Hamilton, Ontario-based biodiesel producer Biox Corp. announced it has acquired a 50 million liter (13.2 million gallon) nameplate capacity biodiesel facility in Sombra, Ontario, from Methes Energies Canada Inc. for USD$4.5 million.

The Sombra facility is located on a 21-acre facility near Sarnia, Ontario, with excellent logistics, including on-site rail. Originally constructed in 2009, the facility has not achieved nameplate capacity due to working capital and market challenges, and is currently not in production. The company will expend an additional CAN$5 million over the next 12 months on upgrades to the facility that will improve the facility’s efficiency and enable the use of a broader range of feedstock, specifically lower carbon intensity feedstocks, such as animal fats and recycled cooking oils. The purchase price and capital upgrades will be funded through a combination of cash on hand and are in discussions for a CAN$1.8 million mortgage on the facility.

“The Sombra acquisition represents a 75 percent increase in our production capacity and fits our strategy to control and distribute more gallons, leveraging our existing sales and marketing capabilities,” said Biox CEO Alan Rickard. “We believe the Ontario market will play an increasingly important role in our distribution network. The implementation of the Greener Diesel program in Ontario, with its increasing blend rates and move toward lower carbon intensity fuels in 2017, made Sombra an attractive asset.”

The province of Ontario implemented the Greener Diesel program in April 2014 based on biofuel percentage and carbon intensity. The program escalates the biofuel percentage for all diesel sold in the province from 3 percent in calendar 2016 to 4 percent in calendar 2017 onward. The regulation requires the use of an estimated 240 million liters of biobased diesel on an average greenhouse gas adjusted volume basis in 2017.

“We are already seeing with the increase in the Ontario mandate for 2016 that distribution of biodiesel from our Hamilton facility is shifting quickly from dependence on the U.S. market to fulfilling the demand in Ontario,” Rickard said. “We expect this shift in distribution away from the U.S. market to continue as the Ontario Greener Diesel mandate increases for 2017.”

Biox currently supplies biodiesel fuel to Shell Canada Ltd. through an interterminal pipeline that feeds directly to the Shell distribution terminal in Hamilton located adjacent to Biox’s Hamilton facility.

The GHG reduction aspects of the Ontario Greener Diesel mandate are an important differentiator for Biox. Biobased diesel produced by Biox has the lowest carbon intensity in the province, reducing GHG emissions by more than 100 percent when compared to petroleum diesel. The Sombra facility, once upgraded to handle lower carbon intensity feedstocks, will produce at a comparable GHG emission efficiency to the biodiesel produced by Biox at its Hamilton facility.

“With these low carbon intensity products, Biox expects to be the best performing source of biodiesel available to obligated parties in Ontario to meet the requirements under the Greener Diesel program,” Rickard said.