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INSIDE: PYROLYSIS OIL CHALLENGES, SOLUTIONS DECEMBER 2010

Plus Accelerating

Industrial Biotechnology Page 20

The Broken Loan Guarantee Program

AND A Regional, Maybe Controversial Feedstock Blend

Why biorefinery developers say the DOE loan guarantee programs need major retooling

Page 30

Page 26

www.biorefiningmagazine.com


September 14-16, 2011 Hilton Americas - Houston Houston, Texas

For more information: 701-746-8385 service@bbiinternational.com www.biorefiningconference.com

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CONTENTS |

DECEMBER ISSUE 2010 VOL. 01 ISSUE 04

20

FINANCE

RESEARCH

Regional Work for Global Change How regional approaches work in biorefining BY LUKE GEIVER

26

30

PROCESS

A Broken Guarantee

Accelerating Industrial Why many biorefinery projects may not get Biotechnology what they’ve been promised BY ERIN VOEGELE

How biotech companies are adopting chemocatalytic processes BY BRYAN SIMS

CONTENTS DEPARTMENTS 4 Editor’s Note

Hybrid Fuels BY RON KOTRBA

6 Advanced Advocacy

Where Do We Go from Here? BY MICHAEL McADAMS

7 Industry Events

Upcoming Conferences & Trade Shows

9 Legal Perspectives

Green Means Go for Patents BY TODD TAYLOR AND ADONIS NEBLETT

10 Business Briefs

People, Partnerships & Deals

12 Startup

Biorefining News & Trends

8 Talking Point

Pyrolysis Oil Challenges and Solutions BY ROMAN WOLFF

DECEMBER 2010 | Biorefining | 3


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EDITOR’S NOTE

Does a coal-based fuel have any place in biorefining? This was the topic of a recent blog entry of mine on The Biorefining Blog, which

HYBRID FUELS RON KOTRBA, EDITOR RKOTRBA@BBIINTERNATIONAL.COM

is distributed in our weekly e-newsletter, Biorefining Week, and found on our magazine’s website. When coal is used as a hybrid mix with woody biomass as feedstock for fuel or chemical refining, there are reasons these projects get support. In the coal-rich Appalachians, West Virginia University is working on a coal-biomass feedstock for gasification and reformation into liquid fuel. This is a focal point of Associate Editor Luke Geiver’s feature article in this issue. Coal is obviously a domestic product so a coal-biomass feedstock blend for liquid fuel production would certainly improve energy security and independence issues. The fuel, derived from coal and wood, could be 100 percent domestic, as opposed to existing biofuel blends, say B20 (20 percent biodiesel, 80 percent diesel from crude, the latter likely being imported from abroad). Additionally, there would be some transportation efficiencies and cost savings without having to ship crude oil halfway around the world. Instead we could ship coal from a regional mine to a local refinery via efficient, modern locomotives. Local economic development in places like in Appalachia in the East and Wyoming in the West would also benefit. But with coal being so rich in carbon, mercury and sulfur, there are big environmental concerns. One comment left on my blog was that these ideas of a coal-biomass feedstock blend sound like “green-washing.” Maybe so, but WVU Professor Kaushlendra Singh looks at it differently. In his December feature article, Geiver interviews Singh, who says the U.S. consumes nearly 48 percent crude oil and nearly 28 percent coal to meet its energy needs, and the U.S. is the second largest producer of coal in the world. “Why can’t we substitute coal? If you add 20 to 30 percent biomass, you are tapping into that 28 percent consumption and you will reduce GHGs by the percentage of biomass you put in. It’s just another way to look at things.” On a similar note, would people say cofiring biomass with coal for power generation is greenwashing, or a step in the right direction?

FOR MORE NEWS, INFORMATION AND PERSPECTIVE, VISIT BIOREFININGMAGAZINE.COM/THEBIOREFININGBLOG

ASSOCIATE EDITORS Associate Editor Bryan Sims authored “Accelerating Industrial Biotechnology,” a feature article that investigates chemocatalytic pathways companies are taking to speed up biobased chemical developments.

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“A Broken Guarantee,” written by Associate Editor Erin Voegele, looks into the U.S. DOE’s loan guarantee programs, and their deficiencies, leveraging experience from biorefiners who have been involved in them.

Associate Editor Luke Geiver’s feature story, “Regional Work for Global Change,” covers how local biomass—in West Virginia’s case, coal and biomass—opportunities can drive research and development of alternative fuels and chemicals.


EDITORIAL EDITOR Ron Kotrba rkotrba@bbiinternational.com ASSOCIATE EDITORS Erin Voegele evoegele@bbiinternational.com Luke Geiver lgeiver@bbiinternational.com Bryan Sims bsims@bbiinternational.com COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com

ART ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com GRAPHIC DESIGNER Sam Melquist smelquist@bbiinternational.com

PUBLISHING CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT Tom Bryan tbryan@bbiinternational.com

SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com EXECUTIVE ACCOUNT MANAGER Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Jeremy Hanson jhanson@bbiinternational.com ACCOUNT MANAGERS Chip Shereck cshereck@bbiinternational.com Marty Steen msteen@bbiinternational.com Bob Brown bbrown@bbiinternational.com Gary Shields gshields@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com Dave Austin daustin@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com SUBSCRIBER ACQUISITION MANAGER Jason Smith jsmith@bbiinternational.com ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com

Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Biorefining are $24.95 per year in the U.S; $39.95 in Canada and Mexico; and $49.95 outside North America. Subscriptions can be completed online at www.biorefiningmagazine.com or subscribe over the phone at (701) 746-8385. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at (701) 746-8385 or service@bbiinternational.com. Advertising Biorefining provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Biorefining advertising opportunities, please contact us at (701) 7468385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Biorefining Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to rkotrba@ bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

Please recycle this magazine and remove inserts or samples before recycling COPYRIGHT Š 2010 by BBI International

DECEMBER 2010 | Biorefining | 5


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ADVANCED ADVOCACY

Where Do We Go from Here? Roadmapping the political future of biofuel subsidies BY MICHAEL McADAMS

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oters in November’s election sent a strong message of their dissatisfaction with Washington, ushering in 106 new members of Congress and giving Republicans more than a 60-seat gain in the House. As Congress returns to finish its business in the lameduck session, many inside the Beltway are still scratching their heads and asking, “Where do we go from here?” The answer for the advanced biofuels industry is, “Full steam ahead!” Our industry will play an integral role in strengthening our energy security while generating real and lasting job growth. My answer comes after key decision makers, from both sides of the aisle and the White House, met with members of the Advanced Biofuels Association for our board meeting last month in Washington. As we heard separately from senior Democrat and Republican staff members on Capitol Hill and a key energy and environmental advisor to President Obama, one thing is becoming clearer: investment in advanced biofuels, and our technologies to build better fuels and products is not a partisan issue. But it will be incumbent upon us as an industry to inform and educate as we move into another session of Congress and approach a presidential election year. Clearly, the new tone in town is one far more focused on the cost of government, and more determined to cut programs rather than extend and create new ones. This will require the biofuels industry be clear in the cost benefits of current or future programs. There will be a complete new slate of committee chairmen in the House, and as many as 12 new members of the tax-writ6 | Biorefining | DECEMBER 2010

ing Ways and Means Committee. There is less turnover at the chairmanship and leadership level in the Senate, although the balance has significantly shifted from 59D to 41R to 53D to 47R. The new chairman of the Senate Agriculture Committee will be Debbie Stabenow from Michigan, replacing Blanche Lincoln from Arkansas. Also of key note, is the replacement of Sen. Chuck Grassley, R-Iowa, by Sen. Orrin Hatch, R-Utah, as ranking member on the Finance Committee. Top staff members on both the Ways and Means and Finance Committees briefed our board on the future of tax extenders. They addressed both the short-term opportunities surrounding the Bush tax credits for individuals as well as the longer-term effort to address all the biofuels provisions in any potential reform package. The Democrats have not agreed yet on an overall tax strategy between the White House and Congress on the larger extender provisions. However, the White House has specifically called for Congress to pass the extenders package, which includes all biofuels tax credits, in the lame-duck session. A current open discussion focuses on the level at which the current ethanol tax credit should be set, and for how long. The numbers range from 30 to 45 cents through the end of 2011. Finance Committee Chairman Baucus , D-Mont., is also drafting a bill that would grant a one-year extension of the biodiesel and ethanol tax credits, along with the Alternative Minimum Tax patch. If this fails, the likelihood of these extenders passing gets more complicated because of statutory requirements that oblige Congress to find revenue streams to offset the cost of the

tax credits— something more likely to get waived because of the popularity of extending the AMT patch. Longer-term reform efforts will take time with all the personnel changes on the House Committee. This should be of concern if the extenders are only renewed through 2011. Heather Zichal, deputy assistant to the president for Energy and Climate Change Policy, addressed the ABFA board about the future of the current Investment Tax Credit (Sec. 1603) and DOE’s loan guarantee program, and reiterated Obama’s commitment to the biofuels industry. While making it very clear that the White House was pushing Congress to pass the tax extenders package in the lame-duck session, she also acknowledged that the administration was keenly aware of the frustration from the biofuels sector, with the accessibility and requirements of the DOE program. She assured ABFA members that before any decision was made concerning either program, there would be full stakeholder involvement across the board. As an industry, we need to be very clear what specific federal support we need across first- and second-generation biofuels companies. Our request must be clear, precise and demonstrate the benefits to the American people, and detail when policy objectives will be achieved. The day of the subsidy without end, without clear overriding benefit to the country, at least for now, is clearly over. Author: Michael McAdams President, Advanced Biofuels Association (202) 747-0518 mmcadams@bhfs.com


EVENTS CALENDAR |

Pacific West Biomass Conference & Trade Show January 10-12, 2011

Sheraton Seattle Hotel Seattle, Washington This event’s program will focus on the vast potential for biomass utilization in the region with more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefining; and biomass project development and finance. (701) 746-8385 www.biomassconference.com/pacificwest

27th Annual FEW Heads to Indy 6/27

Indianapolis may be home to the electrifying Indianapolis Motor Speedway and the Indy 500, but for four days in June, any positive buzz in the city will be coming from ethanol. As host to the 27th annual International Fuel Ethanol Workshop & Expo, June 27-30 at the Indiana Convention Center, the city can expect more than 2,500 well-versed experts and attendees to arrive for the mostrecognized ethanol event in the world. The anticipation for the FEW has already begun, and the mayor of Indianapolis has responded with a personal greeting to those headed for the Hoosier State. “I admire your organization’s commitment to ethanol, a product that helps fuel our famous Indianapolis 500 cars,” Mayor Gregory A. Ballard wrote to International FEW members. And the city itself, according to Ballard, should provide an invigorating backdrop for the conference. “The 13th largest city in the U.S. is continuing to grow, with more than $3 billion in new tourism offerings coming on line by the time we host the Super Bowl in 2012,” Ballard says. “Consistently ranked as one of the Top 25 most visited cities in the U.S., I am confident our numerous cultural attractions, convenient downtown, and diverse culinary scene will create the perfect setting for your meeting.” The four-day event will feature keynote speeches, technical presentations and unmatched networking forums based on the current, and future, ethanol industry. The 27th installment of the FEW will include four main tracks highlighting the most up-to-date innovations, strategies and operations in the realm of production, management, coproducts and cellulosic ethanol, all of which reach the presentation floor through an abstract rating process that utilizes nearly 40 industry experts to hand pick the best of the best. With industry professionals attending from nearly all 50 states, 25 countries and plant personnel from almost every ethanol facility in the U.S. and Canada, this year’s FEW will remain a conference tailored to ethanol producers, and for those interested in the current trends and challenges facing the blossoming cellulosic ethanol industry, expect the latest news and thoughts on where the industry is and where it is headed.

