FedEx is set to fly its jets on fuel made by Fort Collins-based Red Rock Biofuels LLC from tree branches and pine needles.
Red Rock announced Tuesday that FedEx has contracted to buy 3 million gallons of jet biofuel a year from a $200 million refinery it is set to build in Lakeview, Ore.
Southwest Airlines also will purchase 3 million gallons a year of jet biofuel under a September 2014 contract.
“We’ve sold out all the jet fuel from the refinery, and now we are working on the diesel fuel,” said Terry Kulesa, Red Rock co-founder and president.
The Lakeview refinery is designed to turn about 140,000 dry tons of woody biomass into 15 million gallons a year of renewable jet, diesel and naphtha fuels.
“We are using the waste wood from a saw mill — branches, bark, pine needles,” Kulesa said. “It is a really cheap feedstock.”
Kulesa said his company is completing the debt and equity financing for the refinery. “We’re very close,” he said.
The U.S. Department of Energy is contributing $70 million to the project, and in March, Flagship Ventures, a Boston venture capital firm, made an undisclosed investment in the plant.
The agreement with FedEx runs through 2024, with first delivery expected after the refinery is completed in 2017.
FedEx, the international freight and package delivery service, used more than 1 billion gallons of jet fuel in fiscal 2015 at a cost of $2.8 billion, according to company reports.
“We set a strong goal to obtain 30 percent of our jet fuel from alternative sources by 2030,” Joel Murdock, a Fed Ex managing director of strategic projects, said in an e-mail.
“Developing a sustainable jet fuel product that can be produced at scale and transported to where it’s needed at a competitive price is a challenge that can only be solved by working together,” Murdock said.
Kulesa said that starting with a cheap feedstock like forest wastes is key for Red Rock.
“We have to be able to compete with oil and $50 a barrel. That’s a challenge,” he said.
Mark Jaffe: 303-954-1912, mjaffe@denverpost.com or twitter.com/bymarkjaffe
