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Originally published December 15, 2009 at 5:16 PM | Page modified December 17, 2009 at 7:36 AM

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Seattle startup gets 14 airlines to sign on to biofuel agreement

Moving to cut dependence on petroleum for jet fuel, 14 airlines, including Alaska, have signed an agreement for the potential purchase of...

Seattle Times business reporter

Moving to cut dependence on petroleum for jet fuel, 14 airlines, including Alaska, have signed an agreement for the potential purchase of plant-based fuel from a Seattle company that plans to build a production facility in Anacortes.

AltAir Fuels, a Seattle startup, said Tuesday it has entered into agreements with the airlines to negotiate the purchase of jet fuel and diesel derived from the camelina plant, a weed related to mustard that produces seeds with a high oil content.

Led by the Air Transport Association (ATA), an industry trade group, the airlines participating in the deal are American Airlines, Air Canada, Alaska Airlines, Atlas Air, Delta Air Lines, FedEx Express, Hawaiian Airlines, Jet Blue Airways, Lufthansa German Airlines, Mexicana Airlines, Polar Air Cargo, United Airlines, UPS Airlines, and US Airways.

Duncan Mitchell, AltAir Fuels chief operating officer, said the company aims to build a new facility within the Tesoro refinery in Anacortes and begin operating in 2012. He said the company expects Tesoro to become an investor in AltAir.

Mitchell said getting commitments from the airlines was key to soliciting financing. The company is raising $175 million — about $100 million from banks and the rest from private equity.

"It's a jigsaw puzzle," he said. "It has to be put together carefully. If you go too fast with one part, it becomes too expensive."

The memorandum of understanding with airlines sets the basis for further negotiation over price and terms, Mitchell said.

"We need to be inking these contracts by the time we've put major construction in the ground," he said, adding that AltAir hopes to break ground sometime next year. "There's nothing like public expectation to get people to sit down and talk."

So far AltAir has been financed by Chief Executive Tom Todaro, who also leads Targeted Growth, a Seattle crop-biotechnology company.

The plant-based fuel will be blended with petroleum jet fuel and piped to Seattle-Tacoma International Airport for use in aircraft and heavy machinery. AltAir said it expects the initial production capacity of the facility to be 75 million gallons per year, which could replace 10 percent of the petroleum-based fuel consumed annually at Sea-Tac. Mitchell said AltAir is targeting a price to airlines of about $2.50 a gallon.

The camelina oil will be sourced from Montana-based Sustainable Oils, which has camelina-research expertise and production contracts with farmers. Camelina, which requires little water or fertilizer, is rotated into wheat fields, Mitchell said.

Converting camelina oil into jet fuel requires processing similar to standard crude-oil refining techniques. That technology comes from UOP, a Honeywell subsidiary. UOP produced renewable jet fuel for KLM Royal Dutch Airlines' first test flight carrying passengers last month, propelled by 50 percent biofuel derived from camelina.

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Twelve of the airlines negotiating with AltAir, plus AirTran Airways, also signed a deal to negotiate with Rentech, a Los Angeles company that plans to produce jet fuel from coal or petroleum coke.

Bill Ayer, chief executive of Alaska Air Group, called the agreement "an important step on the path to reducing emissions through an affordable and sustainable alternative aviation fuel," and "a promising regional project, which could bring significant environmental benefits and economic opportunities."

United Airlines Chief Executive Glenn Tilton, said the news "reinforces the proactive steps that airlines are taking to stimulate competition in the aviation fuel supply chain, contribute to the creation of green jobs, and promote energy security through economically viable alternatives that also demonstrate environmental benefits."

Tilton urged the U.S. government and investors to support the opportunity to create and use alternative fuels for air transport.

Kristi Heim: 206-464-2718 or kheim@seattletimes.com

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