International Biomass Conference & Expo May 2-5, 2011

America’s Center St. Louis, Missouri This is the biomass industry’s largest, fastest-growing event. Plan to join more than 2,500 attendees, 120 speakers and 400-plus exhibitors for the premier international biomass show of the year. (701) 746-8385 www.biomassconference.com

International Fuel Ethanol Workshop & Expo June 27-30, 2011

Indiana Convention Center Indianapolis, Indiana The FEW is the largest, longest-running ethanol conference in the world. Focused on production of grain and cellulosic ethanol, operational efficiencies, plant management, energy use and near-term research and development, the FEW will attract 2,500 attendees. (701) 746-8385 www.fuelethanolworkshop.com

International Biorefining Conference & Trade Show September 14-16, 2011

Houston, Texas This forum will allow technology developers to connect with investors and strategic partners, putting them on a path toward deployment. The event will include panels on project finance, market development and technology scale-up for advanced biofuels and biobased chemicals production. (701) 746-8385 www.biorefiningconference.com

DECEMBER 2010 | Biorefining | 7


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TALKING POINT

Pyrolysis Oil Challenges and Solutions Upgrading bio-oil to serve fuel markets U with a viable, domestic alternative w BY B Y ROMAN WOLFF

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raditionally, biomass was converted to charcoal or biogas for generation of energy. Currently, due to environmental concerns and the high price of fuel, the approach has shifted to the conversion of biomass into pyrolysis oil for use as fuel. What is pyrolysis oil? It’s a complex mixture of chemicals resulting from the thermal decomposition of biomass. The types and amounts of each chemical may vary widely depending on the thermal process used. Pyrolysis oil is also known as biocrude, bio-oil or bioleum. There are a number of technologies that convert biomass into pyrolysis oil and all of them involve high temperature (between 400 and 650 degrees Celsius). Pyrolysis oil has the potential to become a viable alternative to fossil fuel. The U.S. DOE estimates that there are more than 1.3 billion tons of recoverable biomass today. Using current technologies, this biomass could be converted to 130 billion gallons per year of fuel per year, or 65 percent of the total U.S. consumption. Some energy crops such as switchgrass and Miscanthus, as well as algae, can also be used as feedstock for pyrolysis oil, which can then be further processed into transportation fuels. There is a catch, however: pyrolysis oil is highly acidic and corrosive. As a result, it is difficult to store and transport, and can damage engines, boilers and refinery processing equipment. Upgrading

8 | Biorefining | DECEMBER 2010

pyrolysis oil in a cost-effective manner to remove the high acid content is a challenge that must be overcome. What are the options for upgrading bio-oil? Technologies like hydrogenation, hydro-deoxygenation and other similar conventional processes address the high acidity problem; however, they require large-scale plants and capital, and exhibit substantial yield losses (up to 50 percent sometimes) mainly due to the use of hydrogen. Some next-generation technologies attempt to use existing infrastructure and eliminate the use of hydrogen to reduce the high capital and operating costs of upgrading pyrolysis oil. My company, the Houston-based Enhanced Biofuels, has developed such a technology. We use a proprietary reactor system that bolts onto existing facilities, to share infrastructure, and it uses a readily available and relatively inexpensive alternative to hydrogen for reducing or eliminating the acidity of pyrolysis oil in a cost-effective manner. Once upgraded, the pyrolysis oil can be used many different ways. It could be fed directly into a conventional refinery to make green transportation fuels while using existing infrastructure, becoming a domestic green feedstock for the U.S. refining infrastructure. It could also be a blend-stock for bunker or marine fuel. Bio-oil has lower heating value than bunker fuel, but it also has lower viscosity, essentially no sulfur, and high oxygen content. These properties will likely make

a bunker fuel/pyrolysis oil mix easier to handle, and will improve the burning characteristics of bunker fuel. Pyrolysis oil is also a domestic, green low-cost alternative to heating oil and boiler fuel, which are fossil-fuel based. Upgraded bio-oil can also be used for power generation in diesel and sterling engines. This application supports distributed green power efforts, because the fuel’s easier to transport and handle, and has higher energy density than biomass. Finally it can be a chemical feedstock. Pyrolysis oil contains carboxylic acids, and phenolic and nitrogen compounds, which can be converted into resins, adhesives, solvents, fertilizers, flavors and more. In addition to these valuable building blocks, pyrolysis oil can be processed into traditional petrochemicals and plastic intermediates through refining and processing. Pyrolysis oil has the potential to be available in large amounts and competitively priced. Upgrading bio-oil in a cost-effective fashion to reduce its high acid content is essential. Next-generation technologies that attempt to address this challenge will give pyrolysis oil great promise as a domestically grown, green feedstock for production of fuels and chemicals using the current refining and transportation infrastructure. Author: Roman Wolff President, Enhanced Biofuels (713) 301-8660 rwolff@enhancedbiofuels.com


LEGAL PERSPECTIVE |

Green Means Go for Patents Speed up the patent process through the USPTO’s green program BY ADONIS NEBLETT AND TODD TAYLOR

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reen can mean many things: money, environmentally friendly, and under the Green Technology Pilot Program at the U.S. Patent & Trademark Office, it means “go” for many patent applications involving clean/green technology. These applications get to bypass much of the historical sludge that has bogged down patent applications and will be examined on an expedited basis. The belief seems to be that these applications need to move faster in order to help alleviate our energy and environmental issues. Patent applications that are accepted into the USPTO’s green program are given higher priority and examined much more rapidly. Such applications are accorded special status—the USPTO’s most exclusive designation—as they await action. They also carry the special designation on appeal, and in the patent publication process. After the first action, such applications are accorded a status that is lower than special, yet still prioritized. The bottom line is that participating in the USPTO’s green program means that your green patent applications will reach final resolution much sooner than they otherwise would. Not all green patent applications are eligible for the USPTO’s green program though. The program has both technology and formal requirements. To be eligible, the patent application must be directed to an invention that “materially enhances the quality of the environment by contributing to the restoration or maintenance of the basic life-sustaining natural elements; materially contributes to

the discovery or development of renewable energy resources,” which include “hydroelectric, solar, wind, renewable biomass, landfill gas, ocean (including tidal, wave, current, and thermal), geothermal, and municipal solid waste, as well as the transmission, distribution, or other services directly used in providing electrical energy from these sources; materially contributes to the more efficient utilization and conservation of energy resources,” a category that “would include inventions relating to the reduction of energy consumption in combustion systems, industrial equipment, and household appliances; materially contributes to greenhouse gas emission reduction,” a category that includes “inventions that contribute to (1) advances in nuclear power generation technology, or (2) fossil fuel power generation or industrial processes with greenhouse gas abatement technology (e.g., inventions that significantly improve safety and reliability of such technologies).” Additionally, the USPTO’s classification system—the system that determines which applications are assigned to which examiners—must classify the application into one of the established green technology classes. In addition to the technology requirements, there are also formal requirements. The application must have no more than three independent claims and no more than 20 total claims, though applications that do not meet this criterion can be cured with a preliminary amendment. Green patent applicants wishing to participate in the USPTO’s green program must file a “Petition to Make Special under the Green Technology Pilot Program.” The peti-

i must choose h h technology h l tion one off the eligibility requirements listed above and, “if the application disclosure is not clear on its face,” explain how the application meets that requirement. The official notice emphasizes that this explanation must not rely on “speculat[ion] as to how a hypothetical end-user might specially apply the invention.” The USPTO’s green program represents an opportunity for cleantech companies to strengthen their patent position in an increasingly competitive environment. Since the program began in December 2009, a total of 790 petitions have been granted to green technology patent applicants, and 94 patents have been issued. In contrast to taking an average of 30 months for nongreen applications to receive their first USPTO action, green applications in the pilot program had an average time, between the approval of a green technology petition and the first action on an application, of just 49 days. Some green patent applications have even been issued within a year of the filing date, a speed akin to Warp 11 for the USPTO. If you have a patentable idea that meets these criteria, don’t delay in filing, however. The program, still a pilot, is set to expire Dec. 31, 2011 and is already receiving a large number of filings. Talk to an experienced patent lawyer soon before Green turns from “go” to “goo.” Authors: Adonis Neblett, Todd Taylor Attorneys, Fredrikson & Byron aneblett@fredlaw.com ttaylor@fredlaw.com

DECEMBER 2010 | Biorefining | 9


BUSINESS BRIEFS People, Partnerships & Deals

Alter NRG Corp. announced the signing of a 22-month extension to its agreement with Coskata Inc. to provide testing services to support Project Lighthouse, a wood-to-ethanol facility, for a minimum value $4.1 million and up to $5.6 million if all contemplated tests are performed. This includes monthly fixed payments totaling $2.46 million over the term. Alter NRG’s wholly owned subsidiary, Westinghouse Plasma Corp., has been conducting gasification tests at the plasma center for more than 15 years. In April 2008, Alter NRG and Coskata signed an agreement that resulted in Coskata building its Project Lighthouse facility adjacent to the Westinghouse Plasma Center. Lighthouse was completed in late 2009 and, since then, Alter NRG and Coskata have been converting woodchips into ethanol and optimizing the overall process. Alter NRG converts the woodchips into a clean, tar-free syngas, and Coskata converts the syngas into ethanol using its patented technology. Phoenix-based Heliae, an algae-growing technology and processing company, recently welcomed Dan Simon as its new president and CEO. Simon has more than 15 years of achievement founding and leading public and private energy, technology, and industrial manufacturing businesses. Prior to coming to Heliae, Simon was cofounder and executive with BioFuel Energy Corp., a public biofuel producer. Heliae is an end-to-end algae technology development company committed to producing renewable food, fuel and fertilizer.

