SFO Sustainable Aviation Fuel Feasibility Study Final Report

Sustainable Aviation Fuel Feasibility Study FINAL REPORT 2019

Sustainable Aviation Fuel Feasibility Study Final Report

Table of ContentsExecutive Summary ..................................................................................................................................1

Introduction of SAF ..................................................................................................................................3

SFO Supply Chain ...................................................................................................................................4

SFO Fuel Farm and Shell Storage Facility ............................................................................................................. 5SFO’s Current Fuel Supply Chain, Network, and Constraints ........................................................................... 5Kinder Morgan Fuel Pipeline ...................................................................................................................................... 6

Sustainable Aviation Fuel .......................................................................................................................8

Fuel Demand Forecast and Capacity Assessment............................................................................................... 8Potential Sustainable Aviation Fuel Producers ...................................................................................................... 8SAF Conversion Pathways ......................................................................................................................................... 8Current SAF Producers ..............................................................................................................................................10New Build SAF Capacity .............................................................................................................................................10Existing Renewable Diesel Facilities ....................................................................................................................... 14

Site Evaluation for Supply of Sustainable Aviation Fuel for SFO............................................... 15

Site Selection Process ................................................................................................................................................ 15Site Evaluation ............................................................................................................................................................... 18Site Evaluation Results ...............................................................................................................................................20

Introduction to Potential Funding Mechanisms .............................................................................22

Long list of potential SAF price premium funding mechanisms ......................................................................23SAF support roles for SFO ........................................................................................................................................26Resilient Sustainable Aviation Fuel Credit ............................................................................................................29

Sustainable Aviation Fuel Feasibility Study Final Report

List of TablesTable 1: Overview of pathways currently qualified by ASTM or expected to soon receive qualification ......... 9Table 2: Comparison of Current SAF Producers .............................................................................................................10Table 3: Comparison of New Build SAF Suppliers ......................................................................................................... 12Table 4: Comparison of Current Renewable Diesel Suppliers .................................................................................... 14Table 5: Primary Evaluation Criteria and Information Sources by Site Evaluation Stage ..................................... 15Table 6: Short List of Identified Sites ................................................................................................................................. 18Table 7: Potential Funding Mechanisms ..........................................................................................................................23Table 8: SFO Potential Support Roles...............................................................................................................................28

List of FiguresFigure 1: SAF Supply Chain.....................................................................................................................................................3Figure 2: Regional Oil Products Supply to SFO ................................................................................................................4Figure 3: SFO Fuel Farm ........................................................................................................................................................ 5Figure 4: Shell Storage Facility ............................................................................................................................................. 5Figure 5: Bay Area Conventional Fuel Supply Chain ..................................................................................................... 6Figure 6: Geographic Constraints of North Bay Area Terminals and Refineries Supplying SFO ........................ 6Figure 7: Current SAF Producers ........................................................................................................................................10Figure 8: New Build SAF Producers .................................................................................................................................... 11Figure 9: Current Renewable Diesel Facilities ................................................................................................................ 14Figure 10: Timing and Volume Range Targets (neat SAF volumes) ........................................................................... 17Figure 11: Primary Criteria Categories and Sub-Categories ......................................................................................... 19Figure 12: Short-term Site Criteria Comparison .............................................................................................................20Figure 13: Mid-term Site Criteria Comparison .................................................................................................................20Figure 14: Long-term Site Criteria Comparison ...............................................................................................................21

BackgroundSan Francisco International Airport (SFO) has long been at the forefront of environmental stewardship, both locally in San Francisco and among the nation’s top airports. SFO’s five-year strategic plan includes a goal to “Achieve Carbon Neutrality and Reduce Greenhouse Gas Emissions by 50 percent.” Mitigation strategies include sustainable aviation fuel (SAF).

SFO and the SAF stakeholder working group (SWG) have been collaborating to create a SAF strategy; this feasibility study helps to accelerate the potential transition from conventional carbon-intense jet fuel to SAF and moves SFO’s vision forward to achieve a lower carbon future.

Currently, SAF is a relatively small market worldwide. Additional production processes and facilities are under development and advancing to commercialization. Limited SAF activity is also due to the price gap between fossil fuel and SAF. SFO lead a study to research the current SAF market, opportunities and timing to obtain SAF fuels, infrastructure and site needs, and financial mechanisms for the future SAF strategy. This report is the culmination of that research and analysis.

1Sustainable Aviation Fuel Feasibility Study Final Report

Executive Summary

The San Francisco International Airport (SFO) conducted a Sustainable Aviation Fuel (SAF) Feasibility Study, and would like to acknowledge the consultant study team (WSP, Sky NRG, Rocky Mountain Institute, Argus Consulting, and Terri Herson) for their research, analysis, and recommendation as well as the information and advice from the Stakeholder Working Group including multiple airlines, City agencies, SFO, aviation partners, and the oil industry. Pursuing the development of SAF is aligned with SFO’s pledge to sustainability, environmental, and economic resilience. This study is an extension of previous collaborative work by SFO, airlines, and aviation partners, and provides additional investigation of the commercial feasibility, viability of SAF, and infrastructure needs. The completeness of this study is based on available data, information, and existing market conditions; changes will occur and markets evolve after this report is released.

This report provides a site-specific evaluation of SAF as well as industry insights, and describes the following key findings:

Current SFO supply chain » The available volume of storage at SFO includes:

SFO Fuel Farm (285k bbls to be upgraded to 420k bbls), Shell Storage Facility (186k bbls), and the Kinder Morgan (KM) Brisbane Terminal (150k bbls). This study found that additional storage volume, such as expansion of the SFO Fuel Farm, is important for fuel supply reliability over the medium to long term.

» Multi Modal Transport

• Trucking – Offloading available, but is not ideal due to cost and emissions; the truck rack is open 24 hours per day (capacity of 300,000 gallons per day).

• Pipeline – The Kinder Morgan pipeline provides fuel to the SFO Fuel Farm. The federally regulated tariffs do not currently allow neat SAF in the pipeline; however, a blended and certified product would be allowed.

• Rail – Infrastructure for ethanol and biodiesel offloading is available at regional refineries for blending; however, there are no current direct connections to airport fuel storage facilities.

• Waterborne – Primarily available at refinery storage locations; however there are no current direct connections to airport fuel storage facilities.

SAF ProductionSAF is currently in short supply and available from one producer (World Energy) in California, although SAF production is in development (under construction) at four more locations in Nevada (Fulcrum BioEnergy), Oregon (Red Rock Biofuels), France (La Mede) and China (Sinopec Ningbo). There is significant growth of the SAF industry, although imported SAF would be more difficult to rely upon.


Potential Sites for Storing, Blending, and Supplying SAF to SFO To identify infrastructure and supply chain modifications necessary for SAF, a long list of 1000 sites were screened against criteria which led to refinement of the list down to 37 sites, and a short list of 9 sites. The study carefully considered those 9 sites for the short (3-5 yrs), mid (5-10 yrs), and long term (10yrs +), given the different future opportunities for production and demand. For the short term, the SFO Fuel Farm, Shell SFO Fuel Farm and the KM Brisbane facilities have an advantage of proximity, while KM Brisbane also has potential for expansion. For the mid and long term, existing refinery sites received the highest ranking based on criteria including site development, logistics, planning/permitting, environmental, community acceptance, and contingency/operational risk. For the long term, three Northern California refinery sites (Chevron in Richmond, Shell in Martinez, and Phillips in Rodeo) offered strong potential for both future storage and on-site production. Long term, a multisite solution for production, blending, storage and transport is the most likely outcome.

Funding Mechanisms and Support Roles » There are a range of airport roles and funding

mechanisms that SFO could adopt. The highest ranking alternatives for facilitating SAF include:

• Educate passengers – provide compelling and clear information about SAF and its benefits to increase public understanding of the SAF’s importance to aviation.

• Advance Resilient-SAF (RSAF) concept – promote the RSAF as a new virtual product serving as the aircraft fuel equivalent of the electricity sector’s renewable energy credits.

• Advocate for policy to address SAF price gap – SFO can raise awareness and propose a fix so that jet fuel receives equal funding to road fuel on a per gallon basis.

» The highest ranking funding mechanisms that rely on funding from external sources are:

• State grants – California has multiple potential options including the Low Carbon Transportation Investments and Air Quality Improvement Program, the Carl Moyer Program and the Alternative and Renewable Fuel and Vehicle Technology Program.

