John W. Stone Deploys Renewable Diesel To Lower Greenhouse Gas Emissions

John W. Stone Oil Distributor LLC, a leading dockside, midstream and offshore fuel supplier on the Lower Mississippi River and the Gulf Coast since 1946, is leading by example with regard to its effort to reduce the company’s carbon emissions.

Tony Odak, Stone’s chief operating officer, said that endeavor started around eight years ago, well before ESG, or a company’s commitment and strategy for “environmental, social and corporate governance,” became a household acronym.

“We wanted to upgrade our fleet and be more environmentally friendly,” Odak said. “We started down the road of repowering vessels and quickly learned that you can be both fiscally and operationally responsible, while also being environmentally responsible.”

The company worked to upgrade the engine packages in its fleet of 16 towboats and 43 barges, replacing aging engines with Tier 2 and Tier 3 engines. In addition, company leaders opted to increase horsepower in the fleet, which allowed vessels to throttle back and, thus, “reduce our emissions by reducing fuel consumption,” Odak said.

It turns out that was just the first in a series of strategic moves for Stone.

“The next logical step was that we installed shore power connections to our vessels at several locations on the river, as well as at our terminals in Port Fourchon,” Odak said. “This, again, made fiscal sense as much as it reduced our greenhouse gas emissions.”

Alternative Fuels

But the company didn’t stop there.

“Since that was all we could do to that extent, we decided to review our options with alternative fuels,” Odak said. “We started about this time last year with what seemed a ratable supply of biodiesel/renewable diesel in Texas, again looking at it fiscally and environmentally. We chose to use a B20+ blend in summer months on our vessels and on-road trucks in Texas.”

Biodiesel, produced from vegetable oils or animal fats and alcohol through a process called “transesterification,” is blended with conventional diesel for use as a transportation fuel. Common blends are B5 (5 percent biodiesel) and B20 (up to 20 percent biodiesel).

“This showed us again that, when viewed ‘from the well to the wake,’ or as we like to say ‘from the field to the funnel,’ we were reducing our carbon footprint as well as saving money via state incentives,” Odak said.

But the use of B20 proved to be a challenge because of incentives and mandates in other parts of the country, particularly California, with its “Low Carbon Fuel Standard,” and the Northeast. In fact, that draw toward California in particular puts alternative fuels in short supply in places like the Gulf Coast, Odak said.

Still, over the past few months, Stone has been able to secure a monthly supply of renewable diesel for its marine fleet. Renewable diesel, or RD99, is a fuel sourced from fats or vegetable oils, which have been processed through hydrotreating, pyrolysis or gasification to be the same, chemically, as conventional diesel. Unlike biodiesel, renewable diesel is a drop-in fuel, meaning engines need no modifications to run it and can even swap between renewable diesel and conventional diesel as needed. At current blend ratios and with appropriate feedstocks, renewable diesel can reduce greenhouse gas emissions by up to 75 percent or more on a life cycle basis.

“Recently, we were able to enter into a ratable supply agreement with an established refiner in our portfolio for renewable diesel,” Odak said. “After supplying over 200,000 gallons of RD99 to our vessels and the marketplace to ‘test the waters’ for operational issues, we have found that this is the immediate and obvious drop-in greenhouse gas reduction solution.”

Fuel consumption for Stone vessels has averaged about 2.35 million gallons per year for the past three years, Odak said, with trucks and terminal usage adding about 15 percent to that. The current supply arrangement will meet Stone’s fueling needs and make significant product availability for the company’s customer base both domestically and internationally.

“As of early July, 50 percent of our fleet was on renewable diesel,” Odak said. “We expect the remainder of the inland boats and barges, and even the offshore equipment, to be on renewable diesel by mid-August.”

What’s more, Odak said Stone will be able to supply some of that RD99 to its customers. And that’s significant for marine operators who, like Stone, are under pressure from both internal and external stakeholders to take steps to reduce carbon emissions, Odak said. Stakeholders pushing for Stone to adopt its more environmentally conscious operations include customers, personnel and lenders.

“The stakeholders for Stone are the same stakeholders for other marine operators,” Odak said.

And for companies that operate towing vessels and barges—often 20-year or 30-year assets—the best way to achieve carbon emission reductions now with the existing fleet is through the use of renewable diesel, Odak said.

But there is still the supply issue.

“The biggest challenge is availability—availability at the right price,” Odak said.

State mandates, like in California, which beginning in January 2024 will issue fines to companies that aren’t using renewable fuels, are driving up demand for renewable fuels. At the same time, production is not sufficient to meet the growing demand, since the cost to produce biomass-based diesel is still greater than the cost to produce conventional diesel. Government mandates and incentives help close that gap, but the law of supply and demand still applies.

“There’s not enough supply out there to meet the regulatory demand, but we also have non-regulatory demand,” Odak said. “And if you pull the incentives away, can the business stand on its own?”

That is a valid question, especially with current market conditions driving up the cost to build more production capacity and with the Environmental Protection Agency’s recently announced renewable fuel production requirements for 2023 through 2025, which were lower than many in the industry hoped they would be.

Odak, though, said it’s only a matter of time before standards, arbitrage and supply sort themselves out. One thing is certain. The pressures, both internal and external, to improve a company’s environmental consciousness aren’t going away.

“With our distribution network, our marketing plan and, most importantly, our tremendous customer base, we feel that, as those subsidized markets become saturated, we will have developed a non-subsidized market for the product,” Odak said, adding that with regard to so-called ESG strategies, “For some companies out there, it may not be right now, but you’ve got to start making plans for it.”