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Codexis Inc. has appointed William Rothwell as its vice president and general manager of biobased chemicals, a newly created position. New Doors Rothwell will be reCodexis created a new position, general sponsible for building manager of biobased and managing a new chemicals, and filled it with William Rothwell, business by leveraging who comes from Shell. the Codexis-directed evolution platform in the growing field of biobased chemicals. He will report to Alan Shaw, president and CEO. Rothwell was a member of the Codexis board of directors from 2007 to 2009 as a representative of Royal Dutch Shell plc. He joins Codexis management after a 29-year career with Shell, focused on leadership and strategic development of Shell’s global chemical business, retiring late last year.

LanzaTech announced in November that Prabhakar Nair has joined the company as vice president of business development in Asia-Pacific. With this appointment, LanzaTech says it has added another prominent renewable energy executive to its growing international team. He joins chief executive Jennifer Holmgren and chief scientist Sean Simpson. Nair believes LanzaTech technology will play a vital role in meeting the Asia Pacific region’s ethanol mandates. “LanzaTech’s ability to produce fuel from waste is essential for regions where food resources are so critical,” Nair says. He joins LanzaTech from UOP LLC, a Honeywell company, where he was most recently marketing director for its renewable energy and chemicals business unit.

Englewood, Colo.-based Gevo Inc. received notification from the U.S. EPA that its isobutanol has successfully cleared registration for approval as a certified gasoline blendstock. The EPA’s approval makes Gevo the first company to have isobutanol listed in the EPA’s Fuel Registration Directory. Vertichem received $3 million in capitalmarket funding to develop its portfolio of green technology products and launch the newly formed enterprise. The investment enables Vertichem to commercialize its exclusive U.S. patents for processing using woody biomass to produce high-value specialty chemicals: lignin, xylose and cellulose. The company, headquartered in Toronto, anticipates assisting the multibillion dollar specialty chemical industry in meeting its sustainability objectives.


Thawer Ashcroft Crowne & Co. has entered into an agreement with Algepower Inc. to offer investment collateral to the backend structure of the venture, where it will provide investors with a default-proof, collateral-backed portfolio of funded assets with face values equal to or exceeding the total amount invested in Algepower in case of a default ($25 million). Algepower is currently in its initial capital drive of $2.5 million for its pilot project, which it plans to operate through the second quarter of next year. Algepower is expecting to launch its commercial rollout the following quarter. Montpelier, Vt.-based Algepower is a producer of sustainable, renewable algoil and algae byproducts, and has patented the Algeponics system for enclosed photobioreactor facilities. Pleasanton, Calif.-based waste-to-ethanol developer Fulcrum BioEnergy Inc. has received a detailed indicative term sheet from the U.S. DOE, and has begun the negotiation process to advance the loan towards closure and funding. The funding would be put towards construction and operating costs of its proposed 10.5 MMgy cellulosic ethanol facility, Sierra BioFuels near Reno, Nev. MSW feedstock tipped at landfills in the Reno-Lake Tahoe basin will supply approximately 90,000 tons of feedstock annually for the future plant. The facility will generate 16 megawatts of renewable electricity, which will be used to power the facility. Earlier this year, Texas-based global engineering and project developer Fluor Corp. was awarded the contract to provide EPC services to build the plant, which Fulcrum estimates should operational by 2012. Using proprietary waste conversion technology licensed from Bend, Ore.-based InEnTec LLC, Fulcrum’s thermochemical process will catalytically convert syngas made from the MSW using plasma-enhanced gasifiers.

PHOTO: CATILIN INC.

BUSINESS BRIEFS |

Becoming Clear The algal oil provided by Eldorado Biofuels created a dark glycerol, but a nearly translucent biodiesel that matched ASTM specs.

The National Alliance for Biofuels and Bioproducts has successfully produced ASTM-quality biodiesel from oil extracted from algae. The NAABB, made up of scientists and engineers from universities, private industry and national laboratories, received $44 million from the U.S. DOE to develop a commercial process for algal biofuel. In its first year, it has produced a small sample of the algal fuel. The oil was supplied by Eldorado Biofuels and was converted using the T300 solid catalyst system developed by Catilin Inc. The consortium will now disperse samples of the algae-based biodiesel to all 13 of its members for further analysis. Pall Corp. has launched a new system to support research and development activities in the biofuel and biochemical sectors. Pall’s Research and Modeling Scale Crossflow Filtration System is designed to help research and development teams evaluate the use of membranes in their processes, while also generating data that can provide them with early economic

guidance for the future scale-up of their applications. The RAMs system is capable of concentrating fluid streams by more than 10 times, and enables operators to evaluate a wide variety of membranes including inorganic, ceramic, stainless steel, and organic hollow fiber membranes. The system is also highly flexible, which makes it ideal for cross-flow filtration feasibility studies to compare the effectiveness of different membranes in specific applications. It also enables the design of cost-effective “fit-for-purpose” pilot-scale systems.

DNP Green Technology and French agribusiness firm Agro-Industrie Recherches et Développements restructured their joint venture, called Bioamber, where DNP Green acquired 100 percent ownership of the joint venture and ARD now becomes a shareholder in DNP Green. Concurrent with the acquisition of ARD’s shares in the joint venture, DNP Green has officially changed its name to Bioamber Inc. Established as a 50/50 joint venture between DNP Green and ARD in 2008 to scale up and commercialize biobased succinic acid technology platforms, the decision for DNP Green to acquire ownership of the Bioamber joint venture was due to its evolving global business model to commercialize biobased succinic acid, according to Mike Hartmann, vice president of corporate affairs for Bioamber Inc. SHARE YOUR INDUSTRY BRIEFS To be included in Business Briefs, send information (including photos and logos if available) to: Industry Briefs, Biorefining, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also fax information to (701) 746-8385, or e-mail it to rkotrba@bbiinternational. com. Please include your name and telephone number in all correspondence.

DECEMBER 2010 | Biorefining | 11


STARTUP

Biorefining News & Trends

Enabling a New Industry The Biomass Crop Assistance Program was established in the 2008 Farm Bill, but experienced some delays on the road to implementation. With the release of the USDA’s final rules, BCAP is now ready and able to help expedite the development of second-generation biobased technologies. The program essentially provides incentives to interested farmers, ranchers and forest landowners to establish and cultivate biomass crops as feedstock in approved biorefineries for conversion into heat, power, biobased products or biofuels. According to the USDA, many biomass crops will take several years to become fully established, while the majority of bioenergy facilities will need several years to reach commercial production. “BCAP serves as a catalyst to unite these multiple dynamics by reducing financial risk for landowners who switch from familiar, revenue-generating crops to new, unconventional crops in preparation for these emerging markets,” the agency states. To participate in the program, crop producers can team up with bioenergy producers and submit applications to the USDA. Accepted applications will be selected as BCAP project areas. If selected, crop producers are eligible for reimbursements totaling up to 75 percent of the cost to establish a bioenergy perennial crop. Qualified producers can also receive up to five years of annual payments for grassy crops, both annual and perennial; while producers of annual or perennial woody crops can receive up to 15 years of annual payments. Assistance is also available for the collection, harvest, storage and transport of biomass to qualified biomass conversion facilities. Farmers participating in that component of the program can receive a dollar-for-dollar matching payment, up to $45 per ton, for the delivery cost for a period of two years. Poet LLC expects to see immediate positive impacts due to the impact of BCAP,

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PHOTO: POET LLC

The long-awaited final rule for BCAP finally released

Harvesting the Benefit Farmers who have contracted to supply corn residue feedstock to Poet LLC’s Project Liberty are participating in BCAP, which provides dollar-for-dollar matching funds for feedstock delivered to the biorefinery.

says Jim Sturdevant, director of Poet’s cellulosic ethanol initiative, Project Liberty. “It’s a fantastic boost for farmers to get in the game of biomass harvesting,” he says. “Sometimes, when you are asking someone to do something they’ve never done before, a little extra incentive goes a long way. BCAP is that incentive to help these early adopters.” Project Liberty is designed to use corn residues as feedstock for cellulosic ethanol production. All 85 farmers that Poet currently has contracted to supply feedstock to Project Liberty are expected to participate in the dollar-for-dollar matching component, Sturdevant says. “[This component of] BCAP is a two-year program, so these farmers can take advantage of it for another year as well,” he continues. “For new farmers that might be getting into it for the first time next year, they will also have a chance to stay in the program for two years. We happen to be paying farmers about $40 a bone-dry ton this fall, and

BCAP means that farmers can double their money this fall. They’ll get a match for the full amount. It’s a very attractive program to get these farmers into the game and get them to invest in equipment that maybe they didn’t have before. It just helps the economics to clear this hurdle.” According to Sturdevant, Poet was very pleased with the components of the final BCAP rule. The only alteration to the current program that it would like to see is to have it continue on through the next Farm Bill, he says. A new Farm Bill is drafted every five years, which means time is ticking on the 2008 version that originally established BCAP. Without an extension, the program will expire. “We would like to see it continue to grow our biofuels industry, and an absolutely essential component of that industry is feedstock,” Sturdevant says. —Erin Voegele


STARTUP |

Maximizing Value

bulk density of three, and LignoMAX has a bulk density of one.” Although the majority of work involves DDGS, the company intends to use nonfood-based agricultural waste like corn stover and wood wastes such as wood chips when economically feasible, he says. “We started with DDGS because of handling and availability all year round for that material.” A site has been identified in Laurel, Neb., for the company’s first LignoMAXX production facility. Once built, it would require about 40 million tons of DDGS annually to produce 34 to 36 million pounds of LignoMaxx yearly, Bearnes says. Prime customers for its LignoMAXX would be plastic or composite decking and plastic pallet manufacturers. —Bryan Sims

Lighter, Stronger At a 25 percent inclusion rate, LignoMAXX can reduce weight and increase strength in end products such as pallets by 11 percent.

PHOTO: ROADSIDE ATTRACTIONS AND 1019 ENTERTAINMENTenvironmental problems.