• Federal grants – If the FAA is looking to update the Voluntary Airport Low Emissions (VALE) program so that SAF infrastructure qualifies, SFO could pursue funding this way.

• Greenhouse Gas Reduction Fund – California airports have not yet received funding from this source to date. SFO could help to advocate for a dedicated airport tract within the fund.

» The study also identified SFO and SF government revenue such as operations savings (e.g., green revolving fund), aircraft fuel tax (eliminate SAF; direct existing funds to buy SAF), a new tax, and new fees for vendors/concessions.


Introduction of SAF

SAF is made from a diverse group of feedstocks. SAF is a “drop in” replacement for conventional jet fuels; it is blended with conventional jet fuel and handled with conventional jet fuel infrastructure. Before SAF can be introduced into the existing jet fuel supply chain, new fuels must meet ASTM international specifications and gain certification via ASTM process. The neat SAF (ASTM D7566) will be blended with petroleum-

based ASTM 1655 conventional jet fuel and tested to ensure compliance within ASTM D7566 and ASTM 1655 specifications. The SAF supply chain is illustrated in Figure 1 below. Within this supply chain, the stakeholders include the SAF industry (feedstock and refiners), fuel suppliers, Airport, airport fuel consortium, and airlines.

Figure 1: SAF Supply Chain

Feedstock Production/ SAF Refinery

Transport of Neat SAF

Airport Storage and Hydrant

System (comingled)

Pre-Airport Blending of Neat SAF & Jet Fuel to

meet ASTM D1655

Aviation Consumption

Transport of Blended Fuel


SFO Supply Chain

A schematic that describes the relationship of the refineries, terminals, pump stations, and storage facilities that feed SFO and provide fuel for the airlines serving the airport is provided (refer to Figure 2). This SAF study identifies potential facilities that could be upgraded to receive either neat or blended SAF and support the integration of SAF into the airport’s fuel supply chain.

Source: Draft SFO Infrastructure Study dated July 27, 2018, prepared by HNTB

Figure 2: Regional Oil Products Supply to SFO


SFO Fuel Farm and Shell Storage Facility Two facilities that directly store conventional jet fuel for SFO include: the SFO Fuel Farm (Figure 3) and the Shell Storage Facility (Figure 4). The two facilities are directly connected and provide immediate access to the SFO fuel system. All fuel that is sent to the SFO Fuel Farm is comingled in common tankage, regardless of who purchased the fuel, where it was sourced, how it was transported, or any other aspect of the fuel.

SFO’s Current Fuel Supply Chain, Network, and ConstraintsSFO’s current fuel supply chain begins with the procurement of fuel by the airline or air cargo company. Fuel is delivered to SFO by the Kinder Morgan Santa Fe Pacific Pipeline System (KM SFPP), which is owned and operated by Kinder Morgan (KM). The KM SFPP system can deliver fuel to KM’s Brisbane storage tanks, SFO Fuel Farm, or the Shell Storage Terminal. As described below, there is a list of five refineries, four upstream terminals/stations, and three near-airport storage facilities that could receive either neat SAF or blended SAF.

Key considerations include:

» The KM SFPP pipeline system allows blended SAF certified to ASTM 1655 into its system. It does not allow neat ASTM D7566 SAF. This is mandated by federally regulated tariffs that are unlikely to change in the near term. As such, any neat SAF received at any facility will need to be blended and certified to ASTM 1655 at that same facility before it can be shipped on the pipeline.

» None of the SFO facilities currently handle neat SAF. Neat SAF has its own requirements for handling that are separate from ASTM 1655 jet fuel, so any facility that blends SAF will require facility upgrades to accommodate this product. The duration, costs, and specifics of these facility upgrades will vary significantly by location.


Figure 3: SFO Fuel Farm


Figure 4: Shell Storage Facility


Kinder Morgan Fuel PipelineThe KM SFPP system is a network of pipelines that originate in the Bay Area and serve the central California region. Only a finite number of refineries and terminals can input jet fuel into the KM SFPP system. Furthermore, the KM SFPP system is a California Public Utility Commission regulated common carrier pipeline. This financial regulation removes the pipeline from the market-based system and has a stabilizing effect on fuel delivery costs, further fixing the options for fuel supply sources. Figure 5 is from KM’s Pacific Region Map.

As shown in the Bay Area Detail, the primary pump station that feeds SFO is the Richmond Pump Station. Any refinery or terminal (either KM or third party) that can feed Richmond is a potential fuel source.

Figure 6 provides an overview of the refineries, terminals, and pump stations that have existing links to SFO.

S.F.AIRPORT

SAN JOSE

OAKLAND AIRPORT

DOUGHERTY

OAK. JEFFERSONOAKLAND CONCORD

STOCKTON

STOCKTON JCT.

MATHER AIRPORT

BRADSHAW

ROCKLIN

BRENTWOOD

TRAVIS A.F.B.

SACRAMENTO

AMORCO

RICHMOND

RICHMOND(CHEMICAL)

BRISBANE

Rosevi l le

Suisun City

SanFrancisco

Benicia

10"

BAY AREADETAIL

8"

12"

12"10"

10"

8"

12"4"

4"

10"

8"10"12"

12"

12"

20"

20"

10"

Figure 5: Bay Area Conventional Fuel Supply Chain

Source: Kinder Morgan

Source: Esri, DigitalGlobe, GeoEye, Earthstar Geographics, CNES/Airbus DS, USDA, USGS, AEX, Getmapping, Aerogrid, IGN, IGP, swisstopo, and the GIS User Community

0 1 20.5Miles

Legend

ChevronRefinery

Richmond

KM Richmond Pump Station

Nustar Shelby TerminalPhillip 66 Rodeo Refinery

Valero Benicia Refinery

Shell MartinezRefinery

TransmontaigneMartinez Terminal

KMConcordStation

MarathonGoldenEagle

Refinery

KM Richmond Products TerminalKM Richmond Chemicals

Richmond

Pump StationTerminal

LEGENDRefinery

Figure 6: Geographic Constraints of North Bay Area Terminals and Refineries Supplying SFO

Source: WSP


Once jet fuel is pumped through the KM SFPP system and into the San Francisco area, it is stored at three locations for supply to SFO. The total storage of 621,300 bbls is the sum of the useable storage volumes at the SFO Fuel Farm (285,000 bbls), the Shell Storage Facility (186,300 bbls), and the KM Brisbane Terminal (150,000 bbls). A listing of the three storage locations (geographically from north to south) and their key attributes follows.

» Kinder Morgan Brisbane Terminal – Located at 950 Tunnel Avenue, Brisbane, CA, this facility has 20 tanks with a total capacity of 618,000 bbls, with individual tanks ranging from 10,000 bbls to 75,000 bbls. As described above, the airlines currently lease 150,000 bbls of storage at this facility, which receives fuel from the 12-inch dedicated jet fuel line and the 10-inch multiproduct line from Richmond, as well as ethanol from trucks. This facility issues to SFO via the 12-inch dedicated pipeline to either the Shell Storage Terminal or the SFO Fuel Farm. Further information is available at https://www.kindermorgan.com/pages/business/products_pipelines/brisbane.aspx.

» Shell Storage Terminal – Located at 135 N. Access Road, South San Francisco, CA, this facility has 9 tanks with a total capacity of 217,165 nominal bbls (186,300 useable). As described above, the airlines currently lease this facility to provide backup storage to the SFO Fuel Farm. This facility receives fuel from the 12-inch dedicated jet fuel line from the Brisbane Terminal. It previously had two truck offloading racks that have been removed. This facility issues to the SFO Fuel Farm via a 10-inch dedicated pipeline. Note that this facility cannot receive from Brisbane while the SFO Fuel farm is receiving, and vice versa. The flowrate out of this facility to SFO is 3,200 bbls/hr.

