended fuel can be used in existing diesel engines with no engine modifications required and also can be upgraded into ultra-clean, high quality synthetic jet fuel.

The fuels are expected to be completely compatible with existing pipelines, storage facilities and other conventional fuel infrastructures. Further, the synthetic fuel produced by Dynamic Fuels may be blended with petroleum based diesel and/or conventional biodiesel to help those fuels achieve superior environmental and performance characteristics.

"Tyson's venture with Syntroleum represents another significant step forward in our strategy of leveraging Tyson's access to animal by-products, our trading skills, and industry relationships to become a premier player in renewable energy," said Richard L. Bond, Tyson president and CEO. "We believe this venture will add value to our business, give animal agriculture another opportunity to participate in the production of renewable fuels and is also an environmentally sound way to contribute to America's energy security."

"Our venture with Tyson affords us the opportunity to apply part of our established portfolio of technologies to produce next generation ultra-clean renewable synthetic fuels that contribute to our nation's energy independence while helping reduce greenhouse gas emissions," said Jack Holmes, CEO of Syntroleum. "The Tyson organization is a world class company committed to establishing a new benchmark in the renewable fuels industry, and we are proud to combine our Biofining technology with their resources in this new venture."

As the world's largest producer and marketer of chicken, beef and pork, Tyson produces large by-product volumes of various grades of animal fats, such as beef tallow, pork lard, chicken fat, and greases which can be utilized as renewable feedstock for this venture. Drawing on Tyson's decades of applied protein chemistry experience, the feedstock mix will be pre-processed and optimized for the facilities.

Tyson also intends to use its significant procurement capabilities, industry relationships, and experience in commodity trading and risk avoidance to access feedstocks from other sources. Tyson will also utilize its transportation and logistics team, as well as its truck, rail and barge assets, to coordinate the cost effective movement of the feedstocks to fuel production facilities.

Syntroleum's research and development work, leveraging its gas-to-liquid technology expertise, has already resulted in multiple patent applications related to its Biofining technology for renewable feedstocks. The company's additional pioneering research has targeted an expansion into full biomass-to-liquid fuel production, which could potentially incorporate cellulosic biomass, animal waste and other organic materials.

The companies will each contribute 50 percent of the estimated $150 million dollar cost of the project over the next two and a half years, with the primary contributions coming in fiscal year 2008 and 2009. Annual operating profits, which are anticipated to begin in fiscal year 2010 for Dynamic Fuels, will be driven by market fundamentals such as fuel markets, feedstock markets and government support, and are forecast between $35 and $60 million.

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