Okay, I'd like to introduce Rob Olander. Welcome.
Thank you, I appreciate that. I'd like to thank the sponsors of the LD Micro event and the opportunity to present here today, and also all of you for joining us. Before we get started, you might hear my voice is a little strained. I'm not sick, I assure you. It's not even the one-on-one meetings, it's much worse, weekend youth sports. I think you guys know what I'm talking about, right? The parent that yells a little too loud, a little too long. That's me. I'll try not to let that interfere. I'm Rob Olander, the Chief Financial Officer of Alto Ingredients. I've been with the company for about 18 years, in this role for about two years.
I'm joined this week by my colleague Mike Kramer, Vice President and Treasurer, and we're excited to share a little bit about our story, our strategic diversification, and some of the market opportunities out there. First, I want to share a little personal information. In full disclosure, last week I looked up what are the top 10 phobias out there, and first of all, that's a mistake, do not look that up on the internet. There were three that I noticed, and there are some weird ones, believe me. There are three that I noted. One, fear of heights. Two, fear of flying. Yeah, you guessed it. Three, fear of public speaking. I share an affliction with all three of those.
Some of my friends and family who know that about me asked, "Hey, how are you going to get through this?" I thought about it and I said, "You know what? I got it. I got a game plan. I'm going to share that with you." When things get a little dicey, I'm just going to imagine the alternative of being on a plane, way up high, and being forced to give a presentation to all the passengers. Compared to that, this really should be a walk in the park. Just full disclosure, if you see me looking out my imaginary airplane window from time to time, that's why. All right, let's get this flight started. I'd like to share a little bit of our story because it really helps people to understand the evolution of our company over time and the need to continue to diversify.
We started about 25 years ago as a small ethanol brokering firm. It was essentially a guy operating out of his garage initially. In 2004, Pacific Ethanol Incorporated was formed. The mission of the company was to build plants on the West Coast, renewable fuel ethanol plants, and then to increase trading activities around those assets. We built two plants in California, one in Oregon, and one in Idaho. We kind of pioneered the destination model. What that means is, we built our plants in the destination markets where we would ship our finished goods locally for the most part, but we would source our feedstock, or in this case, corn from the Midwest. It just made sense, right? Cheaper, safer to ship trains of corn out to the West Coast versus trains of renewable fuel across the U.S.
Initially, that really gave us a margin advantage, but unfortunately, markets do what markets do, and that eroded over time, largely due to the increased cost of corn. Not the board price of corn, but the regional corn basis. That component is really what it takes to get the corn out of the farmer's hands and the railroads to ship that corn to the West Coast. We were paying anywhere from $1.50- $2.50 a bushel more than our competition. That really became an inhibitor to being competitive with the destination model. What did we do? We had to adjust and react, and what we did in response was we actually sold the two California facilities. Last year, we idled our Burley, Idaho plant. That was particularly painful since, understanding that they had the high regional corn basis challenge, we knew we had to do something to be more competitive.
We invested in a high protein and, I guess, corn oil expansion technology project a couple of years ago. That took a little bit longer to get dialed in, dealing with water balances and meeting the objectives of the project that we had intended. Last year, about the second half of the year, we actually started with some additional equipment and adjusting the dials. We were starting to get some of the project benefits that we intended with respect to project yields and production volumes with that new technology. Unfortunately, markets do what markets do. The premium prices for protein out there in corn oil had really come off of their highs. This was largely due to the increase in soy crush that came online to meet renewable diesel production.
With that additional competition with our projects, it just was not enough to overcome the challenges with this facility being on the West Coast. We did make the difficult decision to idle that plant. We're currently assessing if it makes sense to divest that asset, or more recently, due to some regulatory changes that are beneficial, we're assessing, you know, maybe the highest and best use is to turn that plant back on. I'll talk about some of those regulatory changes shortly. During this time, I should say, the current state of operations is we are still running our Oregon facility. It's a 40 million gallon plant. They also were not immune to the regional high corn basis, so we need to do something, right? The high protein play didn't pan out.