» SFO Fuel Farm – Located at 904 N. Access Road, South San Francisco, CA, this facility has 7 tanks with a total capacity of 315,000 nominal bbls (285,000 useable), with individual tanks ranging from 11,600 bbls to 89,611 bbls. Upgrades to this facility may increase storage to 420,000 bbls useable. SFO Fuel Farm receives fuel from the 12-inch (3,850 bbls/hr) dedicated jet fuel line from the Brisbane Terminal or the 10-inch (3,200 bbls/hr) dedicated jet fuel line from the Shell Storage Facility, but not both at the same time. It has a truck offloading position that can offload trucks at 300 gallons per minute. This facility then feeds the hydrant system that distributes fuel around the airport to refueling racks and hydrant pits. From that point, the into-plane operator uses refueling trucks and hydrant carts to fuel the aircraft.

https://www.kindermorgan.com/pages/business/products_pipelines/brisbane.aspx




Sustainable Aviation Fuel

1 For this report, commercial scale is defined as at least 5 million gallons of SAF.2 The ASTM International community, which consists of aircraft and airframe, engine, APU OEMs, FAA, fuel producers and user, approves alternative pathways.

Fuel Demand Forecast and Capacity AssessmentIf SAF can be introduced to existing jet fuel supply chains, it is important to assess SFO’s fuel demand and capacity. The previous 11 years indicate growth at a compound annual rate between 3 to 4%. The peak demand in 2017 was approximately 90,000 barrels during a summer month. As SFO fuel consumption forecasts indicate sustained growth throughout the entire period between 2018 and 2033; meeting targets of 1 percent neat and 30 percent blend of SAF in 2033 would require corresponding growth in SAF production and storage infrastructure. Assuming 1 percent SAF in 2033 would require SAF volumes of just over 500,000 barrels, and 30 percent SAF in 2033 would be over 15 million barrels.

Overall growth in demand at SFO will lead to both challenges and opportunities for potential SAF blending options, and pipeline and fuel storage infrastructure investments (see following section on Capacity).

Potential Sustainable Aviation Fuel ProducersThe current market for SAF is relatively small. There is only one commercial-scale1 SAF refinery, the World Energy (formerly AltAir Fuels) refinery in Paramount, CA. However, there are SAF facilities under development that could serve as future supply sources for SFO s airlines. Current production pathways and additional pathways under evaluation and ASTM certification are described below.

SAF Conversion Pathways Six different conversion pathways are currently qualified by ASTM2 to produce a SAF that can be used in commercial aviation. Each of these pathways produces a different fuel with specific characteristics and associated blend levels. More production pathways are in the evaluation and qualification process and may receive certification in the future.


Table 1: Overview of pathways currently qualified by ASTM or expected to soon receive qualification

Technology Code Description Feedstock Max Blend % ASTM

Fisher-Tropsch FT-SPK Converts any carbon-rich material into syngas which is then catalytically converted to jet

Biomass, MSW 50% ✓

Hydroprocessed Esters and Fatty Acids

HEFA Converts oils and fats to hydrocarbons via deoxygenation with hydrogen and cracking Oils and fats 50% ✓

Synthesized isoparaffins SIP Ferments plant sugars to hydrocarbons which

are thermochemically upgraded to jet Sugars incl 10% ✓Fisher Tropsch with Aromatics FT-SKA Converts any carbon-rich material into syngas

which is then catalytically converted to jetBiomass, MSW 50% ✓

Alcohol to Jet ATJ-SPK

Alcohols (ethanol or isobutanol) from any source converted to jet via dehydration, oligomerization, hydrogenation, and fractionation

Any feedstock (sugars, waste gases, etc.)

50% ✓

Co-processing vegetable oil n.a. Co-processing of fats and oils as feedstocks in

petroleum refinery processes Oils and fats 5% ✓Catalytic hydrothermolysis

ARA CHJ

Converts (waste) oils and fats via catalytic hydrothermolysis and hydrotreatment Oils and fats tbd

High Freeze Point HEFA (green diesel)

HFP-HEFA

Same technology as HEFA, but taking a different product cut Oils and fats tbd

Synthetic Aromatic kerosene

Virent SAK

Converts sugars to hydrocarbons by combining Aqueous phase reforming with (conventional) catalytic processing

Sugars, incl tbd


Current SAF Producers Only one commercial-scale facility produces structural volumes of SAF: World Energy in Paramount, CA. However, Amyris has a commercial-scale facility in Brotas, Brazil, that can produce SAF (and has done so in the past) but currently focuses on the production of high-value chemicals rather than SAF. These facilities are shown in Figure 7 and are compared in Table 2.

Major Airline Offtakes The SAF manufacturers and airlines have established partnerships including World Energy with United and KLM & SkyNRG, and Amyris with Cathay Pacific and Air France. United’s off-take covers up to 15 million gallons over a 3-year period, with an option to buy more. In 2016 a three-year biofuel program was enabled by KLM s Corporate BioFuel Programme.

Figure 7: Current SAF Producers

Source: SkyNRG

Table 2: Comparison of Current SAF Producers

Description World Energy Amyris

SAF production capacity 10 million gal SAF 10 million gal farnesene, currently going to other

markets

Other products HRD, naphtha Cosmetics, healthcare, food ingredients

Blending capacity Yes No

Loading modalities Truck (SAF, diesel)Rail (feedstock offloading)Pipe (diesel, gasoline)

Unknown

Location Los Angeles, U.S. Brotas, Brazil

Main feedstocks Used Cooking Oil (UCO) and tallow Sugar cane

Airline offtake United Airlines, KLM Cathay Pacific, Air France

Technology HEFA SIP


New Build SAF CapacityCurrently six plants are being built that will have a dedicated SAF capacity. This analysis only includes facilities that are currently under construction, as shown in Figure 8 and compared in Table 3.

Figure 8: New Build SAF Producers

Source: SkyNRG

10M gal/yr

10M gal/yr


Table 3: Comparison of New Build SAF Suppliers

Description Fulcrum Red Rock Total SinopecLanzaTech Freedom Pines

GEVO

Production capacity

10 million gallons total

6 million gallons SAF (15 million gallons total)



10 million gallons/year total

10 million gallons/year SAF and 5 million gallons/year renewable isooctane

Start production

Renewable diesel in 2020 SAF in 2023

2020

Renewable diesel in 2019 SAF in 2020

TBD 2021 2023

Other products

Renewable diesel, naphtha




Renewable diesel

Renewable isooctane, renewable diesel, isobutanol

Blending capacity

May blend on site or at nearby Spark Terminal

Unknown Yes YesMay blend onsite or offsite

We will not blend on site and then ship blended fuel. Doesn’t make economic sense to do this

Loading modalities

Truck and potentially rail

Truck Truck, rail, barge Unknown Truck and

possibly railTruck, rail, and isotainer

Location Reno, Nevada, U.S.

Lakeview, Oregon, U.S.

La Mède, France

Ningbo, China

Soperton, Georgia, USA

Luverne, Minnesota, USA

Main feedstocks

Municipal solid waste

Forestry residues

Mix of vegetable oils and animal fats

Mix of vegetable oils and animal fats

EthanolLow carbon industrial non-food grade corn

Airline offtake

United Airlines, Cathay Pacific

Southwest, FedEx Unknown Unknown TBD Air Total and

Avfuel

Technology Fischer-Tropsch

Fischer-Tropsch HEFA HEFA Alcohol

to jet ATJ-SPK


Fulcrum BioenergyIn Neveda, Fulcrum recently broke ground on its first Sierra Biofuels Plant in Reno, Nevada. The planned Fischer-Tropsch facility will convert 175,000 tons of municipal solid waste (MSW) into 10 million gallons synthetic crude oil (FT wax) per year. The syncrude will be co-processed in Endeavor’s Martinez refinery, with an initial focus on diesel. The portion of the 10 million gallons that will be converted to SAF will depend on market conditions (and policy incentives).

Fulcrum has received investments and signed off-take agreements with both United Airlines and Cathay Pacific. United has invested $30 million USD and signed a 10-year off-take for up to 90 million gallons per year. Cathay Pacific also made an equity investment and has an off-take for 375 million gallons over a 10-year period.

Red Rock BiofuelsRed Rock Biofuels had its groundbreaking event for the biorefinery in Lakeview, Oregon, in July 2019. The facility will convert approximately 136,000 dry tons of woody biomass into at least 15 million gallons of renewable fuels. Red Rock will take waste biomass from forests and sawmills that is gasified and converted to synthetic crude oil using Velocys Fisher Tropsch technology. Red Rock will build a hydrocracker on-site to covert the syncrude to produce diesel jet fuel and naphtha.