Distillers dried grains with solubles may be an established animal feed, but Laurel Biocomposite LLC in Nebraska has found that DDGS are a viable feedstock for creating its trademarked biobased resin enhancer, LignoMAXX. Using lignin-conversion technology patented in New Zealand, Laurel Biocomposite’s LignoMAXX is described as a resin enhancer, as opposed to a resin filler in traditional thermoplastic or thermoset applications. In bulk molding trial runs where LignoMAXX had a 25 percent inclusion rate, replacing a portion of calcium carbonate and petroleum-derived resins in some thermoset applications, the end product was 11 percent lighter and 11 percent stronger, according to president Tim Bearnes. “The bulk density of our product is lighter than some of the materials that are being used today,” Bearnes says. “For example, calcium carbonate has a

PHOTO: LAUREL BIOCOMPOSITE

How DDGS could become a viable feedstock for biobased resin enhancers

Reframing the Climate Debate New documentary targets solutions-oriented approach The film titled “Cool It” is based on the writings and lectures of economist Bjorn Lomborg. Rather than portraying doomsday predictions of the world’s environmental future, the documentary showcases green scientific solutions being developed today to solve current and future environmental problems. The documentary showcases a wide variety of green technologies, including solar, wind and wave power, fuel cells and algae biofuels, being developed by some of the world’s leading scientific minds. Regarding algae, the film specifically highlights NASA’s biobased jet fuel initiative. According to the film, algae biofuels show real potential in creating a replacement for liquid fuels, with the added

benefit of leveraging existing fossil fuel infrastructure. In fact, a NASA researcher appearing in the film notes that approximately 10.5 million acres of algae cultivation would be enough to offset the use of petroleum-based jet fuel. While 10.5 million acres sounds like a lot of space, it is roughly equal to a 125-mile by 125-mile square of land—making it a completely feasible solution. The overarching message of the film is that we as a global community should not focus on fear and the world’s demise, when it comes to the environment. Rather, the focus should be on renewable energy development, cutting-edge technologies and adaption measures that will have a positive impact the future. “Cool It” was

Brighter Future A new documentary based on economist Bjorn Lomborg’s book, “The Skeptical Environmentalist,” calls for science-based solutions to the world’s environmental problems.

released nationwide Nov. 12. Additional information on the film is available at www. coolit-themovie.com. —Erin Voegele DECEMBER 2010 | Biorefining | 13


STARTUP

Success Spelled with 3 Letters The U.S. military isn’t alone in its pursuit of renewable jet fuel

To make it big as an advanced biofuel developer, there are plenty of paths to follow. But considering the amount of resources and time expended in air travel, it’s fairly apparent that if the U.S. military (and maybe even the USDA) has anything to say about it, success might be spelled J-E-T. USDA Secretary Tom Vilsack recently announced a five-year agreement with the Federal Aviation Administration “to develop aviation fuel from forest and crop residues and other ‘green’ feedstocks in order to decrease dependence on foreign oil and stabilize aviation costs.” The partnership will analyze a number of feedstocks that could be used in biorefineries to produce renewable jet fuels. Cobalt Technologies has already started working on it. Through a Cooperative Research and Development Agreement with the U.S. Navy, the biobutanol developer will work to create a successful production technology suited for that three letter word. If the California-based company succeeds, the agreement will allow Cobalt exclusive license to commercialize the process. In the meantime, the FAA agreement will develop a tool that will examine feedstock supply chain components, including biomass availability, potential of various biomasses and the amount of time it will take to get to full-scale production. —Luke Geiver

14 | Biorefining | DECEMBER 2010

In Case You Missed the Show

A recap of the Southeast Biomass Conference Best-growing practices for Freedom Giant Miscanthus, unique renewable fuel production pathways and everything in between were covered in the biorefining breakout sessions at BBI International’s Southeast Biomass Conference & Expo in Atlanta. Nearly 600 people registered for the show. If you missed it, here’s a CliffsNotesstyle recap. The Freedom variety of Giant Miscanthus was the topic of Phillip Jennings’ talk. He’s CEO of Repreve Renewables, which developed a salt-tolerant variety that grows wonderfully on marginal soils. With operations in Soperton, Ga., Repreve Renewables has 400 acres of the C4 tall grass planted. Phillip Steele, a Mississippi State University professor, discussed two-stage hydroprocessing of bio-oil from fast pyrolysis of biomass. “[Bio-oil] is a recalcitrant chemical compound with a lot of water,” Steele said. Once the second stage is completed, however, water and oxygen content are eliminated and the acidity is lowered to a neutral pH. His advice for project developers is, “Work out a pyrolysis process, get a market for boiler fuel going and get cash flowing, then think about hydrocarbons for on-road fuel.” After anaerobic digestion to get a methane-rich gas, Jeff Sherman, an executive with GRT Inc., said his company’s BTF Process to turn biomass into fuel involves a bromine-mediated light alkalane conversion. “Instead of using oxygen to activate the methane molecule, we use bromine,” Sherman said. “A zeolite catalyst couples them together…” BTF is a three-step process, he said, and is simple, requiring no reformer or air separation. Well-known Auburn professor David Bransby overviewed today’s emerging technologies. He warned the U.S. must pay attention to what other countries are doing, or get left behind. Senior chemist at National Renewable Energy Lab, David Johnson, spoke on converting lignin to hydrocarbon fuels, the improvements of which still needed include better control of hydropro-

PHOTO: BRANSBY

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Keep Watching Auburn Professor David Bransby said the U.S. needs to pay attention to the rest of the world, or be left behind.

cessing catalysts, and lowering the cost of base recycling. Growing enough biomass in a given area to feed algae was what Don Llewellyn, assistant professor at Eastern Kentucky University, talked about. His project is investigating locating a biorefinery in Clark County, Ky., around which enough biomass can be grown and broken down to feed enough heterotrophic, bioreactor-grown algae to produce 50 MMgy of oil a year. Enzymes to break down pectin, or pectinases, found in the hind gut of the crane fly was the topic of discussion, along with the modified yeast AJP50, for Joy Doran Peterson, associate professor at University of Georgia. Alan Lawson, president and CEO of Georgia Alternative Fuels, said his company is developing an electrochemical process that creates a free radical chain reaction, “the propagation effect.” He said, “It takes off at the speed of light. … We let the free radical reaction take care of the dirty work.” Food waste is much less recalcitrant than lignin, the reason that David Stewart, president of Citrus Energy LLC, said he’s moving in that direction. The cost of enzymes to break down the fruit waste is 30 cents a gallon compared to $1 a gallon for corn stover. Focusing on the C6 sugars and standard yeast, he said Citrus Energy achieves 60 gallons a ton. Jerry Horton, president of Sweetwater Energy Inc., talked about his company’s SweetMachines, which process high-moisture biomass onsite into a concentrated sugar stream with syrup-like consistency for delivery to a local ethanol processor. —Ron Kotrba


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A Golden Opportunity A team of chemical engineers at the University of Virginia in Charlottesville have discovered gold. Although neither the type or amount that one might associate with Hollywood films like “The Pirates of the Caribbean,” the findings from their research could potentially unravel a new layer of value specific to the biochemical industry. UVA chemical engineer Robert Davis, along with colleague Matthew Neurock, found that gold and other precious metal nanoparticles exhibit high catalytic reactivity when placed in alkaline water. Armed with their expertise in catalytic chemistry, they studied the mechanism for oxidizing ethanol and glycerol, which coproduced intermediate chemicals in their salt states, such as acetic and glyceric acids. The researchers submitted a paper on the subject, titled, “Reactivity of the Gold/Water Interface During Selective Oxidation Catalysis,” which appeared in the October issue of Science. According to Davis, the team observed about a 60 percent yield of glyceric acid and 70 percent yield of acetic acid in their salt forms from glycerol and ethanol, respectively. “However, we never ran the reactions to complete conversion of glycerol or ethanol, so the yields are conservative,” he says. Acetic acid, one of the simplest carboxylic acids, is a valuable chemical reagent and industrial building block that can be used for production of polyethylene terephthalate, glues and as a food additive. Glyceric acid, a derivative of glycolic acid, is often used as a facial peel and chemical exfoliant. Prior to the completion of their project, it wasn’t fully understood how water could play a role in the oxidation catalysis of alcohols, according to Davis. He adds that because petroleum and many petroleum-derived products aren’t water-soluble, water wasn’t generally considered to be an effective solvent. With that in mind, Davis and his team embarked on a mechanistic study to understand and demonstrate the role of hydroxyl groups in water for the oxidation process. “We saw the important role water had as a contributor to the oxidation reaction,

PHOTO: COLE GEDDY, UVA/PUBLIC AFFAIRS

How gold is valued in biomass catalysis

Eureka! University of Virginia chemists Matthew Neurock and Robert Davis found that gold nanoparticles have high catalytic reactivity when immersed in alkaline water.

specifically oxidation of carbon monoxide to form carbon dioxide via a gas phase reaction,” Davis says. “Since water played a key role, we decided to start looking at the role of gold in liquid water. That’s important for biorefining because the molecules from renewable resources are water soluble, which is different than standard petroleum refining processes that aren’t water soluble.” Davis says the research team has studied the oxidation reaction in semi-batch and fixed-bed reactors. With the ability to recover the catalyst, one might think it would be easily scalable, but there are a few glaring issues. “The capital cost of using gold is very high,” Davis says. “The other issues are that the acids are actually salts of the acid because they’re high pH, so the recovery of the acid isn’t trivial either because you have to neutralize the solution.” As for further research, Davis says the team intends to refine the process with the absence of a base “because that’s going to be a real cost issue if we have to consume base to do this, and then neutralize with other acids to recover it,” he adds. Another possibility would be to use air instead of pure oxygen, which he doesn’t foresee being an issue. “Using air in the absence of base would be our future goals and improving selectivities,” he says. —Bryan Sims

Another Step Forward GlycosBio, Bio-XCell finalize terms

The two companies first announced their partnership to build an industrial biochemical plant and biotechnology research and development facility in May. The final agreement just signed means the project is ready to proceed. Initial research and development efforts for the project are expected to focus on the manufacture of isoprene to support Malaysia’s rubber industry. GlycosBio will now being evaluating partners for construction. The facility is scheduled for operation in 2012. “For Malaysia, isoprene is a strategic product because of the large domestic latex industry, so that’s where we plan to focus much of our R&D efforts,” says GlycosBio CEO Richard Cilento. Bio-XCell CEO Raja Ridzwa Aziz says the partnership with GlycosBio will open opportunities for his company. “This partnership will enhance our significance as a regional biotech hub for industrial and healthcare biotechnology,” he says. —Erin Voegele