We put our heads together, and what we did is we leveraged a long-term relationship to acquire a liquid CO2 processing facility that is actually located on the site. We acquired them January 1st of this year. At the same time, we renegotiated a long-term offtake agreement with a large industrial gas supplier at more accretive current market prices for CO2. That has really made a difference in stabilizing the earnings at this facility. It's actually made it quite a good contributor of our portfolio. I think we mentioned in Q2 that site was profitable the first time in like six quarters. Q2 isn't historically a strong quarter for us. We really are excited to see what we can do with that plant moving forward. Along the way, we had a high concentration of destination plants, and again, that's too much exposure to some of the risks there.
We picked up Alto Pekin in 2015 and Alto ICP in 2017. These are assets that were located just outside of Peoria, Illinois. Midwest plants, and they now comprise what we refer to as our Pekin Campus assets. What's great about this is it wasn't just diversifying away from the destination model, but more so diversifying into other market segments that we serve. For example, now we sell into the industrial markets, pharmaceutical, beverage, agricultural, and several others because these facilities have the capability of producing more products than just renewable fuel. Just a quick rundown, it consists of a 60 million gallon highly efficient dry mill that does produce renewable fuels. It has a 100 million gallon mature wet mill that produces renewable fuels, ethanol, and an array of protein products. They get more from the corn kernel.
Some examples are dried distillers grain, corn protein, corn meal, corn germ, and a high-value yeast product. Then we've got ICP, which is a 90 million gallon, operates more as a 65 million gallon distillery, and they produce high-quality alcohols. That really comprises our Pekin Campus . You're thinking, okay, you went from one commodity market to others. That's smart. It actually was because it gave us a portfolio of products and industries that we could operate in. More importantly, it gave us the optionality to shift our production mix into the markets that will give us the highest value for our products at the time. That's really gone a long way into stabilizing our company's profitability and taking out a lot of the volatility of any one single commodity we'll do.
Also as part of this effort, it didn't really make much sense to call a specific ethanol since the concentration of our assets were no longer on the West Coast, and we were no longer just a one-trick pony with ethanol. We rebranded as Alto Ingredients in 2021, I believe, which really makes a lot of sense because all of the products that we are producing are going into different end-consumer products that you guys are all more familiar with. I'll cover some of those here in a little bit. What's our current focus? Our current focus today is really trying to improve our profitability and continue to stabilize our earnings and to reduce costs, as well as focusing on projects that have shorter paybacks and a greater ROI. At the same time, assessing some of the market opportunities that are now available, I'll talk about those in a minute.
Just a couple of examples are in Q1 of this year, we adjusted our staffing to more properly align with our current company footprint, but that reduced our expenses by about $8 million on an annual run rate basis. We did start to recognize those savings this past Q2. We've also cut a lot of other discretionary spend across the board that in its entirety is having an impact to the bottom line. Another example, we picked up a distribution center, Eagle Alcohol, a few years ago, and they have bulk alcohol capacity. They had that segment of their business. What we did is we took that business and integrated it with our Kennergy marketing segment that also handles bulk alcohol, really allowing us the opportunity to eliminate some unnecessary redundancies.
It also had the added benefit of letting Eagle Alcohol focus on what they do best, and that's customer services that are a little closer to their markets, such as break bulk packaging, storage, warehousing, and logistical services. They have a fleet of trucks that some of our customers find a lot of value in maintaining the chain of custody from beginning to end. Another thing I want to talk about is, we also have taken a hard look at our customer base and are trying to focus on the relationships that kind of meet our profitability requirements and shifting away from the relationships that have more limited returns. With that, what are our growth opportunities? One of them is CO2 utilization.
I talked a minute ago about our Columbia, Oregon facility acquiring that CO2 processing plant that's made a big difference, and a lot of that product goes into beverage carbonation, dry ice, and other industrial applications. What I didn't say is, we're selling about 150,000 tons at that site every year, but the processing facility has the capacity to do 170,000 tons of CO2. We think there's a lot of opportunity to capture that additional volume with just a minimal amount of CapEx and maybe get some more storage capacity and maybe shift our operating hours, and we can capture that opportunity. Furthermore, the plant itself can produce up to 135,000 tons of CO2 a year. If we want to invest more heavily into CapEx, we could put in some more capture and compression equipment there and expand the market.