Red Rock has secured an off-take with Southwest Airlines, which has agreed to purchase approximately 3 million gallons per year of Red Rock’s SAF. In addition, FedEx committed to 3 million gallons of SAF per year. Thereby, the entire SAF proposed production levels have already been allocated.

LanzaTech LanzaTech is building a facility to produce 10 million gpy of jet- and diesel-range hydrocarbons using the alcohol to jet (ATJ) technology developed with Pacific Northwest National Labs. The facility will be located at LanzaTech’s Freedom Pines site in Soperton, Georgia and startup is planned by 2021. The process will utilize sustainable ethanol from a variety of sources, and roughly 90% of the total products will be SAF. The SAF is qualified under the ASTM ATJ-SPK pathway for direct blending at up to 50% with conventional jet. Three 30 million gpy commercial facilities are planned following the startup of this first plant.

LanzaTech has established partnerships with Virgin Atlantic Airways and All Nippon Airways and is in discussions with several other potential offtakers for the fuels from these facilities.


Existing Renewable Diesel FacilitiesAs described, when HFP-HEFA becomes ASTM approved, existing renewable diesel facilities will be able to tap into the jet fuel market. However, road transport will likely remain the main market for these producers.

Current renewable diesel facilities—which are shown in Figure 9 and compared in Table 4—are described below.

Figure 9: Current Renewable Diesel Facilities

Source: SkyNRG

Table 4: Comparison of Current Renewable Diesel Suppliers

Description REG DGD NESTE Singapore NESTE Porvoo NESTE

Rotterdam ENI

HRD production capacity per year

83 million gallons

54 million gallons

330 million gallons

85 million gallons

330 million gallons

191million gallons

Other products Diesel, naphtha

Diesel, naphtha

Diesel, naphtha

Diesel, naphtha

Diesel, naphtha

Diesel, naphtha

Blending capacity Unknown Unknown Unknown Unknown Unknown Yes

Loading modalities Truck, barge Truck, barge Vessels Truck, rail,

vesselsTruck, rail, vessels

Truck, rail, vessels

Location Louisiana, US Louisiana, US Singapore Porvoo, Finland

Rotterdam, The Netherlands

Venice, Italy


Site Evaluation for Supply of Sustainable Aviation Fuel for SFO

Site Selection ProcessAs previously mentioned, there are five refineries, four upstream terminals/stations, and three near-airport storage facilities in SFO’s supply chain that could receive either neat SAF or blended SAF with some level of facility improvements. This SAF study expanded the list for preliminary site evaluation; over 1,000 sites were reviewed. Both existing fuel supply sites (refineries, pump stations, and fuel terminals) and other sites zoned industrial and adjacent to existing pipeline supply to the airport were evaluated. Sites were identified using GIS mapping, property records, and through interviews with various stakeholders and fuel suppliers in the region. Based on the evaluation of the

long list of site options, a list of 37 sites were identified for further evaluation, followed by a short listing of 9 sites that were most promising.

Table 5 provides an outline of the process for refining the initial list of sites down to a short list of sites for detailed evaluation. At various points in the process, stakeholders were engaged for verification of the criteria and results, and for review of the identified sites. The following section describes the step process in deriving the short list of sites in greater detail, criteria, and results of the evaluation.

Table 5: Primary Evaluation Criteria and Information Sources by Site Evaluation Stage

Preliminary Site Evaluation

Long List of Site Options

Short List of Site Options Short List Evaluation

Number of Sites 1,000+ 37 9 9

Primary Criteria » Zoned industrial » SAF supply access » SFO jet fuel supply access

» Availability of existing fuel infrastructure

» Multimodal connections

» Available space/adjacent property

» Environmental restrictions

» Refined SAF and jet fuel supply analysis

» Quantitative analysis

» Site owner/operator acceptance

» Infrastructure costs » Supply costs » Environmental mitigation costs

Primary Information Source

Property records, GIS pipeline and rail

Publicly available site information

Interviews with site owners/operators

Follow-up interviews


Preliminary Site EvaluationAnalysis identified and reviewed over 1,000 sites that met primary criteria of neat SAF and conventional jet fuel supply and were located on industrial-zoned properties. Both existing fuel supply sites (refineries, pump stations, and fuel terminals) and other sites zoned industrial and adjacent to existing pipeline supply to the airport were evaluated. Sites were identified using GIS mapping, property records, and through interviews with various stakeholders and fuel suppliers in the region.

Long List of Site OptionsRefinement of the initial list was conducted to develop a shortened list of 37 sites based on availability of existing infrastructure and the ability to accommodate multi-modal connections. Publicly available property records were accessed to further verify site ownership and zoning. As a result of the screening for the long list of site options, the primary sites that were identified were already active fuels facilities with potential for multi-modal infrastructure to support the receipt of neat SAF. Three sites, two undefined refineries in Southern California and one in the Pacific Northwest, were also considered along with a Coast Guard facility adjacent to SFO.

Short List of Site OptionsThe 37 sites were further refined through interviews with the site owners and operators to confirm suitability. Based on a screening of conventional jet fuel and neat SAF supply, environmental restrictions, and available space and storage capacity, the list of 37 sites was further refined to a list of nine sites, which are described in greater detail in the sections below.

As the short list of options were further evaluated during discussions with stakeholders, additional sites were discussed, specifically the conventional jet fuel storage and fueling facility at United Airlines maintenance base adjacent to the North Access road on the northern side of SFO. The site was evaluated for consideration but did not meet key criteria, specifically there is limited opportunity for installation of neat SAF

storage and blending capacity due to availability of undeveloped land. The site is also currently located at a maintenance facility operated by United Airlines which may restrict direct access for other airlines and presents logistical constraints related to integration with the terminal hydrant system. However, the site does provide an opportunity for future integration with neat SAF sourced by United Airlines directly and should be considered within the overall regional supply dynamic, specifically in the short-term when neat SAF availability will be restricted by the number of suppliers.

In addition to SFO, other airlines and airports are also pursuing neat SAF integration. During the evaluation process of short-listed sites there was a media release regarding a supply deal between FedEx and Southwest Airlines to each source three million gallons per year from Red Rock refinery, in Lakeview Oregon. The six million gallons per year accounts for the full initial SAF production amount for the Red Rock refinery. In the case of the FedEx announcement, neat SAF supply would be focused on FedEx’s operations at Oakland International Airport. Initial indications are that neat SAF supply would go from the Red Rock refinery by truck (or potentially rail) to a blending location with access to conventional jet fuel, stored in a terminal in Sacramento, and trucked to the Oakland International Airport fuel farm. As the short list of sites for SFO neat SAF supply is further evaluated there will likely be opportunities to integrate supply chains, including blending and storage, with the supply to Oakland International Airport.

Additional other announcements have occurred on production volumes, including the Fulcrum plant near Reno, Nevada, but supply agreements were not available at the time this report was prepared.

The final short list of nine sites was further categorized into short-term, mid-term, and long-term options based on conventional fuel demand and corresponding neat SAF volume forecasts, as shown in Figure 10. Although the facilities identified are focused on supply to SAF there would not be any logistical restrictions for truck offloading to supply other regional airports.


When facility upgrades are developed for sites that are receiving, blending, storing and transporting SAF, consideration should be made for SAF truck loading racks to serve a wider target market including facilities without direct pipeline access.

Initial or short-term optionsIn the short-term, the objective was to provide the capacity to handle up to 30 million gallons of neat SAF per year with minimal cost and investment. The sites identified are focused on receipt of neat SAF by truck at an existing petroleum products facility on the San Francisco Peninsula, avoiding the pipeline capacity constraints on the existing KM SFPP. As production and demand justify a larger volume mid-term option, the short-term options are viewed as providing contingency for supply disruptions or the option to transition infrastructure improvements to conventional or SAF blended jet storage and distribution.

Mid-term optionsAs neat SAF volumes exceed 30 million gallons, truck congestion and offload constraints become a larger consideration and there will be a transition to options that allow for rail or vessel offload of neat SAF, direct pipeline access for conventional jet fuel, and direct access to SFO for supply. Constraints related to current KM SFPP capacity are assumed to have been addressed through a new cross-bay products pipeline, refurbishment of the decommissioned Shell cross-bay pipeline, or other methods.

