November 2011 Biorefining Magazine

INSIDE: RFS2 REPORT SENDS WRONG MESSAGE AT WRONG TIME november 2011

Big

Oil Backing

Petroleum Giants BP, Shell and Valero Aren’t Just Competition Anymore—for Many Biorefining Firms, Their Support Means Salvation and Success Pages 20, 28, 34

www.biorefiningmagazine.com

contents |

November issue 2011 VOL. 02 ISSUE 11

features

20

28

34

INDUSTRY Betting on Biorefining

PROGRESS The BP Biofuels Story

PROFILE Synergy by Design

Valero goes long on advanced biofuels

By Erin Voegele

Much more than Gulf damage control

By Luke Geiver

Virent’s boost from Royal Dutch Shell

By Bryan Sims

Contents DEPARTMENTS 4

Editor’s Note

Big Oil

BY RON KOTRBA

9

Legal Perspectives

Liability, Insurance Issues in Biofuel Transport

By James Pray

6

Advanced Advocacy

Wrong Message, Wrong Time

BY MICHAEL McADAMS

10 Business Briefs

7

Industry Events

12 Startup

Upcoming Conferences

& Trade Shows

8

Talking Point

Plant Appraisals and Fixed Asset Management

By Wayne Lee and Catherine J. Rein

People, Partnerships & Deals

Biorefining News & Trends

42

Ad Index

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editor’s note

It is easy to vilify the petrochemical companies as profithungry despots that embody everything advanced renewable fuels and biobased chemicals stand against. They spend untold

BIG OIL Ron Kotrba, Editor rkotrba@bbiinternational.com

amounts of money to locate biomass with an extremely long life cycle, crude oil, far underground or beneath the sea, and drill, baby, drill. In a perfect world, fracking fluids would not compromise pristine soils; there would be no explosions miles offshore that kill humans, pollute our waters, cause slow, agonizing death for wildlife, and destroy countless communities.

But, obviously, we don’t live in a perfect world. And despite the seemingly antagonistic relationship between Big Oil and the biorefining community, perhaps no sector is moving advanced biofuel and biobased chemical development faster and further than the oil industry. As John Huber, head of the National Oilheat Research Alliance, said during the Bioheat Northeast Workshop in Pittsburgh last month, as time progresses, extracting these hydrocarbons from the ground becomes harder and harder—and more expensive—thus, the oil companies must diversify their portfolios if they intend to sustain. Likewise, many biorefining startups have found that Big Oil’s deep pockets, technical mastery, engineering experience and logistical prowess are essential to their survival and prosperity.

To exemplify this, look at Houston, Big Oil Central. The city is also home to the most densely populated conglomeration of biorefining startups—and it’s not by coincidence.

Oil has given us a model to follow for what an efficient, profitable refinery should be. A refinery takes in crude oil and puts out numerous energy products.

Scale this model down, decentralize it and substitute in biomass with a much shorter life cycle than crude oil, and what you have is the quintessential biorefinery.

There is no better way to leverage a century-and-a-half ’s worth of oil industry experiences, bad and good, than funneling it into tomorrow’s more responsible energy paradigm.

for more news, information and perspective, visit biorefiningmagazine.com/BLOG/READ/BIOREFINING

ASSOCIATE EDITORS Erin Voegele gives us “Betting on Biorefining” on page 20, a story on Valero’s investment in the biorefining space.

4 | Biorefining Magazine | november 2011

Luke Geiver writes “The BP Biofuels Story” on page 28 about BP’s vision for cellulosic ethanol production in the U.S.

Bryan Sims authors “Synergy by Design” on page 34, profiling Virent Energy Systems’ partnership with Royal Dutch Shell.

