HollyFrontier Corporation, an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products, plans to construct a new renewable diesel unit (RDU) at its Artesia, New Mexico refinery (Navajo Refinery).
The RDU will have a production capacity of approximately 125 million gallons a year (9,000 BPD) and allow HollyFrontier to process soybean oil and other renewable feedstocks into renewable diesel. The company expects renewable diesel production to generate >600,000 LCFS credits in year 1.
HollyFrontier said the investment will provide the opportunity to meet the demand for low-carbon fuels while covering the cost of its annual RIN purchase obligation under current market conditions.
The RDU, along with corresponding rail infrastructure and storage tanks, is estimated to have a total capital cost of $350 million, and is expected to be completed in the first quarter of 2022.
The RDU will be funded with cash on hand and is expected to generate an internal rate of return between 20% and 30%.
We expect our new renewable diesel plant will generate attractive returns and help us meet our requirements under the Renewable Fuel Standard. At the same time, we are increasing cash returns to shareholders through an increase in our regular dividend with a path for future dividend growth and a new HollyFrontier share repurchase authorization.—Franklin Myers, Chairman of the Board of HollyFrontier
HollyFrontier owns and operates refineries located in Kansas, Oklahoma, New Mexico, Wyoming and Utah and markets its refined products principally in the Southwest US, the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states.
The Navajo Refinery has a crude oil capacity of 100,000 barrels per day. The Navajo Refinery can process heavy, sour and light, sweet crude oils and runs a predominant slate of Permian Basin crudes that are gathered in West Texas and Southeast New Mexico. The refinery can also source a variety of crude oils from Cushing, Oklahoma including Canadian crudes. The Navajo refinery serves markets in the southwestern United States and northern Mexico.
In addition, HollyFrontier produces base oils and other specialized lubricants in the US, Canada and the Netherlands, and exports products to more than 80 countries.