Long-term options Eventually demand and use of neat SAF will justify large-scale storage and blending options. The long-term options are not seen necessarily as a replacement of mid-term options but rather as a supplement or additional supply option. The refineries identified as mid-term options are also the primary long-term options with the assumption that planned mid-term investments can be further expanded to accommodate larger volumes.

Conventional Jet Volumes Per Year

1.2—1.4 billion gallons

0—30 million gallons

Existing and Planned Facilities

(US, Global)

1.8+ billion gallons

300+ million gallons

Mainstream Production(California)

1.4—1.8 billion gallons

30—300 million gallons

Demand/Price Induced

(West Coast, Global)

Short Term3-5 Years

Mid Term5-10 Years

Long Term10+ Years

SAF Volumes Per Year

SAF Production Source

SAF Neat Delivery Modes to Blending

Pipeline Delivery to SFO Fuels

KM

New Cross Bay

Figure 10: Timing and Volume Range Targets (neat SAF volumes)


Sites identified for short or mid-term options can also be considered as backup or supplemental sites in certain cases where they may be well suited for a wider range of supply and blending options. The various option levels are not necessarily assumed to be substitutes but would rather likely be complementary supply sources with multiple private entities likely interested in supplying neat SAF to SFO, especially as volumes approach the mid and long-term ranges.

Table 6 lists the short-listed sites for short, medium and long term options and where they are envisioned as providing the best solution based on projected volumes and logistical access. Three dedicated short-term options were identified, seven mid-term options, and three long-term options.

Site EvaluationThrough further discussion with SFO, SFO Fuels, and various stakeholders including airlines, conventional jet fuel suppliers, and existing and future neat SAF suppliers during stakeholder working group meetings, the above options were further refined using a more detailed criteria scorecard. The results of the criteria scorecard and evaluation integrates findings from

the prior tasks as well as additional information from further research and interviews to assist in prioritizing the preferred option(s). Scores can be used as the basis for prioritizing sites for detailed site analysis to be conducted in future planning, design, and engineering studies.

The criteria scorecard draws upon information from the initial evaluations undertaken in the first phases of site-selection work and expands upon the information through interviews with site owners and operators. Revisions to the findings will be applied in instances where new information is provided during those discussions. Additional measures to the preliminary criteria used to evaluate the long list will be included to account for general financial risk contingency, existing relationships between SFO and site owners, and public and stakeholder acceptance.

Table 6: Short List of Identified Sites

Identified Site Short Term Mid Term Long Term

1. SFO Fuel Farm ✓ Backup Backup

2. Shell Storage SFO ✓ Backup Backup

3. Kinder Morgan-Brisbane ✓ ✓ Backup

4. Kinder Morgan-Richmond Limited ✓ Backup

5. Phillips-Richmond Limited ✓ Backup

6. International Matex-Richmond Limited ✓ Backup

7. Chevron Refinery-Richmond Limited ✓ ✓8. Shell Refinery-Martinez Limited ✓ ✓9. Phillips Refinery Rodeo Limited ✓ ✓


Criteria for the short list of options are based on a combination of experience on similar evaluation projects and feedback from the Stakeholder Working Group Advisory Committee during various meetings. The final list of criteria that were evaluated is provided in Figure 11, and sub-categories are weighted to derive the overall category scoring.

Scoring is based on a one to five scale. A low score of one indicates the site does not meet the minimum requirements for the scoring criteria, while a high score of five indicates the option fully meets the requirements. Calculated totals are based on weighted percentages.

Multimodal Delivery Point Access

a. Kinder Morgan SFPPb. Direct SFO linec. Barge/Vessel offload facilityd. Rail offload facilitye. Truck offloading/onboarding facility

Community Acceptance

a. Existing interaction with site ownerb. Potential for legal & regulatory challengesc. Stakeholder acceptanced. Public acceptance

Site Development and Costs

a. Short-term capacity optionsb. Long-term/buildouts capacity optionsc. Development timelined. Estimate of project costse. Financial risk

Permitting and Planning

a. Ownership right of wayb. Current zoning and handling of biofuelsc. Potential permitting issuesd. Long range site planning

Environmental Constraints

a. Wetlands mitigationb. Flooding riskc. Seismic riskd. Fire and safety

Contingency and Other

a. Operational costsb. SAF supply costsc. Supply riskd. Supply redundancye. Future operational flexibility

Figure 11: Primary Criteria Categories and Sub-Categories


Site Evaluation ResultsAs shown in Figure 12 the results of the short-term site criteria analysis favor the KM Brisbane site over the two airport locations. The primary benefit of the KM Brisbane site is existing access to conventional jet fuel, direct integration with SFO without risk of capacity constraints on the cross-bay pipeline, and future potential integration with rail supply through the sites location adjacent to primary regional freight lines. However, the site does have some increased liquefaction challenges increasing the cost of construction compared with the other two short-listed locations. The SFO Fuel Farm and Shell Storage Facility location at SFO should both still be considered viable alternatives due to the potential for not only short- term neat SAF supply but as long-term solutions for supply redundancy and mitigation in the event of a major supply disruption.

In the mid-term, as shown in Figure 13, the refinery sites score higher regarding site development, environmental factors and logistical access. The refineries tend to have most of the required vessel and rail infrastructure as well as the land availability for future expansion. The primary constraint at the terminal facilities was not necessarily access to multi-modes but constrained capacity to those modes and often no existing conventional jet fuel supply for blending with neat SAF. Of the terminals, KM Brisbane still scores well as the terminal already handles conventional jet fuel and provides additional contingency in the event of a supply disruption on the primary cross-bay pipeline to Oakland. The other short listed terminal facilities in the Richmond area could still be strong options as existing storage capacity on lease may be repurposed for neat SAF storage and blending, reducing costs, and increasing the overall financial competitiveness of the location.

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Value

1. SFO Fuel Farm2. Shell Storage SFO

3. Kinder Morgan - Brisbane

Figure 11. Short-term Site Criteria ComparisonCategory

Community AcceptanceCon�ngency and Opera�onal RiskEnvironmentalLogis�cal AccessPermi�ng and PlanningSite Development1. SFO Fuel Farm, 2. Shell Storage SFO and 3. Kinder Morgan - Brisbane. Color shows details about Category. Details

are shown for 1. SFO Fuel Farm, 2. Shell Storage SFO and 3. Kinder Morgan - Brisbane. The view is filtered onCategory, which has mul�ple members selected.

Figure 12: Short-term Site Criteria Comparison

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Value

3. Kinder Morgan - Brisbane4. Kinder Morgan - Richmond

5. Philllips - Richmond6. Interna�onal Matex - Richmond

7. Chevron Refinery - Richmond8. Shell Refinery - Mar�nez9. Phillips Refinery - Rodeo

Figure 12. Mid-term Site Criteria ComparisonCategory

Community AcceptanceCon�ngency and Opera�onal RiskEnvironmentalLogis�cal AccessPermi�ng and PlanningSite Development

3. Kinder Morgan - Brisbane, 4. Kinder Morgan - Richmond, 5. Philllips - Richmond, 6. Interna�onal Matex - Richmond, 7.Chevron Refinery - Richmond, 8. Shell Refinery - Mar�nez and 9. Phillips Refinery - Rodeo. Color shows details aboutCategory. The view is filtered on Category, which keeps 6 of 6 members.

Figure 13: Mid-term Site Criteria Comparison

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Value





are shown for 1. SFO Fuel Farm, 2. Shell Storage SFO and 3. Kinder Morgan - Brisbane. The view is filtered onCategory, which keeps 6 of 6 members.

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Value







The three refineries assessed as long-term options share many of the same attributes and achieved comparable scores as shown in Figure 14. The Chevron Richmond Refinery site scores slightly higher than the other two locations as a result of lower site development requirements, specifically in regard to accommodating larger international supply vessels, and slightly lower environmental concerns relating to flooding risk and wetlands mitigation. However, all three locations should be considered viable alternatives, and potentially considered as

supplemental alternatives in that each refiner may identify or source from different neat SAF suppliers through different logistical modes. Competition between the three primary suppliers to the market may also help to maintain lower blending costs and create additional regional supply options for other commercial airports as well as private and business aviation requirements, potentially further reducing costs through economies of scale.