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 designerS Erica Marquis emarquis@bbiinternational.com Lindsey Noble lnoble@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 Andrea Anderson aanderson@bbiinternational.com Dave Austin daustin@bbiinternational.com Kelly Kilgore kkilgore@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com Senior Marketing Manager John Nelson jnelson@bbiinternational.com

Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Biorefining Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada or Mexico. To subscribe, visit www.biorefiningmagazine.com or you can send your mailing address and payment (checks made out to BBI International) to: Biorefining Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to (701) 746-5367. 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 Magazine 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 Magazine advertising opportunities, please contact us at (701) 746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Biorefining Magazine 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 TM

COPYRIGHT Š 2011 by BBI International

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advanced advocacy

Wrong Message, Wrong Time Flawed RFS2 report may send inaccurate assumptions to policymakers

BY Michael mcadams

O

ver the past year I’ve found myself appreciating more the popular quip by President Reagan when he said the “most terrifying words in the English language” are “I’m from the government, and I’m here to help.”

Well, that “help” was offered up to Congress recently when the National Research Council, an arm of the National Academy of Science, delivered a report proclaiming advanced biofuels won’t reach the 16 billion gallon requirement for cellulosic biofuels called for under the renewable fuel standard (RFS2).

That’s the kind of help America’s domestic biofuels industry does not need, particularly now as companies are itching to commercialize while Washington is wielding its budget axe.

The report concluded that without significant subsidies or, alternatively, high oil prices or a carbon standard, advanced biofuels made from cellulosic material would be unlikely to fulfill its mandated gallon target under RFS2.

After carefully reading through the complete report, I can tell you that boat won’t float.

Of its numerous flaws, the fatal mistake comes with the report’s assumption that the technologies it analyzes have reached their maximum potential and won’t—as we’re actually seeing in the real world—continue to advance at a rapid rate. The report leaves the overall impression that all the various potential pathways are at the same development space in time and doomed to be noncompetitive over the near term. It makes very little, if any, distinction between the various feedstock and technology platforms. Have you heard of Moore’s law?

The report focused on three particular advanced biofuels pathways: gasification, fast pyrolysis and cellulosic ethanol. Personally, since the Advanced Biofuels Association 6 | Biorefining Magazine | november 2011

represents a number of cellulosic technologies that have decided making jet fuel, renewable diesel, or gasoline is a smarter bet, I question why the continued focus on simply one molecule: ethanol? As for pyrolysis, I have personally visited two demonstration facilities in the past year and a half, and I can report they are moving ahead quickly and making significant R&D and technological advancement at a rapid rate.

Following the release of the report, Professor Robert Brown of Iowa State University made a significant observation that’s also worth mentioning here. He wrote, “For reasons not clearly justified, data from the ISU studies related to the capital cost of pyrolysis technology, one of the most promising approaches to advanced biofuels was inflated to levels that erased the projected profitability of this technology.”

While the 400-page report was required, it took a great deal of time to assemble; and by the time it was published, I would argue the report has sections that are already behind the development curves they were evaluating. This is a snapshot in time and should not become the gospel to be referred to over the next four or five years, like some opponents of biofuels will attempt to do.

The bottom line is we are now in an environment in Washington where a number of lawmakers on Capitol Hill are either directly trying to remove any form of government support for advanced renewable energy technologies broadly, with some specifically aiming at biofuels. Take, for instance, Rep. Bob Goodlatte of Virginia who recently introduced legislation to repeal RFS2. Still there are others, many of whom are not fully aware of the promise and success of our industry, pulling back as the Solyndra solar company debacle has given anxious lawmakers reason to go dark

for a while on all topics related to government support of advanced biofuels.

One redeeming aspect of the report is the recognition of the need for a stable policy platform at the federal level if we are truly to deploy these advanced biofuels technologies. It simply sends an extremely confusing message to those considering investing in the sector to have the supporting tax provision expiring on a year-to-year basis. Additionally, it is confusing to have multiple loan guarantee programs that expire or have different terms of engagement between the parties, or are run by multiple agencies. Clearly, with the current commercial lending environment a strong consistent federal policy over a reasonable period of time would be more supportive than the existing array of various support mechanisms found in the federal policy books.

