Syntroleum: Fat is good

Syntroleum, a company perhaps best known for their coal-to-liquids conversion technologies (as bizarre an alternative fuel as there possibly is, but that's another story), recently announced it's getting into the fat-to-fuel business with leading meat processor Tyson Foods.

The stated objective for the partnership is to produce 75 million gallons of diesel and jet fuel (!) from cow, pig and chicken waste fat. The plant is to come online in 2010.

For Tyson, this is big step number two in their attempt to enter the alternative fuels market. Tyson, you might remember, recently launched a similar partnership with petroleum giant CononoPhillips (which I blogged on here.) It's an intriguing tactic in that it is taking a byproduct that is quite literally waste and transforming it into a commodity (versus re-tasking a food stock grain such as corn into ethanol, which, incidentally, just gets less appealing by the day... see this BBC article.)

For Syntroleum, the early returns say it all: stock value increased 12% in the day following the announcement. Things have cooled off a bit since, but Syntroleum isn't going away anytime soon. In addition to its new Tyson deal, the company has some proprietary technology in converting natural gas into diesel that has attracted the attention of the Department of Energy and Marathon Oil. I figure this quote from Hillary Kramer at Seeking Alpha says it all:

Syntroleum’s gas-to-liquid technology is patented, it is developing coal-to-liquids, and if it can get plants off the ground smoothly, it should fly high. Further, this an acquisition target: a great option for a larger energy company looking to acquire this cutting edge technology, and if acquired, imagine the upside to the stock under those circumstances.

Certainly Syntroleum is no sure thing, but if you're looking for early stage alt fuel investment opportunities, its certainly worthy of consideration.