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Value

7. Chevron Refinery - Richmond8. Shell Refinery - Mar�nez9. Phillips Refinery - Rodeo

Figure 13. Long-term Site Criteria ComparisonCategory

Community AcceptanceCon�ngency and Opera�onal RiskEnvironmentalLogis�cal AccessPermi�ng and PlanningSite Development7. Chevron Refinery - Richmond, 8. Shell Refinery - Mar�nez and 9. Phillips Refinery - Rodeo. Color shows details

about Category. The view is filtered on Category, which has mul�ple members selected.

Figure 14: Long-term Site Criteria Comparison

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Value






0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Value







Introduction to Potential Funding Mechanisms

SAF currently commands a price premium over fossil fuel-based jet fuel, even when taking existing Federal and State policy credits available in the California market (Renewable Fuel Standard and Low Carbon Fuel Standard) into account. The goal of this section is to provide options for new funding to be generated to bridge the price premium, accelerate investments in new SAF capacity and help pay for facility development. SFO and its stakeholders have the potential to help move the industry forward.

First, this memorandum identifies a range of funding mechanisms that could potentially be used to purchase the co-benefits of SAF, thereby closing the price premium. A co-benefit can be defined as a secondary value from a product purchase that is additional to the primary purpose of the good. In the case of SAF, a co-benefit is any non-monetized service beyond the energy associated with the liquid fuel. Second, there are a variety of roles SFO can play to support and/or incentivize the economically viable deployment of SAF in California that do not involve directly funding the co-benefits of SAF. Within these two pathways, there are 9 identified funding mechanisms using SFO revenue and 5 mechanisms from external sources; additionally there 6 potential SAF advocacy roles that are described.

Carbon reduction is the primary motivator to shift from fossil fuels. There is no global value for carbon reduction from jet fuel currently. When the Carbon Offset and Reduction Scheme for International Aviation (CORSIA) is implemented, there will be a market value for the carbon reduction. For actions before CORSIA goes in effect, any reduction in CO2, no matter where it occurs below the stratosphere, helps reduce the greenhouse gas effect. Besides carbon, SAF offers multiple advantages over conventional jet fuel above lifecycle carbon dioxide reduction. These advantages are often referred to or described as “co-benefits.” Co-benefits are the positive externalities that result from SAF purchase and usage but are not reflected in the pricing of the product. Most of the co-benefits accrue to parties other than the airline, which is why a third party may choose to purchase these “co-benefits” and then airlines can use this revenue source to reduce SAF cost premiums.


Long list of potential SAF price premium funding mechanismsThe long list of SAF price premium funding mechanisms below builds off the work of previous studies in the industry. Leveraging lessons from recent SAF work at other airports and observing how stakeholders responded to the various funding mechanisms proposed in other locations enabled the current options presented.

The funding mechanisms shown in Table 7 are organized into two groups: SFO / City & County of SF Revenue and Non-SFO / Non-City & County of SF Revenue. The reason for this categorization is that it allows for a clear separation of funding mechanisms that involve SFO or the City & County of SF (SFGOV) purchasing SAF co-benefits from those that involve voluntary or other third-party sources covering the cost premium for their own unique motivations. Table 7 summarizes the 9 mechanisms using SFGOV generated revenue and 5 mechanisms from external sources. A detailed discussion of these funding mechanisms follows.

Table 7: Potential Funding Mechanisms

SFO/SFGOV revenue based mechanisms Non-SFO/SFGOV revenue-based mechanisms

1. Retail vouchers 1. Federal grants

2. Landside operation fees 2. State grants

3. User surcharge and parking fee 3. Greenhouse gas reduction fund

4. Operational savings/GRF 4. Corporate support programs

5. Aircraft fuel tax payments 5. Traveler support programs

6. Toll road

7. Use of general non aeronautical revenue

8. New services for sustainable travelers

9. Taxing authority


Potential SFO/SFGOV Revenue Based Mechanisms1. Retail vouchers: Airport retail and food vendors

could sell coupons that cover mileage or pre-determined SAF volumes to passengers. Vouchers could function as a voluntary contribution that passengers can make similar to the donation options to hunger campaigns and other causes when they complete a transaction at the cash register. The coupons could be redeemed for preferential pricing at concessionaires. The revenue generated by the coupons would go towards SAF co-benefits, while concessionaires that accept the coupons for redemption would experience reduced margins on sales of discounted products and/or services. Reduction in concession revenue will result in an increase in airline expenses because SFO operates in a residiual lease with the carriers.

2. Landside operation fees: The airport could create a fee for contracted vehicles entering the airport (e.g., buses, taxis, limousines, transportation network companies, etc.). TNC and other operators might protest a fee that goes to aircraft operation.

3. User surcharge and parking fee: SFO could create an additional charge to various customer groups including passengers, concessions, and business aviation. An example of this could be an increase in parking fees. FAA regulations permit airports in funding programs to improve their relationship with surrounding communities.

4. Aircraft fuel tax payments: Existing aircraft fuel taxes could be redirected to either cover the cost of SAF co-benefits directly, or to make a capital investment that would generate operational savings that could then be leveraged. States have jurisdiction to decide how Federal aircraft fuel tax revenue, from fueling in that state, are distributed amongst airports3. For SAF itself, the tax on sustainable jet fuel could be waived to help reduce the fuel price premium further. Geneva Airport had established this approach as part of their SAF program implementation.

3 https://www.kaplankirsch.com/portalresource/Federal_Law_on_Use_of_Local_and_State_Taxes_on_Aviation_Fuel.pdf

5. Toll road: SFO could levy a toll on airport access roads.

6. Airline agreement: New requirements for SFO co-benefit fees or funds could be part of newly negotiate service contracts between the airport and its airlines. This mechanism contradicts insights gained from contract negotiations in Seattle between the Port of Seattle and airlines.

7. Use of general non-aeronautical revenue: SFO could allocate a fixed amount or percent of total non-aeronautical revenue above a certain threshold to pay for SAF co-benefits.

8. New services for sustainable travelers: The airport could consider developing new services that are specifically targeted at sustainable travelers. This can take many different shapes or forms including a fast track service, a green travelers lounge, etc. The underlying concept is that travelers join a program that offers them extras that increase their comfort and convenience. The proceeds (or part thereof) of this program are then used to increase the share of SAF at SFO. A third party could operate the service as a concession.

9. Taxing authority: SFGOV could create a new tax specifically dedicated to funding the co-benefits of SAF. If this mechanism was selected, city residents would need to learn how the tax generated value for them directly as well as the greater benefit to the climate.

Potential Non-SFO/SFGOV Revenue Based Mechanisms1. Federal grants: The FAA’s Voluntary Airport

Lower Emission (VALE) grant program offers airport funding to pursue projects that improve air quality. To date, the funds have covered equipment costs and have not been used to procure cleaner energy. The Swiss Aviation Authority (FOCA) has established industry precedent for covering SAF price premium when it approved a multi-year grant by Genève Aeroport. Given FAA’s bold goal to achieve 1 billion

https://www.kaplankirsch.com/portalresource/Federal_Law_on_Use_of_Local_and_State_Taxes_on_Aviation_Fuel.pdf


gallons of SAF usage by 2018 was not reached, the agency could take a more active investment role with a few pilot airport hubs to create regional demand centers and catalyze new production supply. SFO could work with the FAA to design a program to support the San Francisco Bay Area as a potential regional hub with a modified VALE grant program.

2. State grants: The State of California offers several grant funding programs intended to support projects that reduce GHG emissions and other air toxics and pollutants and/or support biofuels/alternative renewable fuels research and production. The exact eligibility of SFO or SFGOV as a recipient of these grants and whether the funds can be used to pay for the co-benefits of SAF should be determined. Some examples of promising grants are included below:

• Low Carbon Transportation Investments and Air Quality Improvement Program (AQIP)4 : A voluntary incentive program administered by the California Air Resources Board (CARB) that funds clean vehicle and equipment projects and research of biofuels production for mobile sources to reduce GHG emissions, criteria pollutants, and air toxics.

• Carl Moyer Memorial Air Quality Standards Attainment Program5: The Carl Moyer Program provides grant funding for engines and equipment that are cleaner than required to reduce air pollution. Eligible projects do not currently specify alternative fuels, however new funds are now available to reduce emissions in communities affected by air pollution.

• Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP)6, 7: ARFVTP has an annual budget of $100 million devoted to projects that promote the accelerated development and adoption of alternative fuel and advanced technology vehicles to help attain California’s climate change policies. Examples

4 https://www.arb.ca.gov/msprog/aqip/aqip.htm5 https://www.arb.ca.gov/msprog/moyer/moyer.htm6 https://www.energy.ca.gov/altfuels/index.html7 https://www.energy.ca.gov/transportation/arfvtp/

of eligible projects include those that develop and improve alternative renewable low-carbon fuels and those that produce alternative and renewable low-carbon fuels in California. The Energy Commission can use grants, loans, loan guarantees, revolving loans, and other appropriate measures. Public agencies such as SFO and SFGOV are eligible recipients under the statute.

3. Greenhouse Gas Reduction Fund: As part of the “Cap and Trade” Program originally created in 2006 (Global Warming Solutions Act, AB 32) to reduce greenhouse gas (GHG) emissions throughout the California economy, some sectors must purchase “allowances” if their emissions exceed specified thresholds. These allowances create revenue that ultimately can be placed in a Greenhouse Gas Reduction Fund (GGRF). The GGRF is ultimately allocated funding generated by AB32 . The funding available for GGRF was $2.6B in 2018. If only a small fraction of the total was dedicated to airports and SAF purchases, it could secure new supply equal to or greater than the total volume SAF production globally. Corporate support programs: There are several models whereby corporations can contribute to the introduction of SAF, but they are all based on the same idea: giving corporations the opportunity to make their business travel truly sustainable by flying on SAF. Examples: • KLM Corporate Biofuel Program. Allows

corporations/individuals to reduce the carbon footprint of their travel through biofuel. The program was launched in 2012 as a partnership between KLM and SkyNRG and has been instrumental for the biofuel developments at KLM. At this stage there are 11 partners, including corporations such as Schiphol and Accenture as well as Government Ministries. This program also enables the daily SAF flight between LAX and AMS.

https://www.arb.ca.gov/msprog/aqip/aqip.htm

https://www.arb.ca.gov/msprog/moyer/moyer.htm

https://www.energy.ca.gov/altfuels/index.html

https://www.energy.ca.gov/transportation/arfvtp/


• The Fly Green Fund. The Fly Green Fund (FGF) is similar to the KLM’s corporate program as it offers corporations a way to travel in a truly sustainably way; however, there are a few key differences. The FGF is not tied to one airline but has multiple airline and airport partners. Also, the revenues are used differently, 75% is used for SAF purchase and 25% goes to regional supply chain development efforts. Finally, the FGF also offers individual travelers the opportunity to fly on SAF.

• Board Now. SkyNRG is working towards the launch of a new customer program that enables organizations around the world to fly on sustainable aviation fuels, lower their carbon footprint and play a key role in the development of new production capacity. The expected launch is in Q2 2019.

4. Traveler support programs: This is a variation on the corporate support programs, which focusses on (individual) travelers. Again, these travelers have the option to make their trip sustainable by purchasing an equivalent volume of SAF. At this stage there are three programs that target individual passengers. In addition to the programs described below, the Fly Green Fund also has an individual passenger proposition, although the largest share of the revenues at this stage comes from corporations.

• San Diego Airport created The Good Traveler brand to provide passengers a universal voluntary carbon offset brand across airports. SFO is already currently a member of the program along with 10 other US airports. The long-term goal for The Good Traveler is to directly support greenhouse gas reduction within the aviation sector. SFO can work with The Good Traveler team to design an approach for travelers to purchase SAF cost effectively.

• Finnair’s Push for Change program. In early 2019 Finnair introduced a service whereby its customers can mitigate the CO2 emissions of their flights by supporting a CO2 emission reduction projects or reduce emissions by buying biofuel. Passengers can choose to buy biofuel for €10 for a domestic flight, €20 for an intra EU flight or €65 for an international flight.

• Swedish regional airline BRA introduced SAF service on their new route Lyon – Gothenburg. BRA customers can offset the CO2 emissions of their flights by purchasing SAF on a new route between Lyon and Gothenburg. Customers can pay €30 extra, which allows BRA to buy roughly 4 gallons of SAF, corresponding to 40-50% of the fuel used per passenger on that flight.

Assessment of SAF price premium funding mechanismsThe Long List above represents a group of mechanisms that warrant additional analysis. SFO is not endorsing any specific option as they currently appear in this document. Additional analysis by SFO and its stakholders, not limited to the criteria that were employed in this study (SAF volume, implementability, stakeholder impacts and considerations, and operational ease), will inform future decisions.

Based on a preliminary analysis by the study team, the results indicate the strongest mechanisms rely on funding from external sources:

» State grants – California has multiple potential options including the Low Carbon Transportation Investments and Air Quality Improvement Program, the Carl Moyer Program and the Alternative and Renewable Fuel and Vehicle Technology Program.

» Federal grants – If the FAA is looking to update the Voluntary Airport Low Emissions (VALE) program so that SAF infrastructure qualifies, SFO could pursue funding this way.

» Greenhouse Gas Reduction Fund – California airports have not yet received funding from this source to date. SFO could help to advocate for a dedicated airport tract within the fund.


SAF support roles for SFOIn addition to the potential financing mechanisms outlined above, SFO could consider other ways to incentivize SAF usage at the airport and in California. This implies a less direct involvement whereby SFO would leverage its position at the intersection of all airport stakeholders to work towards increased adoption of SAF. Table 8 lists out potential support roles and a summary of airport roles are included in the following paragraphs.

1. Champion the RSAF concept The RSAF Concept requires at least one airport champion. California has a track record developing alternative goods such as RECs and has demonstrated a commitment to climate action. SFO could help to drive the formation of a working group to further develop this idea at the state level. It could work with a coalition of the Air Resources Board, non-profits, fuel producers and aviation stakeholders to generate a plan on how to move forward with RSAF.

2. Policy advocacy to address LCFS discrepancies

SFO could work together with its stakeholders to ensure that aviation is correctly incentivized by the relevant policy schemes. The SAF pricing analysis showed that California’s current policy environment favors the production of renewable diesel over SAF.

The stakeholder group that has worked towards the incorporation of aviation under the LCFS could undertake a similar initiative to account for this discrepancy.

In this context it is useful to consider what has happened in Europe with the revised Renewable Energy Directive that will come into force from 2021 onwards. The revised directive will include preferential treatment for biofuels used in aviation compared to biofuels used in road transport. As a result, SAF is counted for 1.2x its energy content. When considering some sort of double counting for biofuels used in aviation it is important to ensure that this does not erode the overall target. Such a mechanism should ensure that the additional cost associated with SAF production are accounted for and if this happens by means of double counting, the overall reduction target should be adjusted accordingly.

Table 8: SFO Potential Support Roles

SFO/SFGOV Support Roles

1. Champion the Resilient Sustainable Aviation Fuel (RSAF) concept

2. Policy advocacy to address LCFS discrepancies

3. Carbon pricing

4. Education of passengers

5. Statewide contracted airfare with airlines

6. Business Aviation mandate


3. Carbon pricing Placeholder for section on potential carbon pricing/tax at US national level. We don’t know how this will stack with LCFS/RFS, but it could potentially further reduce the price premium and SFO should be aware of it. Look at Baker-Schultz tax proposal in House to see how it might affect value of SAF. (Aviation credit effective Jan. 1, 2019)

4. Education of passengers At this stage, passengers are unlikely to take sustainability into account when choosing between flights. One of the reasons may be that it is not clear what the difference is between flights/carriers. As the use of SAF is set to increase over time, there may be a role for SFO to enable passengers to make a sustainable choice. As travelers are increasingly aware of air travel emissions and the benefits of SAF, they will more likely be motivated to act upon this. This include both efficient aircraft as well as biofuels.

5. Statewide contracted airfare with airlinesThe California State Department of General Services (DGS) maintains negotiated contracted fares with airlines for specific city-pair combinations (e.g., San Francisco to Los Angeles). As part of future agreements DGS could include provisions in the Request for Proposals that either require a minimum percentage of SAF as part of every state employee ticket, or it could be part of the ranking criteria established with the acquisition process. Here is how it could work for each of the two options:

Minimum requirement – California could require that 100% of the fuel for every state employee ticket is SAF. In the case of SFO to LAX, that would equate with 32 gallons for a round trip, or $16.96 + a logistical cost using January 2019 cost premium pricing information. Technically, aircraft can only fuel with a maximum of 50% SAF blended with conventional jet fuel. The remaining 50% would have to go to support other flights that have hiver energy demand. The airline that wins the contract for a City-Pair would be obligated to add this amount of SAF to their fuel purchase somewhere in the United States and maintain accounting documentation that can be shared with the State of California on an annual basis.