Right now, CO2 is pretty hot on the West Coast, with plants starting to sequester CO2 and with some refineries having operational issues and starting to come offline. It is a good time to take advantage of these opportunities. I should say there's additional incentive with putting or bringing on and investing in new equipment because then you start to get 45Z or 45Q utilization credits. We are taking a hard look at that right now and seeing how we can bring some of those benefits to bear. When you talk about large-scale CO2 opportunity, it's our Pekin Campus . They have the production capability to produce 600,000 metric tons of CO2 a year. That just used to be a waste product, but now it's a product that there's a lot of interest in the marketplace.
We're currently capturing about 100,000- 130,000 tons a year with other industrial gas suppliers for the same industrial purposes as what we are at our Columbia facility. We're in discussions with some of these same parties to come in and put equipment to capture a lot more as the market for the CO2 is continuing to expand. You're not seeing the same prices as you are on the West Coast, but you make up a lot of that in volume. For us, it's all incremental. I'll also say we've talked about our carbon capture sequestration project, which is another good opportunity with that much CO2. We did recently have a setback where the state of Illinois put a ban on direct injection through the Mohammed Aquifer and adjacent recharge areas.
We view that as a, it was largely an unnecessary step considering Illinois already had a moratorium on direct injection through reservoirs until the EPA came out with increased safety and compliance standards, all of which is part of the Class VI well permit application. It wasn't unnecessary, but they went through with it anyway, and unfortunately, that specifically impacted our target project. At a minimum, the options are assessing other well locations potentially further away, might cost more, but at a minimum, we'll probably add the time that we can go out and capture these benefits. Right now, we're keeping our options open on where's the best path forward and how we can capture those opportunities sooner. Again, what's within our control, where's the least amount of risk, and how quickly can we capture the CO2 market? More to come on that in a few quarters.
I want to talk about some, I guess, positive regulatory headwinds. Sorry, not headwinds. Been in the industry for a couple of decades, faced a lot of headwinds. It's a breath of fresh air to now talk about some regulatory tailwinds. The first one being 45Z credits. The OBBA, or we all know is the one big beautiful bill act, but nobody says it out loud because it's kind of exhausting. Try to say that 3x real fast. What the OBBA, be honest, how many of you are doing it right now? I've tried it. It's tricky. The OBBA extended the 45Z transferable tax credits starting 2025 through 2029.
What that is for the transportation industry, particularly Alto and the ethanol industry, is if you have a baseline, if you have a CI score, carbon intensity score below a baseline of 50, you get $0.02 of transferable tax credits for every point below 50. We feel that we're confident that our Columbia facility will qualify starting 2025 with a 45 CI or 5 CI points times $0.02 per gallon. Using easy math, 40 million gallon plant, that'd be $4 million of gross 45Z value. We think in 2026, when they remove the ILUC or the indirect land use change from the emissions calculation, that's going to double to $0.20. For 40 million gallons, $4 million, that'll go to $8 million of gross 45Z tax credits.
Initially in the first year or two, we anticipate a haircut of anywhere from 15%- 17% to monetize those credits, but it's really a really nice addition to the EBITDA stack at our Columbia facility when you're talking about the changes we've made in monetizing the CO2. We also believe that our dry mill at the Pekin Campus , it's a 60 million gallon facility, will qualify for $0.10 per gallon starting in 2026 after the ILUC, and so that'll be $6 million of additional value. This will go a long way to stabilizing our earnings and addressing the consistency of our profitability and kind of start building our balance sheet back up to take advantage of a lot of the opportunities that are out there in the market, particularly around investing more to maximize the 45Z credits.
You can imagine CapEx projects that reduce our energy consumption or even the nature of the energy that we consume, pursuing low carbon corn sourcing or even utilizing energy reduction credits or EACs will go a long way in maximizing the value under the 45Z programs. Another regulatory change that the industry is really excited about is there is growing support for E15 on the national and state level. A lot of what's driving this is obviously increasing our energy independence. It's important, right? Also, lowering the cost of gas at the pump for consumers. Being in California, for those of you that are from here or visit often, you know that that's a pretty important thing in the state. It has the added benefit to the ag sector clearly as well.