DECEMBER 2010 | Biorefining | 15


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STARTUP

The Race Is On

How two cellulosic ethanol projects are coming closer to breaking ground While there may be several cellulosic ethanol projects in the mid to late stages of development, two world-renowned firms are in the early stages of their projects, with ambitions of spurring economic vitality and helping fulfill RFS2 mandates. The DuPont Danisco Cellulosic Ethanol LLC joint venture is in the process of evaluating sites for its first commercial-scale production facility called “Project Blackhawk.” DDCE is scanning potential sites in the Midwest for its proposed 25 to 50 MMgy corn stover-fed facility, with Iowa under serious consideration. Representatives from DDCE presented a Feedstock Frenzy full application on the project to the state’s Efficient collection of corn stover, according economic development funding arm, the Iowa to Jennifer Hutchins, Power Fund board, which agreed to continue Dupont Danisco’s negotations on the project, according to Don corporate communications Tormey, public information and communicadirector, will be a tions director for the Iowa Office of Energy key element for the company’s cellulosic Independence. “DDCE wants to have a deciethanol project in the sion made by the board no later than the end Midwest. of January 2011,” he says. Upon approval, the cellulosic ethanol plant would take about 18 months to complete construction with anticipated commercial operations in 2013, according to DDCE corporate communications director Jennifer Hutchins. Funding for a 50 MMgy plant would require about $300 million in capital costs but, unlike other com-

mercial cellulosic projects, Hutchins says DDCE isn’t relying on significant financial aid to complete the project. “The majority of the capital investment will primarily come from the parent companies [DuPont and Danisco],” she says, adding that it could potentially receive $30 million in Iowa state incentives. “We’re not looking for large capital investments from the government.” She adds that DDCE would need about 550,000 tons of corn stover annually, harvested from about 275,000 acres of land, for the 50 MMgy plant. Meanwhile, Archer Daniels Midland Co. is moving closer to breaking ground on its proposed corn stover-fed cellulosic ethanol in Decatur, Ill. In addition to ethanol, ADM plans to produce biobased ethyl acrylate, a compound used to make plastics, adhesives, coatings and other materials. Expected annual capacity of cellulosic ethanol and ethyle acrylate weren’t disclosed. The facility, which would be located adjacent to ADM’s existing 300 MMgy ethanol plant, has cleared approval by the county board and the city council, according to Decatur economic development corporation president, Craig Coil. It is in final stages of expanding an enterprise zone to accommodate the project. “We’re now looking at the boundary modification application request through the state department of commerce and awaiting their approval,” he says. According to Coil, the proposed expansion would have an estimated completion in July 2012. ADM intends to leverage a $24.8 million U.S. DOE grant to fund the project, Coil says, along with various state and tax credits and exemptions. —Bryan Sims

Pushing for Advancement

A new trade association takes on Washington to build support for biobased diesel replacements The Global Biofuels Alliance was established to serve as a voice for small- and medium-sized companies active in the biofuels sector. Representing a wide range of industry players, including producers, traders, marketers, distributors and other interested parties, the group is focused on building support for all biobased diesel replacements, including biodiesel and renewable diesel. Founding board member Wade Randlett says the alliance’s most pressing goal is the reinstatement of the biodiesel tax credit. “The biodiesel credit is the only means of leveling the playing field between petroleum diesel and renewable diesel,” he says. The second component of its mission is to ensure that the potential of new secondgeneration technologies are understood and valued. “We think that there is a new wave 16 | Biorefining | DECEMBER 2010

of technology, as well as business model innovation, that is going to occur so long as there is some leveling of the playing field between renewables and petroleum diesel,” Randlett says. He also stresses that the alliance will serve and support both first- and secondgen biofuels technologies. “We’re stalwart defenders of virgin vegetable oil for biodiesel, but that doesn’t mean that it is the only product or only way of making a diesel replacement,” he says, noting that rather than a compete turnover to second- and third-generation technologies, the alliance is expecting the industry to broaden, to encompass a wide range of technologies, processes, and feedstocks. —Erin Voegele

Another Voice The Global Biofuels Alliance was recently formed to promote biofuel production, trade and incorporation the world over.


PHOTO: BUTAMAX

STARTUP |

A Sweet Tweak Researchers at the new Brazilian Butamax facility will work on process technique to produce biobutanol from sugarcane.

Biobutanol: The Next Best Advanced Biofuel? New developments in the biobutanol world take root

Any fears biobutanol producers may have had regarding public acceptance, future use or a general misunderstanding of its potential could be coming to an end. For some time, biobased butanol producers and supporters like Butamax Advanced Biofuels LLC or Gevo Inc. have touted its advantages compared to ethanol. Butamax boasts its biobutanol’s ability for higher blend concentrations in gasoline, which then creates a higher level of renewable energy in every gallon of fuel. In addition, a product like Butamax’s requires zero modifications to automobiles and infrastructure, putting the product into the gold-standard class of drop-in fuels. Gevo, the Colorado-based company, also points out its product’s high energy density qualities and drop-in capabilities, and says the isobutanol it produces has characteristics that make it attractive to urban gasoline markets, where ozone level requirements

under the Clean Air Act constitute the use of low Reid Vapor Pressure fuels. All of that sounds good but now, people (important people) are not only listening, but they’re taking biobutanol-based action. In Brazil, a country that knows a thing or two about biofuel development, U.K.based Butamax has opened a biobutanol technology laboratory to research and eventually engineer a biobutanol production method utilizing, you guessed it, sugarcane. In Brazil where a broad biofuel plan based on sugarcane ethanol exists, one could argue a new facility, especially one that produces a different product, might get a cold reception. “On the contrary,” says Tim Potter, Butamax CEO. “Brazil’s understanding of the ethanol biofuels industry has enabled advanced discussions on how biobutanol production could offer an export opportunity for mill owners in Brazil.” Support for Butamax’s product doesn’t end in Brazil

either. Butamax has R&D operations on four continents, where Potter says efforts are collaborative. Butamax isn’t the only company to get approval by a major player in the biofuels industry, either. The U.S. EPA has approved Gevo’s isobutanol, listing its fuel as the firstever isobutanol in the agency’s Fuel Registration Directory as an additive for gasoline blending. While it may not be a household term yet, could biobutanol be the next best available biofuel? If it’s any indication, support from countries like Brazil or entities like EPA could be showing that all those advantages highlighted by Butamax and Gevo could be something soon discussed during the evening meal. —Luke Geiver

DECEMBER 2010 | Biorefining | 17


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STARTUP

Don’t Fear the Reaper Climate change legislation may sound concerning, but farmers could benefit While cap-and-trade legislation may seem ghostly white, it is definitely not dead. A new study has emerged from the University of Tennessee’s Agricultural Policy Analysis Center, and with it, the ghost of the now-seemingly defunct climate change legislation. The good news is the study’s findings are nothing close to scary. Titled “Evaluating Possible Cap and Trade Legislation on Cellulosic Feedstock Availability,” the study looked at the possibility of linking climate change legislation with the policy goals of the renewable fuel standard. “We wanted to make a model of how the two would interact,” says Chad Hellwinckel, a UT assistant professor and coauthor of the study. The team from UT ran a series of tests in an economic modeler and calculator for a wide range of possible payment plans including biomass crop practices, no-till practices and one for the two together to find the most valuable carbon reduction methods that could eventually receive funding. “What we knew beforehand was that biomass policy is by far more of a benefit to agriculture then climate change policy,” he says. But, if done right, climate change policy can also be a good thing for agriculture. “We found the best policy was one that restricted residue removal to the carbon neutral level and paid incentives to no-till practices and biomass crops for their carbon sequestration values,” he says. While the reaffirmation that biomass crop practices are a benefit to the atmosphere, Hellwinckel says that farmers who have gained a revenue stream through the practice of residue removal don’t need to be scared. “By restricting residue removal,” he says, “it shifted the burden of meeting the biomass policies onto dedicated energy crops like switchgrass, and that acted to increase land use competition and increase all crops across the board by about 6 percent.” Unfortunately, as Hellwinckel points out, there is not going to be a climate bill in the next few years, so any impact this

Dedicated Crops The University of Tennessee study found it better for the environment, and farmers, to leave ag residues on the field, favoring grassy energy crops instead.

study might have in shaping a biomass and crop residue policy that could ultimately benefit agriculture, isn’t going to happen. But, even a never-was piece of legislation apparently can create a positive, and this study might have revealed why. Will climate change legislation happen this year, next year or anytime soon? It’s not expected, but if or when it does, there’s no reason to fear that specter hovering about, at least if we listen to Hellwinckel. “The big take home message from our study,” he says, “is that it (climate change legislation) can be a big benefit to agriculture.” —Luke Geiver

America’s Future Biofuels Hotspots

Obama’s Biofuels Interagency Working Group called for them. Now, they’re here Nebraska could become America’s next fuel tank. At least that’s what Sen. Ben Nelson, D-Neb., said after USDA Secretary Tom Vilsack announced the University of Nebraska-Lincoln would be the new home for a Regional Biofuels Feedstocks Research and Demonstration Center. Soon to be one of five regional centers, the Lincoln location will be led by USDA’s Agricultural Research Service, and more importantly, it will help develop and construct future biorefineries. 18 | Biorefining | DECEMBER 2010

Nelson’s remarks about the potential of the Nebraska facility may soon be echoed, as other locations have been identified in Madison, Wis., Maricopa, Ariz., and Pullman, Wash., in conjunction with Corvallis, Ore., and a southeastern center consisting of Boonesville, Ark., Tifton, Ga., and Auburn Ala. On Oct. 21, Vilsack announced that within 60 days, the Rural Development office of the USDA will announce funding

“of a specific biorefinery or bioenergy plant in each of the regions.” The construction will begin in 2011 and for the effect of this measure, Vilsack said it best: “The entire country can begin to see the economic benefit to producers and the job creation potential of the biofuel/bioenergy industry.” —Luke Geiver


STARTUP |

The Truth about Hawaii Most have heard projections that suggest energy demand will grow significantly, possibly doubling by 2030. Hawaii is sunny and lined with beaches, and most know this too. Pyrolysis oil development for transportation fuel in Kapolei, Hawaii, however, may not be known—but it needs to be. Envergent Technologies, a Honeywell Company, specializes in running a fast thermal process known as RTP. During the process, “biomass is rapidly heated to approximately 500 degrees Celsius in the absence of oxygen,” says Mark Reno, managing director. “As the biomass moves through the unit, a tornado of hot sand vaporizes it and the product is then rapidly quenched to yield 65 to 75 percent pyrolysis oil (by weight).” The result is a pourable liquid that can be used as fuel for industrial heat or electrical generation. It can also be used as a feedstock for drop-in transportation fuel, and Envergent is using a U.S. DOE grant to make it happen in Hawaii.

The company is engineering a working demonstration facility for operation by 2013, but before that, it plans to have the process for upgrading pyrolysis oil to transportation fuel perfected. The upgrade, Reno says, requires an additional refining step that looks a lot like hydroprocessing in a traditional refinery, where hydrogen is used to remove oxygen from the feedstock and the product is further isomerized (the chemical compounds are restructured) to meet the product specs sought. There are difficulties in making this process available by the scheduled completion date, but don’t expect these plans to fade off into the sunset. “The biggest challenge in this work is to select the combination of upgrading steps that achieve the objective in a cost-effective way at this scale,” Reno says. Luckily, he points out, the chemistry is fairly straight forward.