Understandably, the world isn’t waiting for America to get its house in order. This is all occurring while other nations around the world, specifically China, are doubling down on their bets in the advanced renewable energy space by investing a significant portion of the GDP to lead the race in developing advanced biofuels and other clean energy technologies.

Developing and deploying innovative and paradigm-shifting technology such as advanced biofuels takes vision, time and investment. It is far too early in the game to denounce the pace or efforts in this space. It offers too great an opportunity for creating economic and energy security while moving in a more sustainable direction. Washington, next time you seek to promote advanced biofuels, lend a hand that pulls us forward—not one that pushes our heads down.

Author: Michael McAdams President, Advanced Biofuels Association (202) 469-5140 Michael.McAdams@hklaw.com

events calendar |

Southeast Biomass Conference & Trade Show

November 1-3, 2011

Hyatt Regency Atlanta | Atlanta, Georgia With an exclusive focus on biomass utilization in the Southeast—from the Virginias to the Gulf Coast—the Southeast Biomass Conference & Trade Show will connect the area’s current and future producers of biomassderived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utility executives, technology providers, equipment manufacturers, investors and policy makers.

(866)746-8385 www.biomassconference.com/southeast

Pacific West Biomass Conference & Trade Show

January 16-18, 2012

Biomass Event Hotspot: San Francisco in January 1/16 If you go to one event in the western U.S. in 2012, make it BBI International’s Pacific West Biomass Conference & Trade Show, produced jointly by Biomass Power & Thermal and Biorefining magazines.

The Pacific West Biomass Conference & Trade Show, which heads to the Bay area this year, will be held Jan. 16-18 at the San Francisco Marriot Marquis.

The conference, one of three distinct regional offshoots of BBI’s International Biomass Conference & Expo, will feature more than 60 speakers in four tracks: - - - -

Biomass power and thermal Feedstocks Biomass project development and finance Biorefining

The Pacific West Biomass Conference & Trade Show will connect the area’s current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels, with: - Waste generators - Aggregators - Growers - Municipal leaders - Utility executives

- - - -

Technology providers Equipment manufacturers Investors Policymakers

The Pacific West Biomass Conference & Trade Show is designed to help you, the biomass industry stakeholder, identify and evaluate solutions that fit your operation.

It’s time to improve your operational efficiencies and tap into the revenue-generating potential of sustainable biomass resources in the region.

Register today at http://pacificwest.biomassconference.com.

San Francisco Marriott Marquis | San Francisco, California With an exclusive focus on biomass utilization in California, Oregon, Washington, Idaho and Nevada—the Pacific West Biomass Conference & Trade Show will connect the area’s current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utility executives, technology providers, equipment manufacturers, investors and policy makers.

(866)746-8385 www.biomassconference.com/pacificwest

California Biodiesel & Renewable Diesel Conference

January 16, 2012

San Francisco Marriott Marquis | San Francisco, California Presented by California Biodiesel Alliance and Biodiesel Magazine, CBA will kick off its first statewide conference Jan. 16 in downtown San Francisco. This one-day event, with evening reception, will take place as part of BBI International’s Pacific West Biomass Conference to be held Jan. 16-18 at the Marriott Marquis. Details are being developed now and will be posted here as they become available.

(866)746-8385 www.biomassconference.com/pacificwest

International Biomass Conference & Expo

April 16-19, 2012

Colorado Convention Center | Denver, Colorado Organized by BBI International and coproduced by Biomass Power & Thermal and Biorefining Magazine, this event brings current and future producers of Bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true onestop shop—the world’s premier educational and networking junction for all biomass industries. Presentation ideas are now being accepted online.

(866)746-8385 Colorado Convention Center | Denver, Colorado www.biomassconference.com

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talking Point

Plant Appraisals and Fixed Asset Management The many benefits of accurate, detailed books

By Wayne Lee and Catherine J. Rein

D

oes your plant’s depreciation record accurately reflect your facility’s equipment?

