Renewable chemicals and biofuels company Gevo has acquired an ethanol production plant and carbon capture and sequestration (CCS) assets of Red Trail Energy to expand sustainable aviation fuel (SAF) production.
The assets, which also include pore space and operations personnel, were acquired for $210m and have been renamed Net-Zero North. In 2021, Gevo teased the concept of its Net-Zero projects.
Net-Zero 1, the first project in the expected series, hopes to produce around 65 million gallons per annum of liquid hydrocarbons in the form of SAF or renewable gasoline.
Additionally, the project is expected to produce at least 695,000 tonnes per year of high-value nutritional products, as well as approximately 34 million pounds of corn oil.
Gevo held a ceremony at the future site of its first commercial-scale SAF facility, Net-Zero 1, in Lake Preston, South Dakota, in September. It hopes to start production in 2026.
Patrick Gruber, CEO of Gevo, said the CCS site will permanently sequester biogenic carbon dioxide to produce US products with carbon abatement to address the growing global demand.
“Net-Zero North is a key step on our path to becoming self-sustaining and profitable as a company in advance of our Net-Zero 1 project coming online.”
Gevo’s production process separates sugars and proteins from non-edible industrial corn grown using climate smart agricultural practices. The sugars are then used to make SAF, and the proteins are fed to livestock, whose manure can be used in biogas digestors to produce renewable natural gas (RNG) and agricultural fertiliser.
The asset purchase from Red Trail Energy was funded with a combination of Gevo equity capital and a $105m senior secured term loan facility from Orion Infrastructure Capital (OIC).
OCI is also investing $5m in Net-Zero North.
Ethan Shoemaker, Investment Partner and Head of Infrastructure Credit at OIC, said the company is thrilled to partner with Gevo on the acquisition.
“The Net-Zero North assets bring together operating carbon sequestration, a strong track record of profitability, near-term upside from their carbon intensity score, a strong operations team, and room to grow.”
Net-Zero North is one of a select few ethanol plants in the US, that Gevo is aware of, that is expected to maximise value from carbon abatement, including under Section 45Z.
Chris Ryan, President and Chief Operating Officer of Gevo, said, “Net-Zero North, with its operating profile and CCS, is projected to achieve a carbon intensity (CI) score in the low 20s (not including improved agricultural results that farmers can achieve using regenerative agriculture practices) using the variation of the GREET model proposed in the Section 45Z rule.”
“We believe that is about 30 CI points lower than the best plants that are not connected to CCS. British Columbia previously scored the Net-Zero North plant at a CI of 19. This is a great starting point to expand Gevo’s business.”
45Z explained
Section 45Z provides a tax credit for transportation fuel production with lifecycle greenhouse gas emissions below certain levels. The credit is in effect as of 2025 and is for sustainable aviation fuel (SAF) and non-SAF transportation fuels.
The credit provides a per-gallon (or gallon-equivalent) tax credit for producers of clean transportation fuels based on the carbon intensity of production. It consolidates and replaces pre-Inflation Reduction Act (IRA) credits for biodiesel, renewable diesel, and alternative fuels, and an IRA credit for sustainable aviation fuel.
Like several other IRA credits, 45Z requires Treasury to establish rules for measuring carbon intensity of production, based on the Clean Air Act’s definition of “lifecycle greenhouse gas emissions.”
Under Section 45Z, transportation fuels must be suitable for use in highway vehicles or aircraft. Treasury and the IRS propose that this includes marine fuels like diesel and methanol if they meet these criteria.
Neat SAF blended into a fuel mixture with practical or commercial use would qualify for the credit. RNG would also be eligible if further compressed for transportation fuel use.