Making a Dent

Specifically, Toyota Tsusho will manage the upstream and downstream aspects of the project, including supplying the facility with sugarcane-derived ethanol imported from Brazil as feedstock, production of biobased monoethylene glycol (MEG) and market it from GTC to various PET manufacturers where it will off-take the biobased PET on a tolling basis, to be sold to end users in Japan, Europe and the U.S. As the final application for its biobased PET, Toyota Tsusho intends to sell biobased PET-derived textiles for vehicle interiors and resins for beverage bottles, including using bio PET for vehicle interiors developed together with Toyota Motor Corp. GTC says it has received all the necessary environmental approvals to go ahead with the project, which is anticipated to come online by first quarter 2012. “GTC will become the first domestic manufacturing company that will produce bioethylene derivatives,” says GTC chairman Kyle Wang. “High-purity bioethylene oxide is a main intermediate chemical for the production of a variety of surfactants, and bioethylene glycol is a major raw material for antifreeze and PET pellets and filaments.”

Toyota banks on bio PET

Although most plastic components found in today’s automobiles are petroleumderived, serious efforts are underway worldwide to mass-produce renewable alternatives to complement, or some day substitute, them. Greencol Taiwan Corp., a 50/50 joint venture between China Man-Made Fiber Corp. and Toyota Tsusho Corp., the trading arm of Toyota Group, is building a 100,000 metric ton biobased ethylene facility in Kaoshiung, Taiwan. Using ethylene as a building block molecule, GTC will produce biobased monoethylene glycol, a monomer that’s used with purified terephthalic acid to make polyethylene terephthalate (PET). The ethylene plant will feed existing ethylene oxide and ethylene glycol plants at the site, which have been transferred from Man Made China Corp. to the GTC joint venture. Wilmington, N.C.-based Chemtex International Inc. will engineer and build the plant while Petron Scientech Inc. is the process technology provider.

PHOTO: ENVERGENT

Why pyrolysis oil has found a home in Kapolei

Hawaii 2.0 Envergent is building a pyrolysis oil upgrade plant on Oahu.

Envergent will also have access to process technology expertise from omnipresent Honeywell UOP, in selecting the best methods to go from pyrolysis oil possibility to a transportation fuel truth on the Big Island. —Luke Geiver According to Toyota Tsusho, the world demand for PET stood at 45 million tons in 2009. “We expect the growth ratio of PET demand will be around 8 percent per annum due to new demand coming from developing countries during the next five years, so world PET demand will be 60 million tons per year as of 2015,” the company said in a public statement. Additionally, Toyota Tsusho anticipates between 2.25 million to 3 million tons a year of biobased PET production is needed to penetrate the global market. For EPCs such as Chemtex, being involved in projects like this is a welcoming sign of a new and burgeoning client base within the global chemical sector. And, the firm looks to accommodate its build-out accordingly, says Dennis Leong, executive vice president and global business development manager for Chemtex International. “There’s a lot of interest in this field right now,” Leong says, adding that facilities of this nature are profitable entities. “These plants are competitive on a stand-alone basis because of their drop-in capacity,” he adds. “They can make good sense.” —Bryan Sims DECEMBER 2010 | Biorefining | 19


Accelerati

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PROCESS

Furanic Future As part of its YXY furanic-based chemical platform, Avantium uses NanoFlow technology to complete high-throughput catalysis research. PHOTO: AVANTIUM INC.

20 | Biorefining | DECEMBER 2010


ing Industrial PROCESS |

Biotechnology

How catalytic approaches are being adopted by biobased chemical companies to accelerate product development BY BRYAN SIMS Biobased chemicals and polymers derived from corn or wood or a hundred other biomasses are highly touted as potential gamechangers in the chemicals sector.

Through the years, many of the prominent initiatives in biobased chemicals and polymers, such as NatureWorks’ polylactic acid and DuPont Tate & Lyle’s 1,3 propanediol, relied on industrial biotechnology platforms like fermentation or biocatalytic techniques as springboards to bring their products to market.

Building on those successes, several chemical companies are employing novel chemocatalytic approaches via highthroughput screening (HTS) experimentation as a tool to help them identify catalysts to make new intermediate and platform chemicals from biomass. HTS experimentation involves sophisticated robotics, data processing and control software, liquid handling devices and sensitive detectors for chemists to rapidly conduct hundreds, thousands or even millions of biochemical screening experiments.

DECEMBER 2010 | Biorefining | 21


One firm that actively uses HTS experimentation methods in its technology platform is Amsterdam-based Avantium, which also provides high-throughput equipment and services for chemical and pharmaceutical clients. Specifically, the biochemical producer uses a parallel catalyst testing platform called Nanoflow for its catalyst development work. The company inherited the basis of the technology from oil conglomerate Royal Dutch Shell, from which Avantium was formed. It subsequently advanced the technology and developed several proprietary features to enable the testing of heterogeneous catalysts under industrial conditions. The use of its Nanoflow technology, according to Chief Technology Officer Gert-Jan Gruter, allows the company to run many experiments within its 64 fixed-bed lab-scale reactors as effectively and economically as petrochemical platforms. “By using a chemocatalytic route we can keep all the six carbons in the product,” Gruter tells Biorefining. “You can generally optimize and fine-tune these heterogeneous catalysts relatively easily compared to genetically modifying enzymes.” The use of HTS in its technology platform has been essential to Avantium’s goals of creating a biobased alternative to petroleum-derived polyethylene terephthalate (PET) by using biobased ethylene glycol, and replacing purified terephthalic acid (PTA) with its platform chemical 2,5-furandicarboxylic acid (FDCA). According to a 2004 U.S. DOE report, FDCA was listed as one of the top 12 biobased building blocks. As a way to get to FDCA, however, a bifunctional furan is needed as an intermediate. Traditionally, chemists have gotten the sugar molecule hydroxymethylfurfural (HMF) as a primary product. But HMF has its drawbacks, according to Gruter. “The problem with HMF is that, under the conditions where it’s formed, the acidic conditions in the presence of water, HMF reacts further to form levulinic acid,” he says. “It cannot be isolated easily. It also dissolves quite well in water and it cannot be distilled easily, so it’s not an ideal target to work on.”

22 | Biorefining | DECEMBER 2010

PHOTO: AVANTIUM INC.

PROCESS

Building Blocks Avantium's YXY pilot plant in the Netherlands is expected to propel production of biobased chemical building blocks for the burgeoning biorefining industry.

PHOTO: RENNOVIA INC.

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Tuning In Rennovia employs a multichannel, high-pressure reactor for adipic acid production and development.


PROCESS |

Adipic Acid Market Share by Producer

Others 15%

Asahi Kasei 4% Radici 5% BASF 9%

Fermentation

Extraction

Invista 35% A Ascend 14%

Production Pathway for Top 100 Organic Chemicals

noncatalytic

Rhodia 18%

Chemocatalytic

SOURCE: INFORMATION PROVIDED BY RENNOVIA INC.

Gruter credits the company’s Nanoflow technology for coming up with a catalyst to make methoxymethylfurfural (MMF), a stable alternative to HMF from glucose and fructose. This has allowed Avantium to oxidize MMF to make FDCA, Gruter says. “Essentially, we have a primary step where we convert the sugars to HMF derivates, like MMF, and then in the second step we can either convert them into furan-based fuel components or into FDCA as chemical building blocks to potentially replace terephthalic acid used to make PET.” Avantium calls its furanic chemistry platform “YXY.” The company has teamed with NatureWorks to help commercialize its furanics along with NatureWorks’ parent company, Cargill Inc., for access to starchbased sources such as syrups. The company started construction of a pilot plant in October to produce its furanics-based monomers and polymers beginning early next year. Gruter says Avantium also intends to use lignocellulosic biomass feedstock, where economically and technically feasible.

Eyeing Adipic Acid While Avantium uses HTS to accelerate its furanic-based chemistry for biobased chemicals and fuels, Menlo Park, Calif.-based

Rennovia Inc. is working to utilize its HTS capabilities to develop chemocatalytic methods to produce existing major chemicals. One chemical Rennovia is focused on is adipic acid, which represents a 4.8 billion pound global market, according to Chemical Market Associates Inc. Adipic acid is a monomer used to manufacture nylon 6,6 fibers and resins, adipate esters and polyurethanes. The per-pound selling price for adipic acid is about $1.25, according to ICIS Chemical Pricing. Unlike adipic acid produced from cyclohexane feedstock by petrochemical refiners, Rennovia’s chemocatalytic process uses glucose, which is converted into a glucarate intermediate via catalytic oxidation. The glucaric acid is then converted into adipic acid using a selective hydrogenation process with water as a byproduct. There are other companies that have identified adipic acid’s market potential, but Rennovia CEO Bob Wedinger says he believes his company is the first to use a chemocatayltic pathway via HTS experimentation. The company believes that high space-time yields, temperature, solvent flexibility, high carbon efficiencies and low costs of product isolation are technical characteristics that make chemocatalysis the preferred method

over fermentation-based techniques for highvolume chemical production, Wedinger says. “If you’re doing fermentation, you have to keep the bugs alive” he says, adding that employing chemocatalysis methods can be more readily used in existing petrochemical assets than fermentative approaches. “We have a lot more flexibility where we can run at higher pressures, high or lower temperatures, pH flexibility and so forth. It gives us more degrees of freedom.” Based on this knowledge, Rennovia developed its own structure for high-throughput R&D into catalysts that can automatically synthesize and screen about 2,000 catalyst formulations per week using HTS experimentation, according to Wedinger. The company exploits its high-throughput expertise to compress the time and cost of early-stage catalyst discovery, and to develop and establish broad intellectual property coverage around its platform technologies. The chemical catalysis used in the two later stages of Rennovia’s adipic acid technology were developed by Rennovia's founders, Tom Boussie and Vince Murphy, who were formerly with Symyx Technologies, a company in the field of high-throughput technology for catalyst, and other chemicals and materials, development.

DECEMBER 2010 | Biorefining | 23


PROCESS

PHOTO: RIVERTOP RENEWABLES

|

In the Lab To make glucaric acid, Rivertop Renewables is developing a catalytic process based on the oxidation of nitric acid.

Wedinger believes that adapting traditional petrochemical processes for renewable feedstock conversion is the fastest, lowest risk and the most cost-effective path to successful commercial adoption. “The further away from the refinery we get, the better advantage we have versus the existing petrochemical processes,” Wedinger says. “That’s why we chose product targets like adipic acid, where we’ll have a significant cost advantage.” Wedinger says the company plans to move out of lab-pilot stage with demonstration-scale development expected by 2012 with a commercial plant by 2014. The firm also intends to use existing infrastructure for its feedstock supply, including tapping into the oversupplied high-fructose corn syrup capacity.