For most biorefineries, the answer is a resounding “no.” Many plants don’t have their fixed assets properly identified, tagged and matched in company books and accounting systems. Often the plant’s equipment has been entered into the books in groups such as “tank farm” or “process equipment” instead of specifying each piece separately. Pieces of equipment have been pulled out of service, sold or otherwise disposed and new assets have been added without being recorded, and there is no list of equipment that matches labeled equipment actually in the plant.

The result is that when any outside source tours the plant, any inventory or inspection consists of a series of explanations by the plant management about why new equipment is present or old equipment is absent. A well-managed plant has each piece of equipment listed separately (including year of manufacture, make, model, serial number and date placed in service), and each entry is matched to a permanently tagged piece of equipment in the plant.

Typical plant equipment that is included in a fixed asset audit includes all process and support equipment such as boilers, air compressors and lab equipment; all office support equipment including furniture and computers; and all inventory.

Whether a plant’s equipment was not documented accurately to begin with or assets were disposed of without updating the books or new assets were added, a fixed asset audit and continuing asset management is a good way to clean house.

8 | Biorefining Magazine | november 2011

It speaks volumes about a plant when an appraiser, investor, buyer or tax official can walk through a plant without the owner and see each piece of equipment tagged and matched to a fully informational, corresponding entry in the books.

While managing fixed asset records might not seem like a high priority, the truth is that a comprehensive and current fixed asset inventory appraisal assists plants in many ways. It makes financial reporting and capital expenditure planning easier and much more accurate. The audit can help clean up the books with a clear, updated description of the asset. This involves both plant management and the plant’s accounting personnel. A detailed listing all of all assets, their location, description, condition and age, must be developed.

Groups of assets must be broken out as to individual costs and updated values placed on individual assets. Each piece of equipment must be properly tagged and must match a corresponding entry in the books. Finally, a fixed asset management system should be put in place so that when equipment is added or removed, the system can be easily updated.

While these fixed asset audits can be done any time, they are quite often done in conjunction with an appraisal since the professional is already on site. That said, two things should be noted. First, every plant should have asset management in place, whether an audit is in its future or not. Second, not all appraisers perform asset management audits, so be sure to check when doing an appraisal.

The time and expense of such an audit pays for itself in many ways. Clean fixed asset records that accurately describe, and

are easily matched to pieces of equipment in the plant, bring several benefits. They help lower property taxes, insurance costs and claims; improve financial planning and capital budgeting; reduce expenses on future appraisals and audits as less time is needed to identify and research equipment; and insure accurate accounting and help in establishing higher values when selling or seeking investment.

The longer a plant goes without performing such an audit, the greater disconnect between the records and the actual plant equipment. This results in a greater potential for higher taxes or insurance premiums, and a much more difficult budgeting, sale or investment process.

At Lee Enterprises Consulting, plant appraisals are commonplace services. Our appraiser does appraisals for owners trying to raise capital or preparing for sale, lenders or investors trying to determine the value of their proposed collateral, in matters where ownership is changing, or even where the plant is involved in legal matters such as foreclosures and bankruptcies. Regardless of the reason hired, the appraisers find certain common trends. One of those is that well-managed and well-kept plants are usually worth more. To some, this fixed asset management is akin to keeping the plant clean. Not only does it save money, but it separates the well-managed from the average.

Authors: Wayne Lee, Catherine J. Rein CEO; Appraiser, Lee Enterprises Consulting Wlee52@lee-enterprises.com cathy@lee-enterprises.com

LEGAL PERSPECTIVE |

Liability, Insurance Issues in Biofuel Transportation Legal considerations in moving product

By James Pray

B

iofuel refineries have a good working understanding of the steps needed to avoid workplace accidents and damage to the refinery infrastructure. The insurance to cover these claims is also well understood. Workers’ compensation insurance covers injuries to employees; liability policies cover injuries to visitors, contractors, and third parties who are injured while at the facility; and property casualty insurance and business interruption insurance covers damage to the facility. But what about the risks posed by the transportation of goods both to and from the site? Some of these risks arise from transporting products and other risks arise from the products themselves. In either case, these risks may be excluded by many of the standard policies.