What that can do is if we shift to E15 on a national level, we're currently at about a 10% blend. That's going to increase demand by about 50% or 5 billion- 7 billion gallons. Now you're talking about a real boon for the industry. I mean, that's more of a production demand than what the industry can bear right now. That really will stabilize, you know, crush margins and the volatility of earnings moving forward. Another thing that we're pleased to see is earlier this month, California did in fact approve E15 blends year-round, and that has the potential to add over 600 million gallons a year. You heard me mention earlier, we have a presence on the West Coast. We feel Alto Ingredients is well positioned to serve that demand with low carbon renewable fuels. How are we doing on time? Okay.
Real quick, I just want to go over a slide, my favorite slide here. What this demonstrates is, you know, through the diversification over time, the very top row are some of the different industries that we now serve, including where we started at the very end, renewable fuels. Now these are the other segments. In the middle, what you're seeing is the broader portfolio of products that we produce that then go into what you see on the bottom, which is the end-use consumer products that you guys are all more familiar with. Everything is an ingredient into something else that then is utilized later. I just want to go over a couple of these real quick. The health, home, and beauty segment. These are some of our higher alcohol grades.
They go into laundry detergents, mouthwashes, and sanitizers, which a lot of you are probably familiar with after COVID. The other one is food and beverage. Some of our other high-quality alcohols go into things like RTDs or ready-to-drink seltzers or gray neutral spirits such as gins, vodkas, and whiskeys. I mentioned earlier also the dry ice and the carbonization of the CO2. When it comes to industry and agriculture, a lot of our ethanol, industrial ethanol, goes into fertilizers. In the essential ingredients column, this is really the category of proteins that I talked about earlier. Those predominantly serve the pet food and dairy and feedlot markets. Last, where we all started, which was renewable fuels. Obviously, it's a blend into the fuel and the transportation industry. We also sell some of our corn oil. It can be a poultry feed, but also as the feedstock for renewable diesel.
As we approach our final descent, I'd just like to state that Alto Ingredients is dedicated to operational excellence and strategic diversification and capturing some of these market opportunities that I talked to you about today. With three minutes left, I will open it up for any questions. Yes?
What's your most profitable product? What product do you earn the highest percentage margins on?
That goes to my point about today or in general because it shifts. These commodity industries value the products differently based on supply and demand and other factors. Right now, you know, we've had the benefit, you know, we shifted, we've talked about in the past, we shifted, you know, more of our production from renewable fuels, ethanol, into high-quality alcohols. We enjoyed a nice premium, you know, over ethanol. Some of that's come down a little bit this year, but we have offset that and then some with actually exporting our ethanol into the European market or the ISCC market. I would say right now, that's the market that, you know, we're excited to serve the most. Yes?
On the emissions side, I was just wondering what's the cost kind of associated with shifting some of those other plants to the emission level to get those tax credits?
Our Columbia plant already qualifies. I mentioned that in our dry mill at our Pekin Campus . Our Burley, Idaho facility that's currently idled would also qualify. Starting 2025 at $0.10 per gallon, but it's a 60 million gallon plant, so a lot more value there. There is one tricky catch in the regulations, though, which is that you actually have to be producing alcohol to qualify for the tax credits. It really has called into question being a larger plant, having a low carbon score. Is there an opportunity? Does it make sense to bring that plant online? We're not going to do it just for a government incentive. There have to be other mechanics that ensure the long-term viability of this facility. We're currently looking into those avenues. I think we'll have more to talk about in the upcoming quarters. Good question. Anybody else? Yes?
With those five markets that I know you're talking about, there's quite a few tailwinds going for you. Which of those five really excites you the most?
Excites me the most right now? The food and beverage. Just because the demand for the CO2 is really climbing. For example, on the West Coast, one plant idled, one plant operating. There's not a lot of big CO2 producers out there. The ones that are the refineries, and they're starting to come offline. There's not large production to replace that. I think that is a really big opportunity for us. Also, when you talk about the volume at our Pekin Campus , that CO2, there really is a lot of opportunity, particularly when you factor in 45Z or the 45Q tax credits. 25 seconds. We got time for one more. All right. Thank you very much.