Getting to Glucaric Acid While it may not utilize HTS experimentation like Avantium and Rennovia, 24 | Biorefining | DECEMBER 2010

Rivertop Renewables leverages a different approach to making its glucaric acid from glucose. Based on 10 years of research that began at the University of Montana, Rivertop Renewables uses a proprietary process that refines the oxidation of nitric acid into a catalytic process, according to Tyler Smith, the company’s research and development director. “Ultimately, we’re consuming oxygen and glucose so, from that standpoint, it’s a catalytic process,” he says, adding that the oxidation platform is adaptable to feedstock beyond glucose, such as sucrose and xylose. “We’re not screening hundreds of different catalysts or anything like that. That’s not our game.” In addition to glucaric acid, the company is also investigating xylaric, arabinaric and mannaric acids, which are derived from sugars extracted from woody biomass, to make a range of bioproducts and polymers. Early markets for its glucaric acid include

being used as a substitute for phosphates in detergents, corrosion inhibitors for road salt deicers and a sequestering agent for a wide variety of metals. The company, according to Smith, sees its glucaric acid being a viable replacement to phosphates in detergents alone, representing a $10 billion market opportunity. “One of the attractive points to our technology is that it’s scalable and capital efficient,” Smith says. “A lot of people might look at our chemistry and say, ‘Well that’s not as sexy as some of the other chemistry,’ or maybe not as high-tech, but it’s really about keeping it simple and getting the cost down to make it scalable.” Rivertop has tripled the size of its labscale reactor and plans to build a pilot plant with an annual capacity of about 100,000 pounds, according to Smith.


PHOTO: RENNOVIA INC.

PROCESS |

Bench-Top Batch Rennovia's channel parallel batch reactor is also used in development of adipic acid production techniques.

Complementary Chemistry Although companies like Avantium and Rennovia see chemocatalysis holding an edge over biotechnological platforms, the companies don’t dispute how far industrial biotechnology has evolved over the years. In fact, companies like these are

Wedinger expects industrial biotechnology and chemocatalytic processes to coexist and even complement each other— enzymatic technology could be used to free up sugars and then, once those sugars are available, companies like Rennovia could step in and chemically convert them. “There are some chemicals that will be more cost-effective to get from fermentation, and there are some chemicals that are more cost-effective from chemocatalysis,” he says. “If there’s a raw material that’s derived from fermentation that’s a cost-effective route, and we take that and do further transformations on it, that’s fine.” Gruter echoes Wedinger’s sentiments. “We think converting polymeric carbohydrates like lignocelluloses, cellulose and hemicelluloses in that first step is where biocatalytic technology could play an important role,” he says. “The first step could be biotechnology and the second step could be to use our chemocatalysis route, which makes sense if you want to make chemicals or furan-based fuels.”

exploring the ability of chemical catalysis to assist and even expand the chemistry of biocatalysis. Incorporating biocatalytic and chemocatalytic steps into a reaction cascade could mimic biochemical pathways and enable value-added products to come out of one stream.

Author: Bryan Sims Associate Editor, Biorefining (701) 738-4974 bsims@bbiinternational.com

Building the New Bio-based Economy Together There is a global race to bring next-generation renewable fuels to market first. Sustainable Development Technology Canada’s $500 million NextGen Biofuel Fund is open for applications.

To find out more, email us at nextgenapplications@sdtc.ca or visit the Funding section of our website at www.sdtc.ca DECEMBER 2010 | Biorefining | 25


|

RESEARCH

Dual Purpose West Virginia researchers are teaming up to create a coal-woody biomass hybrid feedstock for reforming into liquid fuel. PHOTO: WEST VIRGINIA UNIVERSITY

26 | Biorefining | DECEMBER 2010

R


RESEARCH |

Regional Work

for Global

Change Local feedstock opportunities mean a diverse, ever-promising biorefining industry BY LUKE GEIVER

The idea of growing a bioenergy-based industry, complete with region-specific biorefinieries exploiting geographic location with other environmental attributes makes perfect sense—almost. There’s

one problem though, and it has to do with the root of the issue. In the Iowas and Minnesotas of the world—places that year after year pump out agricultural products well-suited to producing energy in the form of biofuel or biopower— growing crops is essentially routine, a way of life. The evidence can be seen from the windows of almost any Midwestern farmhouse, where fields of corn, wheat, soybeans or an array of other crops well-suited to the region, stretch from horizon to horizon.

But what about the dry, arid regions of the Southwest, or the coal-rich states in the Southeast, where the prospect of growing is much more complex than the plant, water, fertilize and wait process virtually perfected by farmers in the Midwest? A look out the window in those regions shows a different scene entirely, including white, cracked soil and sagebrush, or clearcut mountain tops surrounded by dense, dark forest. Fortunately for the bioenergy industry, many believe that the future of the country’s energy needs can be met by biorefineries spread throughout the nation, regardless of what the view outside the window is.

DECEMBER 2010 | Biorefining | 27


RESEARCH

PHOTO: WEST VIRGINIA UNIVERSITY

|

The M&M Candy Fuel The process combining coal and woody biomass will result in a substance similar to a piece of candy, complete with a hard outer shell and a separate inner piece, say WVU researchers.

A Coal-State Combination “In West Virginia, we have abundant coal resources and a huge Appalachian forest to supply large amounts of biomass for biorefining and biopower applications,” says Dr. Kaushlendra Singh, an assistant professor for the Davis College of Agriculture and Natural Resources and Design at West Virginia University. “We are in perfect shape to take advantage of our existing resources.” And to take advantage of those resources, Singh and his team of researchers are working to make something that, he says, looks a lot like a piece of M&M candy. That “candy” could also be described as a hybrid feedstock that combines two unlikely energy sources, coal and woody biomass, into one form (an outer shell and an inner shell, like the M&M) that could be used in a wide range of energy operations. “Coal and biomass are like two opposite poles of the earth and generally do not go along with each other,” Singh says. Coal is an energy-rich fossil fuel, processed at very high temperatures producing large amounts 28 | Biorefining | DECEMBER 2010

of greenhouse gases (GHG), mercury and sulfur emissions. On the other hand, he says, biomass is comparatively low in energy content, and uses low temperatures for processing. Someone asked Singh why they would want to add biomass to coal, which would mean putting a lot of GHGs into a renewable source. “I said, ‘I was thinking the other way around,’” Singh says. According to him, the U.S. consumes nearly 48 percent crude oil and close to 28 percent coal to meet its energy needs, and the U.S. is the second largest producer of coal in the world. “Why can’t we substitute coal? If you add 20 to 30 percent biomass, you are tapping into that 28 percent consumption and you will reduce GHGs by the percentage (of biomass) you put in. It’s just another way to look at things,” Singh says. Singh, who has experience working on biorefining and biomass gasification and biomass liquefaction, has teamed up with Dr. John Zondlo, a chemical engineer with experience working on coal liquefaction research, and Dr. Jingxin Wang, an associate profes-

sor of forestry and wood science, who has worked with harvesting forest residues. The team’s efforts, which began in September, are showing that innovation in the bioenergy industry can, and will, happen anywhere; and, the regional approach seems to be a great place to start. “We’ve been working with coal for the past 30 years,” Zondlo says, “so a lot of the equipment that we have for coal can translate to processing biomass and coal together.” This should sound familiar to those in the Midwest who are utilizing existing infrastructure and equipment to gather and process corn stover, or other agricultural residue. “This is very feasible,” Zondlo says. “The obstacles are going to be in gathering, transporting and treating the wood so it is compatible with coal, but I think the opportunity is tremendous.” To capitalize on the opportunity, the team is working to develop a process to combine the coal and woody biomass into that candy-like format. The team plans to find that process through two separate


projects. In the first, Singh says, the group is trying gasification to transform the coalbiomass combination into a Fischer Tropsch liquid fuel. The second project involves liquefaction where the team directly liquefies the combination to get a liquid fuel. The researchers are working on a process that heats the wood particles first, then adds coal directly to the mix, and lets it cool. This, Singh says, may bind the wood particles and coal together that will make the new particle possible for either method of fuel production. While the end-product would be a hybrid feedstock to create a hybrid fuel, the process to make that concoction is what the team is really after, Singh says. With a successful process, the end results could vary depending on the needs of the user. “If you want to feed it through a coal-based system, the biomass content would be around 20 to 30 percent. But, when you are talking about a biomass-based system, you are talking about 80 percent biomass.” At this point, the team has not calculated the GHG reduction levels of the hybrid feedstock or fuel, but Singh says for each percentage of biomass used, the GHG levels will go down. Wang is securing the woody biomass from WVUbased mills and Zondlo is providing the coal used for the research. The team hopes to complete its work in roughly a year and, although it is hesitant at this time to reveal any findings, they have formed a few combination feedstock pieces. “I can tell everybody is very, very excited about the research,” Wang says. “Possibly, we can create a new industry of bioenergy.”

Everyone Wants In WVU is not alone in its approach to utilizing locally available resources, or in its support of building out the bioindustrial sector. “There has been over a billion dollars of economic development energy incentives that have been approved initially, and if all of those happen it would mean more than $17 billion of capital construction investment for new energy technologies of the future,” says state Rep. Rocky Adkins, D-Ky. “We want Kentucky to be looked at as the place to come to have your research and development done in the energy field,” he says.

PHOTO: CRAFT

RESEARCH |

Great Bioenergy Race With full support from state policymakers, EKU's CRAFT center is just one of a growing number of bioenergy facilities racing to be the best.