The transportation of biofuels usually requires the use of train cars or trucks.

Liability can arise if a carrier’s vehicles are damaged on the facility grounds. As an example, poor road conditions and unclear signage can contribute to accidents on the facility. Releases of sulfuric acid and methanol (used to refine biofuels) can escalate the size and complexity of the claim. The facility’s management should make sure that it has adequate insurance. Standard property casualty policies may not cover damage to trucks and trains owned by third parties because that property is not owned, controlled or leased by the facility.

Standard liability policies frequently exclude incidents involving train derailments or collisions. If the facility owns railroad tank cars, then management should check to make sure that there is insurance in place to cover not only the cost of repair but also any liability or demurrage claims that may arise if an injury or derailment is caused by a defect in the tank car. If coverage for damages to or caused by railroad trains is excluded, then the company should buy a special endorsement or policy.

Transportation of finished biofuels and byproducts can also pose a liability risk. This risk is greatly reduced if the product is being carried by a common carrier’s equipment.

Generally, the common carrier will be liable for accidents involving its own equipment and drivers. However, depending on the tariff or contract, the shipper may have a duty to secure the load properly. If the facility owns the trailer or tank car, then any equipment problem that contributes to an accident or release of product can also generate secondary liability, even if it is being transported by a common carrier.

If product is released during transport, there are possible civil, administrative, and criminal penalties that can be assessed by state and federal agencies if the release can be traced back to a failure of the refinery to properly load and secure the product.

For releases that are large enough to require removal and remediation, then there may also be liability to state and federal agencies that respond and third parties whose property may be affected. Standard policies may specifically exclude any claims arising from the release of a “pollutant.” Finding environmental insurance that will cover those claims can be

very challenging. Lower tier environmental insurance policies contain so many exclusions that they are nearly worthless. There is also no point in buying an environmental insurance policy if it excludes releases that take place during transport or cleanup costs. It is hard to believe that an environmental policy would exclude emergency response and removal costs, but they are out there.

The story does not end with the identification of an insurance policy that appears to cover a given claim. There is an old adage that insurance companies are in the business of collecting premiums and not paying claims. If the claim is small, insurance companies reject the claim knowing that the cost of litigation for the insured to recover on the claim will consume any recovery. If the claim is large, they reject the claim knowing that when faced with the prospect of costly and drawn-out litigation the insured may capitulate and take less than the full value of the coverage. In either case, the refinery may have to go to court in order to get the coverage that it has paid for.

Author: James Pray Attorney, BrownWinick (515) 242-2404 pray@brownwinick.com

november 2011 | Biorefining Magazine | 9

business briefs People, Partnerships & Deals

Mannheim, Germany-based specialty chemical company Rhein Chemie Rheinau GmbH has been presented with the 2011 Frost & Sullivan Global New Product Innovation Award in the Bioplastic Additives Market for its BioAdimide product. BioAdimide is an additive that has been specifically formulated for use with bioplastics. The product enhances the durability of polylactic acid (PLA) plastic, and makes the material more amenable to processing. Rhein Chemie first announced the availability of its BioAdimide additive line of biobased polyesters in March.

According to the company, BioAdimide additives are designed to improve the hydrolysis resistance of biobased polyester in general, and PLA specifically. The additive expands the range of applications PLA can be used for. Two grades of BioAdimide are currently available: BioAdimide 100 improves the hydrolytic stability up to seven times that of an unstabilized grade, which helps to increase the service life of the polymer. BioAdimide 500 XT also provides hydrolytic stability, but also acts as a chain extender that can increase the melt viscosity of an extruded PLA by 20 to 30 percent when compared to an unstabilized grade. This allows for more consistent and easier processing.

to meet targets, but claim there is uncertainty over how the cellulosic mandate will be met.

