Great Plains Synfuels Plant's ability to shift production has meant millions for Dakota Gas this summer

This summer, Dakota Gasification Company’s Great Plains Synfuels Plant broke all-time production and sales records for diesel exhaust fluid (DEF). A record was set in July, then was shattered in August when the plant produced nearly three times as much DEF as a normal month.

The increased production came at a time when DEF prices soared, a result of five major production facilities conducting planned and unplanned maintenance outages. As the market for DEF increased, the Synfuels Plant shifted its normal production to making less granular urea so additional DEF could be produced.

“This is a clear advantage the Synfuels Plant has – as commodity prices change, so can its product slate,” says Daniel Schaaf Gallagher, Basin Electric manager of commodity sales and trading. “We’ve shifted production a day or two here and there since the urea plant was built, but this is by far the most dramatic shift – it’s the most significant amount of product for the longest period of time.”

rail car
A diesel exhaust fluid (DEF) railcar is loaded at the Great Plains Synfuels Plant. Records were set for DEF production and sales in July and August.

According to Schaaf Gallagher, there are a lot of moving parts that need to go smoothly for a transition like this to be successful. “Normally, we have orders come in, we prepare them, fill the rail cars that are on site, and fill trucks when they come in. These last few months, we’ve been managing about 150 extra rail cars, increased truck traffic, working to maintain storage levels, and ensuring all orders are filled and shipped on time. We also need to make sure we are still producing enough urea to fill the orders we’ve committed to. There is constant and significant coordination between marketing, production, and logistics,” he says.

“When we first built the urea plant, I would have said there was no way we could have produced and shipped as much DEF as we have the last few months,” says Trinity Turnbow, Synfuels Plant assistant plant manager and process operations manager. “The job process operations field technicians have done loading and moving product without any big hiccups has been outstanding, and the collaboration between all the groups that are involved has been really good. This has gone better than I ever could have imagined. It’s helping our customers get the products they need and it’s helping Dakota Gas’ bottom line.”

The shift to producing an increased amount of DEF has had a significant financial impact for Dakota Gas with the plant seeing revenue millions of dollars over budget.

Knowing when to shift production takes many different factors into consideration, and having Basin Electric’s marketing department is a definite advantage. Marketing helps ensure the plant is aware of market conditions including product prices, domestic and global supply, local and regional logistics, and input considerations. In addition, marketing helps communicate plant issues in detail to N-7, LLC (the joint marketing partnership between Dakota Gas and OCI N.V.) so N-7 can make the best decisions on Dakota Gas’ behalf. Ultimately, this allows the plant to focus more closely on maximizing production and increasing efficiencies as well as help N-7 focus on customer relationships and competitive awareness.

Another advantage of the N-7 partnership is that it is able to give Dakota Gas an expanded market view because it sells products across the country. N-7 is actively participating in the import market as well, so it has increased insight on the international markets. “This wider viewpoint allows Dakota Gas to pivot production based on the anticipation of customer needs, which is a huge advantage,” says Zach Jacobson, Dakota Gas’ marketing account manager.

In addition to increased demand and high prices on DEF, urea and natural gas prices have been higher than normal as well.

Urea saw steady price increases in the Northern Plains region this summer as a result of limited supply due to the maintenance outages as well as Hurricane Ida impacting imports. While supply was down and prices were up, DEF margins were still higher than those of urea, which is why the Synfuels Plant focused on DEF production.

Natural gas prices have changed dramatically over the last several of months, increasing from $3.15 in June to about $5.45 in late September. Increased prices are the result of several factors including strong U.S liquid natural gas exports, lower than anticipated storage injections, decreased production due to Hurricane Ida, and a very warm summer across the country. Schaaf Gallagher says increased natural gas prices could lead to another production shift. Just as the plant can modify production with products such as DEF and urea, it also has the ability to lower the production of certain fuels and chemicals, such as tar oil and naphtha, to produce more natural gas, if the price is right.

All the reasons Dakota Gas has committed to doing whatever it takes to successfully shift production whenever it makes sense to do so boils down to one “why” – Basin Electric’s membership. “The ability to make these modifications benefits our members because it allows us to make strategic decisions about where to sell, what to sell, and how to sell it in order to bring the most profit back to Dakota Gas,” Jacobson says. “And, the fact that Basin Electric is a rural cooperative and many of Dakota Gas’ fertilizer products end up in the hands of farmers and retailers in our members’ communities is a great benefit to our members, too.”

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