What Adkins says about utilizing the state’s resources may sound familiar. “We are an agriculture state, and we are a coal state. And when we combine these two industries to complement each other, I can assure you that it is going to build a strong economy.” And if it’s not a coal-agriculture combination, it’s something else. Eastern Kentucky University officially opened its Center for Renewable and Alternative Fuel Technology, where a process is being developed that starts with feedstock well-suited for the region such as switchgrass or Miscanthus, and then seeks to use that feedstock to feed a heterotrophic algae strain for eventual use in biofuel production. Rep. Ben Chandler, D-Ky., says the CRAFT center is one of the nation’s best kept secrets and that the work being done at EKU is helping to form the region’s new economy. “This is an investment in our state,” he says. And like Adkins powerful words that

seemingly endorse the idea that anywhere in the country a biorefinery can create, produce and provide for a region’s energy needs, this is what Chandler says: “Consider for a moment what our region would look like if, right alongside our beautiful horse farms, our beef cattle farms, our crop land, we had farms producing feedstock for nextgeneration biofuels,” he says. “Now to me, that is a pretty picture.” And that pretty sight Chandler is talking about isn’t from a farmhouse in Minnesota or a grain operation in Iowa. This, remember, is a different region but, if coal-woody biomass works or algae development in the Southeast is any indication, the industry will grow—no matter where one looks. Author: Luke Geiver Associate Editor, Biorefining (701) 738-4944 lgeiver@bbiinternational.com

DECEMBER 2010 | Biorefining | 29


|

FINANCE

30 | Biorefining | DECEMBER 2010


A Broken Guarantee FINANCE |

Why biorefinery projects may not be afforded a loan guarantee BY ERIN VOEGELE A primary goal of the U.S. DOE’s loan guarantee program is to reduce risk, making clean renewable technologies more attractive to investors. To do this, the loan guarantee essentially

leverages private investment by assuring lenders that, should the project fail and the company default on loan payments, the DOE will step in and reimburse the lender for its losses, up to a predetermined percentage. There are two different DOE loan guarantee programs—1703 and 1705—that those in the biorefining sector may wish to pursue. While the programs are largely similar, there are some significant differences that should be considered. “1703 was created as part of the Energy Policy Act of 2005 in order to support the deployment of innovative technologies that avoid, reduce, or sequester greenhouse gas emissions,” says Jonathan Silver, DOE’s executive director of the Loan Programs Office, in testimony given in September at the U.S. Senate Committee on Energy & Natural Resources hearing. The 1703 program is designed to be cost neutral to the

government, and has been executed as a “self pay” program. This means that applicants are required to pay the credit subsidy cost associated with loan guarantees they secure under the program. Biorefinery Developer “The Section 1705 pro- BlueFire Renewable CEO Arnie Klann gram was created as part of Inc. is working diligently the American Recovery and toward a DOE loan Reinvestment Act of 2009, guarantee approval. The process is proving to jumpstart the country’s difficult. clean energy sector by supporting projects that had difficulty securing financing in a tight credit market,” Silver says. One notable difference between the programs is that the 1705 program does not require applicants to pay the credit subsidy costs associated with a loan guarantee. However, Silver says in order to qualify for the guarantee projects, construction must begin by Sept. 30, 2011. “DOE’s authority to issue guarantees under 1705 expires on that date, as well,” he says.

DECEMBER 2010 | Biorefining | 31


|

FINANCE

While the private sector alone can provide the massive, sustained investment that is required for the widespread and largescale deployment of new and innovative clean energy technologies, Silver says action in this area has been lacking. “The private sector has not invested in clean energy at the scale necessary to drive meaningful change,” he says. “A fundamental impediment for investors in the clean energy space stems from the relatively high completion risks associated with clean energy projects, including, in particular, technology and execution risks. Private sector lenders have limited capacity or appetite to underwrite such risks on their own, particularly because large-scale clean energy projects are very capital-intensive and often require loans with unusually long tenors. Without the federal government’s financial support, following a careful review of the underlying technology, many promising technologies may not get funded to reach commercial scale or scope.” Silver says the loan programs were designed to address these impediments, and that loan guarantees lower the cost of capital for projects utilizing innovative technologies, making them more competitive with conventional technologies, thus more attractive to lenders and equity investors. “Moreover,” he says, “the programs leverage the department’s expertise in technical due diligence, which private sector lenders are often unwilling or unable to conduct themselves.”

Stages of the DOE Loan Guarantee Process 1. Intake a. Part 1: Applicant submits summary application, which is used to determine eligibility b. Part 2: Applicant submits a comprehensive application, which is analyzed to determine if the project warrants additional review or term sheet negotiation 2. Due diligence and term sheet negotiation a. Due diligence includes a detailed examination of the technology, analysis of the project’s financial model, and detailed legal, market and environmental review b. Term sheet negotiation includes negotiation with the applicant on terms and conditions of a potential loan guarantee, this may include a restricting requirement 3. Credit analysis and review DOE staff completes a comprehensive credit analysis of the proposed transaction, specific elements of review include pledged collateral, market risk, technology risk, regulatory risk, contractual foundation, operational risk, and recovery profile 4. Deal approval and conditional commitment Once stages 2 and 3 are complete, the transaction is submitted for necessary approvals, including a final decision by the Secretary of the DOE 5. Post-conditional commitment due diligence and financing documents negotiation DOE staff ensures conditions met in the conditional commitment are met, and the parties draft and negotiate the final loan documentation 6. Closing Once all other actions are completed, staff conducts a comprehensive credit analysis based on the final terms and conditions of the loan, resulting in a calculation of the projects estimated subsidy cost. Upon final closing the loan guarantee is obligated by DOE.

Limitations and Setbacks Although the goals of the DOE’s loan guarantee programs are admirable, many in the biorefining industry are finding the programs ineffective. Approximately six applications for biofuel projects have been submitted. To date, none have been awarded a guarantee, although several have been awarded for other forms of advanced energy, including nuclear, wind and solar. There has been a great deal of speculation on why loan guarantee requests for biorefinery projects seem to be stalled. Some in the industry believe its structure stacks the odds against liquid fuel projects. Others sense that the DOE is hesitant to award loan guarantees to biofuel projects due to some embarrassing project failures in 32 | Biorefining | DECEMBER 2010

SOURCE: JONATHON SILVER, U.S. DOE EXECUTIVE DIRECTOR OF LOAN PROGRAMS OFFICE, TESTIMONY AT SEPT. 23 U.S. SENATE COMMITTEE ON ENERGY & NATURAL RESOURCES HEARING

the 1970s and ‘80s. Either way, the industry needs to be focused on finding a solution. One of the foremost complaints from the biorefining sector is that the loan guarantee process is excruciatingly slow, fragmented, and inefficient. BlueFire Renewables Inc. recently moved into the second stage of the application process. “From the time we first submitted the application for the loan guarantee until we were accepted for part two, they did quite a bit of due diligence,” says BlueFire CEO Arnie Klann.

“We ended up answering a lot of questions, we had to give them more information, and many times duplicate information because it was either lost or disseminated,” due to the fact that many of the program’s reviewers are contracted from the private sector. “Now we’re in part two and we’re getting those same questions asked again…which is very disconcerting because it’s a time waster.” The slow advance of the review process is especially frustrating for BlueFire be-


FINANCE |

cause the company has already been awarded approximately $88 million in DOE grant money for the same project for which it is seeking a loan guarantee. “That involved a very rigorous due diligence process, which is now largely being repeated.” Klann says it would be helpful if some of the due diligence work could be transferred between DOE offices to expedite the process. In addition, Klann notes that the hurdles and criteria DOE has set for the loan guarantee program are simply not realistic for first-of-their-kind technologies in the biorefining sector. One example is the requirement that applicants have long-term off-take agreements for both product and feedstock. The requirement handicaps liquid fuel projects when compared to renewable electricity projects. This is because such off-take agreements are common in the power sector. Liquid fuels are bought and sold as commodities on the spot market, however. Klann says BlueFire has managed to put these agreements in place, but notes many other projects have struggled to meet the requirement. The Sept. 30 drop-dead date for the 1705 program also poses a problem. The program has a longer timeline than many other funding programs authorized by the Recovery Act, Klann mentions, which has decreased some of the DOE’s urgency in reviewing applications and issuing guarantees. It is also problematic because it’s delaying projects that are shovel-ready. “We could be sitting here, literally, another 11 months before we have a loan guarantee. The question is how do you sustain all your permits, all your contracts? We have contracts that are time sensitive, particularly for the construction of the project. The price will change…If the department moves too slowly on this program, many projects are that are shovel-ready are going to die, and the companies supporting them are going to die.”

Complicating Financial Matters The loan guarantee programs, first and foremost, are designed to help jump-start commercial technologies that will serve the nation’s best interest, says Michael McAdams, president of the advanced biofuels association. “If the whole point of having

a loan guarantee program—from a policy standpoint, according to congress—is to try to deploy these new technologies for national objectives, then the program needs to have a different set of requirements than a commercial bank,” McAdams says. “The way the program is currently functioning, there is not a significant differential between the requirements of a commercial bank and the requirements of this program. Period.” Many investors that want to be involved in biorefinery projects are depending on loan guarantees to come through. It is possible that delays in the program could turn some investors off biofuels, impacting not just the projects that were relying on them, but the industry as a whole. “There is a time-value to the money, and if investors don’t see their returns coming in the way they want to see them coming in, they are not going to continue to invest,” Klann says. “That seems to be lost on the government programs. Think about it like an investor, you are betting your money— and your shareholders’ money in many cases—that the government is going to do what they say they are going to do. When they can’t perform under a reasonable schedule, the equity investors are going to see a loss, potentially, in their investment and they are not going to want to invest again.”

Finding a Solution Although several problems with the loan guarantee program need to be fixed from the perspective of the biorefining industry, McAdams notes that applicants can’t forget they have to take on the responsibility of submitting strong applications for viable projects. “It’s one thing to have a government program trying to incentivize the advanced technologies that are moving forward, but the advanced technologies also have a responsibility to deliver an economically verifiable business plan to the government, to be funded.” However, the way the loan guarantee program is currently structured, even strong, viable projects many not be able to meet the DOE’s benchmarks. In late September, the ABFA teamed up with the Algal Biomass Organization and the Biotechnology Industry Organization to write a letter to President Obama and the administration

outlining three specific changes that could improve the program in the short term. First, the organizations ask that the criteria mandated “reasonable prospect of repayment” be clarified. The letter states that it seems the DOE has interpreted the requirement to mean “certain prospect of repayment,” which is counterproductive to the program’s goals of commercializing first-of-kind technology. The groups also asked that the renewable fuel program be recognized as a mechanism of long-term market certainty in the absence of off-take agreements for finished product. Second, the organizations asked that the 1705 program to be extended to benefit the rapid development of new technologies that have come into play within the past year. Finally, the group has asked that monies borrowed from the program be restored and that a portion of those monies be set aside and dedicated to biorefinery projects. Whether these requests are met remains to be seen. In the meantime, McAdams stresses the importance of all sectors of the renewable fuel sector banding together to push for improvements to the loan guarantee program as well as other federal biofuels policies. “To help overcome problems with the loan guarantee program, and other issues like tax policy, that the renewable fuel sector faces, it is going to be increasingly important for all sectors to band together and support one another,” McAdams says. “The real enemy here is foreign oil. We need to be working together. The biofuels industry needs to have a conversation where we can collectively walk into the White House, sit down across from the president and say, ‘If you did X, Y and Z, here is the number of renewable gallons we could provide, here are the number of jobs created, and here is the timeframe in which we can do it.’ We’re not prepared right now collectively to have that conversation. That needs to change.” Author: Erin Voegele Associate Editor, Biorefining (701) 850-2551 evoegele@bbiinternational.com

DECEMBER 2010 | Biorefining | 33


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Biorefining Magazine - December 2010