The report also points out uncertainties related to greenhouse gas reductions. The report states dedicated energy crops will be needed to meet the RFS2 targets; however, their cultivation will probably require the conversion of uncultivated land or the displacement of commodity crops and pastures. The authors also point out that the RFS2 program can neither prevent market-mediated efforts nor control land use or land-cover changes in other countries. In addition, the report notes that biofuels face challenges related to price competitiveness, and that RFS2 will lead to government spending in relation to grants, loans, loan guarantees, and other payments to support biofuel production. The authors also claim that the specific environmental outcomes from increased biofuels production cannot be guaranteed.

A report produced by the National Research Council at the request of Congress claims the U.S. is likely to be unable to meet some specific biofuel mandates under RFS2, the federal renewable fuel standard, unless polices are changed or new innovative technologies are developed. The report further states that the program may be ineffective at reducing global greenhouse gas emissions and that achieving the standards established

by RFS2 would likely increase federal budget outlays and have mixed economic and environmental effects. Those in the biofuels industry have spoken out questioning various aspects of the analysis. The authors note the industry is expected to produce enough conventional biofuels and biomass-based diesel

photo: NATUREWORKS LLC

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Bioplastics manufacturer NatureWorks LLC has announced that Thailand’s largest chemical producer, PTT Chemical Public Co. Ltd., is investing $150 million in NatureWorks, which until now has been wholly owned by Cargill. The deal is subject to regulatory approval. Once granted, PTT Chemical will hold a 50-percent equity share in NatureWorks. The investment means that NatureWorks’ second manufacturing facility will be built in Thailand, and is projected to be operational by late 2015. The company currently operates a 150,000-ton-per-year bioplastics manufacturing facility in Blair, Neb. The Nebraska plant actually consists of two adjacent facilities; one that produces biobased lactic

acid and a second that converts that biobased feedstock into NatureWorks’ Ingeo bioplastic. NatureWorks will need to determine if the company can purchase sufficient quantities of biobased lactic acid on the market, or if it will need to establish a lactic acid plant in addition to the Ingeo facility. If a lactic acid plant must be built, it will also need to be decided whether NatureWorks, Cargill or PTT Chemical would construct and operate the plant. The new facility is expected to produce approximately 150,000 tons of Ingeo bioplastic a year.

Toyota Motor Corp. recently held an event at its Toyota Biotechnology and Afforestation Laboratory to showcase technologies it has developed as part of its biotechnology and afforestation business. A newly developed yeast strain that increases the production yield of cellulosic ethanol was one of the technologies on display at the event. According to information released by Toyota, its researchers used gene recombination technology to develop a new strain of yeast for cellulosic ethanol production. The new yeast is highly efficient at fermenting xylose, and is also highly resistant to fermentation-inhibiting substances such as acetic acid.

“As a result, the yeast has achieved one of the highest ethanol fermentation density levels in the world (approximately 47 grams per liter), and is expected to improve biofuel yield and significantly reduce production costs,” said Toyota in a statement. It also stated that research is currently underway to develop comprehensive technologies for the various processes involved in cellulosic ethanol production, including raw material pretreatment, enzymatic saccharification and yeast fermentation. Toyota says it is striving to achieve a stable supply of feedstock as well as technologies that reduce production costs.

business briefs |

Arizona-based algae technology developer Heliae Inc. has announced the signing of a memorandum of understanding to produce algae-derived jet fuel for SkyNRG, an Amsterdam-based educator and marketer that focuses on the jet aviation industry. Heliae was established in 2008 when it partnered with Arizona State University to begin efforts to develop algae strains capable of producing high quantities of lipids. A pilot facility was established on ASU’s campus in 2008 and 2009. In 2010, the company established its headquarters in Gilbert, Ariz., where it recently constructed a demonstration-scale facility. The demo plant will be capable of producing more than 100 tons of algae biomass per year. The company is developing algae strains, bioreactor designs and extraction technologies, and will look to develop partnerships with entities that have technology to convert algae biomass into jet fuel. The company ultimately intends to license its technology to third parties, but will be scaling up to the next level internally.

