It’s just, Del City is where much of this is going to be located, intertwined at the refinery. So, it will further diversify PBF’s energy platform and sort of further extend us into renewable fuels, even if we’re just hosting it. But it also highlights the importance of having refining capacity in Delaware, because if that were not there, the competitiveness of this hydrogen hub would decline precipitously. And also the last piece is, we’re in the early days of developing what we believe is a meaningful real estate portfolio around Delaware City. We own 5,000 acres around it. And if we’re able to construct a hydrogen hub that’s based there, we think the value of that real estate, which is ideally situated for warehouse and distribution and refrigerated storage and data processing, to the extent you can have a green hydrogen project that’s there and situated, the value of all those projects go up.
So we think it’s profoundly interesting, but it is a long slog, and we are in the very early days.
Matthew Blair: Thanks for the details. I wanted to turn to the RD side of things and congrats on the strong initial operations at SBR. Could you share anything on what you’re seeing in various RD end markets? For example, we’ve heard that areas like British Columbia and Oregon have become more appealing than the California market. And then also, if you could share anything on the feedstock side of things, I think the DOE showed a big increase in tallow consumption in August, and we were thinking that might be due to your PTU startup? Thanks.
Matthew Lucey: Yes, in regards to – look, I think there’s going to be competitive markets and all the markets are dynamic. I think there’s going to be the ability to export into Europe. And so, as regulatory credits move around and natural gas prices move around, feedstock prices move around, we are beholden to nobody. We do have logistical advantages to the degree we import into California and that’s where we’ve been sending our product up until this point. But the moment that we’re able to economically improve our position by delivering other places, we will. In regards to specific grades of feedstocks, I think you’re going to see lots of gyrations because these markets are relatively small. But again, having the pretreatment capability is incredibly important.
It’s like having a complex refinery. If you’re a heavy sour coking refinery, you can run any crude, whereas if you’re a sweet refiner, you can’t run heavy grades. Well having the pretreatment unit, we’re able to buy the most economic feeds we can, and we’re focused on buying them every single day.
Matthew Blair: Great. Thank you.
Operator: Thank you. Our next question comes from the line of Paul Cheng with Scotiabank. Please proceed with your question.
Paul Cheng: Thank you. Good morning, guys. Matt, maybe that – I would ask – want to ask about Toledo refinery. It seems like the utilization rate for that facility over the past several years has been lower than, say, earlier in last decade. Is that – the facility has changed the way how you run, and as a result that runway has been lower or this has some structural issue there?
Matthew Lucey: No, nothing’s changed at Toledo. The facility optimizes itself on a daily basis. It’s, obviously, a pipeline fed refinery, and so you have to operate within the confines of that refinery if the pipelines are treated, but no major step change.
Paul Cheng: And that look like you’ve been running at somewhere between the high 80% to maybe 90%, 91%. Is that the kind of utilization rate we could expect from this facility on a going forward basis?
Matthew Lucey: No. No, I mean they have not operated as well as they could, and therefore, we’ve had some impacts to throughput. I appreciate you calling them out because they should be called out and we expect it to improve.
Paul Cheng: Okay. And when I’m looking at your fourth quarter throughput guidance, it seems to be a tad low given that you really don’t have much of a turnaround other than in the West Coast. Is that reflecting some economic-run slowdown due to the current margin environment or that – why that run will not be a bit higher?
Matthew Lucey: No, I think it’s based on a whole host of factors. And obviously, the current market should impact it, but there is no other limitations that we need to worry about.
Paul Cheng: Okay. Just final one if I – more of a request, if we would be able to see some additional OD, joint venture operating data, if that’s possible, in the press release going forward. Thank you.
Matthew Lucey: Thanks Paul.
Operator: Thank you. Our next question comes from the line of Joe Laetsch with Morgan Stanley. Please proceed with your question.
Joe Laetsch: Hi, good morning to you. Congrats on a good quarter. And thanks for taking my questions. So I’ve just got two kind of related questions, so I’ll just ask them up front if that’s all right. So first, just on WCS, there we saw spreads widen out in the past couple of months. I was hoping you could just talk to the impact that had in the quarter. Is that for a fourth quarter going ahead and then next year with TMX coming online? And then relate to that, it looked like to us at least, East Coast and West Coast capture came in particularly strong. So I was just hoping you could talk to any drivers there. Thank you.
Matthew Lucey: Look, I think widening crude diffs are a tailwind. Tom, you want to just comment further?
Thomas Nimbley: Yes. I mean, Joe, I think as you mentioned in terms of widening WCS differentials, I mean it’s a – kind of a combination of a lot of fits and starts as to when TMX was going to be starting. So, obviously, we got more clarity in terms of that being delayed. We had a combination also with a fairly robust turnaround activity with several refineries that consume a fair bit of WCS, which ultimately impacted really the value of where WCS was landing in the Gulf Coast, and then, sort of several knock-on effects in that point, right, that coming out of the third quarter, where we had very strong differentials and particularly very strong fuel oil values. The fuel oil market basically responded to the WCS values and came off.
And there’s also just sort of – while not specifically in the market or any precipitous change at this point, but is also any potential relaxations on Venezuela sort of opening up a more competitive environment for barrels being available in the Gulf Coast. So I think that those are what we’ve seen and I think that, certainly our expectations would be is that the crude differentials would continue to fall around the seasonals at this point, right. Differentials is a bit wider in 4Q and 1Q. And then, as we get into the second quarter and third quarter of next year, particularly if TMX meets its targets to coming online, probably could expect differentials to be a little bit tighter in there. But there’s also some impacts in terms of what the freight market has done, which has ultimately sort of capped the move on U.S. domestics, which were quite strong sort of in that late part of the third quarter and then have sort of declined in value since then.
Joe Laetsch: Thank you. Appreciate it.
Operator: Thank you. Our final question comes from the line of Jason Gabelman with Cowen. Please proceed with your question.
Jason Gabelman: Hi. Good morning. Thanks for taking my questions. Strong margin performance has already called out a couple of times and part of that you alluded to, was driven by the RIN mark-to-market, I just wanted to give you an opportunity, if there was anything else unique that drove the strong margins in the quarter that maybe won’t repeat in 4Q. And then, somewhat tied to that, we’ve seen a lot of peers have pressure in their margins, driven by weaker secondary product realizations. And I’m wondering if your secondary product yields are perhaps a bit unique in the market or relative to your peers and perhaps that supported 3Q margins and that will continue into 4Q? Thanks.
