THE SITUATION:
Consumers are increasingly seeking more sustainable products, making a company’s environmental, social and governance (ESG) practices part of their purchasing decisions. In the alcohol space, breweries, wineries and distilleries have been answering the call for improved sustainability with a variety of small-scale innovations.
Beam Suntory—the producer of Jim Beam bourbon—decided it was time to take the company’s efforts to the next level, aiming to meet its ambitious sustainability goals of cutting company-wide greenhouse gas emissions and water usage in half by 2030.
THE CHALLENGE:
With those goals in mind, Beam Suntory mapped out a $400 million renewable energy expansion of the Booker Noe distillery, Jim Beam’s largest distillery in Kentucky. The planned expansion would not only increase Booker Noe’s size and output and allow the company to employ more people locally: It would also use stillage from the whiskey distillery process as feedstock to produce renewable natural gas (RNG), which could then be used to power the expanded distillery.
OUR OBJECTIVE:
Beam approached its longtime alcohol, regulatory and distribution legal team at McDermott for guidance in bringing its sustainability vision to life.
The McDermott team brought in experienced colleagues in the energy and project finance space, helping Beam negotiate a Renewable Energy Services Agreement with 3Rivers Energy Partners to develop and run the Booker Noe distillery’s renewable energy expansion. Nichole Shustack and Parker Lee led the cross-practice effort.
THE OUTCOME:
Following successful contract negotiations, Beam will invest in a facility to convert spent stillage from the Booker Noe distillery into RNG. Along with using that RNG to power its own operations and cut greenhouse gas emissions and water usage, Beam’s expansion will create 51 new local jobs, provide fertilizer byproducts from the RNG facility to local corn and wheat growers, and give Beam and 3Rivers Energy Partners an opportunity to supply additional RNG to the consumer market, among other benefits.
To facilitate the deal, the McDermott team collaborated with Beam—along with 3Rivers Energy Partners and its counsel—to create a unique contract structure that protects both parties’ interests if project development does not meet expectations within the first several years. Using plain language to ensure clarity, the contract pulls together complex scientific concepts and legal considerations to address Beam’s business needs and concerns.
Throughout the negotiation process, the McDermott team was careful to consider how each decision could affect Beam’s business interests and recommend pragmatic solutions.
GO FURTHER:
The alcohol team’s trusted relationship with Beam and strong reputation within the industry gave Beam a high level of belief in its cross-practice McDermott team at the outset of the project, allowing the energy group to operate effectively.
In addition to achieving overall sustainability goals and enhancing its brand reputation, Beam’s renewable energy expansion at the Booker Noe distillery is a profitable allocation of resources. The company will use stillage—a waste product it would otherwise have to pay to dispose of—as feedstock for RNG, which will then fuel operations at the expanded Booker Noe distillery.
Biofuels like RNG ultimately play a critical role in the world’s ongoing transition from fossil-based fuels to renewable forms of energy. Deals like this one help commercialize RNG on a larger scale, providing tangible evidence of the benefits of biofuels and powering the movement toward fuels like hydrogen and methanol, which require more technological advancement before they can be widely adopted.
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