California-based BioSolar Inc. has announced that a significant number of Asian solar companies have received samples of its biobased backsheet and are actively evaluating the possibility of utilizing BioSolar’s product in the manufacture of their solar panels. BioSolar’s BioBacksheet is designed for use in photovoltaic (PV) solar modules.The product is manufactured using a polyamide made from renewable feedstocks. Castor beans are a primary ingredient in the product. It also contains mineral components. The finished biobased backsheet product has achieved certification under the USDA’s BioPreferred Program. In mid-2011, BioSolar announced that it had entered into a sales representative agreement with ShinHa Inc., a Korean firm representing large Asian PV panel manufacturers targeting the U.S. market. According to BioSolar, that announcement helped drive interest in BioBacksheet. The company expects to receive a provisional relative thermal index

for its product from Underwriters Laboratories Inc. later this month. That rating is needed in order for PV manufacturers to replace their current petroleum-based backsheets with BioBacksheet. BioSolar currently uses a contract manufacturer to produce batches of its BioBacksheet product.

The U.S. DOE finalized a $132.4 million loan guarantee to Abengoa Bioenergy Biomass of Kansas LLC to support development of a commercial-scale cellulosic ethanol plant. ABBK’s parent company and project sponsor, Abengoa Bioenergy US Holding, Inc., estimates the project will fund approximately 300 construction and 65 permanent jobs.

The project will be located in Hugoton, Kan., about 90 miles southwest of Dodge City. The facility is expected to convert approximately 300,000 tons of agricultural crop residues, including corn stover, into approximately 23 million gallons of ethanol per year using an innovative enzymatic hydrolysis process. The project is expected to displace more than 15.5 million gallons of gasoline, which will avoid 139,000-plus tons of carbon dioxide emissions, and it will be self-sufficient, using unconverted biomass to generate 20 megawatts of electricity to power the cellulosic ethanol plant. ABBK expects more than 90 percent of the project’s sourced components to be produced in the U.S. The Advanced Research Projects Agency-Energy has awarded $36 million to PETRO-based projects, but the awards have little to do with fossil-based oil. The projects, housed under what the ARPA-E has labeled Plants Engineered to Replace Oil, are projects aimed at “dramatically improving how the U.S. uses and produces energy,” according to the agency. In total, 10 projects under the PETRO category received funding. For the

full list of project’s awarded ARPA-E funding visit www.arpa-e.energy.gov.

Redwood City, Calif.-based biotech outfit Codexis Inc. and Raizen Energia S.A., a joint venture between Royal Dutch Shell and Brazilian ethanol giant Cosan, have signed a joint development agreement to develop an improved first-gen ethanol process with potential of expanding the collaboration to include the production of biobased chemicals.

As part of the agreement, the two firms will deploy Codexis’ trademarked CodeEvolver directed evolution technology platform to improve Raizen’s current ethanol production process from sugarcane-derived sugar. The agreement will focus on a range of targets, including improving the performance of yeasts now used in ethanol production. Both companies anticipate pilot production to launch at Raizen’s Bonfim mill. Codexis will retain commercialization rights and Raizen will receive preferential commercial terms. Codexis said in a statement that the collaboration may potentially expand into the development of biobased chemicals but the company responded to Biorefining Magazine in email correspondence stating the firm couldn’t disclose specifically which biochemicals they might be at this point. In July, Codexis teamed with Chemtex, a global technology and engineering company wholly-owned by Italy’s Gruppo Mossi & Ghisolfi, to jointly develop and produce biobased detergent alcohols—a $6 billion global market—to be used in a variety of consumer products such as surfactants, laundry detergents, shampoos and other consumer products. The collaboration includes development of second-gen detergent alcohols derived from cellulosic biomass.