8 https://www.faa.gov/regulations_policies/policy_guidance/benefit_cost/media/econ-value-section-4-op-costs.pdf

There are over 200,000 full-time employees in the state of California and if only 10% purchased a ticket that equated with 32 gallons of SAF, that would generate approximate $340,000 in SAF funding.

A parallel can be drawn with Swedavia, the state owned owner and operator of all Swedish Airports. For the past years Swedavia has covered the price premium for an amount of SAF equivalent to the fuel burn resulting from staff travel. Last year Swedavia issued a public tender for the delivery of SAF in 2019. The SAF is delivered to the tank farm, and the fuel supplier delivers it as conventional jet fuel under existing contracts.

Ranking criteria – California could require all airlines bidding on the state employee travel contract announce a minimum blend level for their entire company. The airlines would be committed to this level of SAF usage across their airports or limited to flights originating in California. Carriers could pass on the cost of increased SAF volume to state employees with higher ticket fees that include the price premium. The disadvantage to this approach is it would requirement enforcement and monitoring of employee flight booking to limit the number of individuals who might seek lower fares from a non-contracted airline. Additionally, it would be difficult to assess the positive impact of this program and confidently link SAF volume to the state contract.

6. Business Aviation mandate General Aviation has a more favorable cost structure than commercial airlines for SAF. Fuel represents a far lower percentage of costs for corporate jets than other expenses such as pilots and maintenance. In addition, general aviation operators are accustomed to paying much higher prices for conventional fuel at smaller airports with costs that exceed $7/gallon8. Business aviation is also not subject to the same razor-thin margin dynamics that commercial airlines have to navigate. Based on these factors, SFO might consider implementing a requirement for business aviation jets to use some percentage of SAF for their fuel. Presumably, a tracking mechanism would need to be established to account for SAF fuel volume purchased.

https://www.faa.gov/regulations_policies/policy_guidance/benefit_cost/media/econ-value-section-4-op-costs.pdf


The cost premium could be collected along with the landing fee payments. SFO could phase the implementation in order to provide adequate advance notice of the program and explain the rationale behind the mandate. It is recommended to be aware of the total costs of alternative General Aviation airport options in the region so that SAF costs do not rise to the level that business aviation pilots decide to land at other locations. In general, corporations prefer to keep their business aviation activity discreet due to potential negative public perception regarding private jets. Any action with business should address this concern. Airline stakeholders have stated concerns that this would set a negative precendent and that incentive programs are the preferred approach. Assessment of SAF support roles for SFO

Similar to the assessment SAF price premium funding mechanisms, it is noted that SFO is not endorsing any specific option as they currently appear in this document, nor has it conducted legal or operational analysis of implementation of any option. Stakeholders will provide additional feedback that will shape SFO’s analysis and future decision making.

Based on a preliminary evaluation by the study team, the potentially highest ranking support roles for SFO include the following:

» Educate passengers – provide compelling and clear information about SAF and its benefits to increase public understanding of the SAF’s importance to aviation.

» Advance Resilient-SAF (RSAF) concept – promote the RSAF as a new virtual product serving as the aircraft fuel equivalent of the electricity sector’s renewable energy credits.

» Advocate for policy to address SAF price gap – SFO can raise awareness and propose a fix so that jet fuel receives equal funding to road fuel on a per gallon basis.

Resilient Sustainable Aviation Fuel CreditA new credit could be offered as a new product to overcome the price premium barrier to the adoption of SAF for the purpose of this study. This credit has been termed Resilient and Sustainable Aviation Fuel (RSAF) credit. RSAF credits represent a certified claim to the aggregated co-benefits created by the purchase and delivery of one metric ton (1224 liters) of SAF, establishing for the buyer full provenance of ownership of the right to the intangible services and the associated “Claim” to any additional benefits from the delivery of SAF beyond the energy value of the fuel. Resilient credits could consist of all the non-carbon benefits referenced in this chapter including: serving as a proof of purchase and physical delivery of SAF, catalyzing the broader SAF industry, Improving Air Quality, spurring regional economic development and advancing bio resilience.

Co-benefits will vary between SAF products depending on their air quality attributes, job creation and other qualities. For this reason, it is recommended that an RSAF represent a unit of sustainable aviation fuel being purchased that contains a number of unmonetized co-benefits. That allows for universal recognition of the role the RSAF plays to secure volume without the burden, and potential confusion introduced, by detailed accounting for each benefit. The over-arching benefit is improved resilience and climate solution for the industry that have access to additional capital from the RSAF. On a loose framework, associated air quality benefits accrue to employees that work on the airfield and in adjacent neighborhoods to the airport. The region benefits from new jobs, either from the distribution of SAF or from new production. And, the greater planet benefits from supporting a durable “in-sector” carbon solution for aviation that might otherwise require more time to develop due to cost barriers.


How would it work?A market could function as follows. SAF producers could sell the newly created RSAF credits, ahead of new production, as an independent revenue stream. By securing the price premium amount before production, SAF producers would also require assurance that the remaining value of the energy content value of the fuel would be purchased by aircraft fuel suppliers. To address the price premium value, and any differential necessary to cover the gap between the price of conventional Jet-A and delivery of SAF volume to an airport, an accepted market price index system would need to be established. Currently, there is no official published commodity pricing for fossil-based jet fuel which poses a transparency barrier.

There might have to be pre-existing contracts with SAF producers in advance of selling RSAF credits so that buyers will have a transparent price and confidence in their transaction. It is recommended to offer a pilot of the RSAF model to gain public acceptable.

Once the mechanism(s) are in place to cover the price premium producers could work directly with brokers to secure advance sales for RSAFs. Third party sellers could then generate sales with large volume commercial clients (e.g., professional service firms at the headquarters level) and once aggregate RSAF purchases meet some pre-determined threshold they could contact all the potential certified sustainable producers to bid on a SAF volume. This would help to minimize market distortions with a buyer paying inflated prices for SAF.

RSAF does not include the carbon value of the fuel. In order to provide a method to fund sustainable fuel and avoid double counting with government support programs the RSAF co-benefits exclude carbon dioxide. The intended purpose of the RSAF is to establish the longer term climate solution for aviation which is a scaled SAF production solution. Without carbon credits RSAF is compatible with CORSIA and regions like California that operate a low carbon fuel standard.

9 https://www.epa.gov/greenpower/history-voluntary-markets

What would it take to launch RSAFs?RSAFs would require a number of actions before the concept could be available on the market. Requirements include:

Market: A marketplace for consumers to purchase RSAFs needs to be established similar to the one that exists for green power. The market would stipulate the standards for RSAF credits, and the attributes associated with the product. Established markets promote trust among potential buyers. California pioneered the green power certificate concept in 1995, and it took a number of years for the concept to be accepted in other states as part of compliance with the Renewable Portfolio Standard9.

New Production: The primary function of the RSAF is to accelerate the production of sustainable aviation fuel. Generating additional revenue for fuel that is already being produced (e.g., World Energy volume) or already under offtake contracts for future production (e.g., Fulcrum or Red Rocks) would not necessarily produce the intended impact. Measures need to be adopted that would incentive new volume that would not otherwise be produced and an implementation team needs to determine how this could be accomplished. Tracking: To ensure that credits are counted once and then retired there has to be a system that provides documentation and accountability. A service provider, independent from RSAF producers/developers, needs to operate to provide a system to track credits and document their retirement once they have been purchased. This system will add cost to individual RSAF unit costs; however, it is essential for buyers to have trust that purchases result in actual co-benefits. Third party RSAF verifiers can provide the data for this to work, or a system with virtual “book and claim” tracking can be established to minimize costs over time.

Funding: some organization, firm or coalition needs to invest resources to establish a product standard and establish a market. Minimum funding requirements could easily exceed $500,000 to implement the items listed above.

https://www.epa.gov/greenpower/history-voluntary-markets

SFO Sustainable Aviation Fuel Feasibility Study Final Report

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Transcript of SFO Sustainable Aviation Fuel Feasibility Study Final Report