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.

november 2011 | Biorefining Magazine | 11

PHOTO: LANXESS

startup

Biorefining News & Trends

Flakes of Rubber In addition to Triunfo, Brazil, Lanxess manufactures EPDM at its plants in Marl, Germany, Orange Texas and (pictured) in Geleen, Netherlands. EPDM rubber is a range of complex copolymers with highly saturated molecular structures that have the lowest densities of all standard rubbers.

First to Market

Specialty chemical firm to introduce world’s first biobased EPDM rubber Lanxess is strengthening its commitment to produce premium synthetic rubbers from biobased inputs. The German specialty chemical company aims to produce ethylene-propylene-diene monomer (EPDM) from biobased ethylene by the end of the year, which would make it the first form of biomased EPDM rubber in the world.

Traditionally, EPDM is produced using petroleum-based raw materials such as ethylene and propylene. Alternatively, Lanxess plans to use ethylene derived from sugarcane.

This biobased form of ethylene is produced by dehydrating ethanol from sugarcane. Brazilian petrochemical company Braskem SA will supply Lanxess the biobased ethylene via pipeline from its 200,000-ton-per-year ethanol plant in Triunfo, Brazil, to Lanxess’ existing EPDM production facility also located in Triunfo.

“Lanxess’ ongoing search for alternatives to fossil fuels underlines its commitment to 12 | Biorefining Magazine | november 2011

reducing carbon dioxide emissions through sustainable production,” says Guenther Weymans, head of Lanxess’ technical rubber products business unit. “We are very excited that our Brazilian plant will be the pioneer for biobased EPDM.” Lanxess’ facility in Triunfo produces 40,000 metric tons of regular petroleum-based EPDM rubber annually and it’s expected that the company’s first batches of biobased EPDM will amount to several hundred metric tons. The company’s other EPDM production sites are based in Geleen, Netherlands; Marl, Germany; and Orange, Texas. According to Lanxess, all of its EPDM grades will be sold in the future under the brand name Keltan with its biobased grades marketed under the brand name Keltan Eco. “Lanxess will contribute to broaden its portfolio of renewable chemicals’ clients,” says Marcelo Nunes, Braskem’s renewable chemicals director. “This agreement will bring

the benefits of green ethylene to other important applications and markets. Lanxess has extensive automotive experience and an excellent reputation in this market, which makes it an ideal partner.”

Although used predominantly for rubber-based components in the automotive industry, EPDM is also used in the plastics modification, cable and wire, construction and oil additives industries. Its beneficial properties include low density, a resistance to heat, oxidation, chemicals and weathering as well as solid electrical insulation properties.

In addition to including biobased forms of EPDM, Lanxess intends to use renewable sources for the production of butyl rubber, a material predominantly used in the tire industry. Together with Colorado-based Gevo Inc., Lanxess is developing isobutene, a key raw material needed in the manufacture of butyl rubber, derived from Gevo’s corn-based isobutanol. —Bryan Sims

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Professor formulates plan using flood plains for biomass production Marginal lands are not necessarily areas where it is difficult to grow crops. Shibu Jose, a professor at the University of Missouri and director of the university’s Center for Agroforestry, estimates there is nearly 116 million acres of marginal land along corridors of the Mississippi and Missouri Rivers. “We do have perhaps the nation’s most productive agricultural land in this corridor, but the

A Positive Evaluation

Virent’s renewable gasoline successfully completes road trial Royal Dutch Shell recently tested the impact of Virent Energy Systems Inc.’s biobased gasoline on vehicle engines. The results of the evaluation show that the renewable fuel caused “no harm” to vehicles when compared to conventional gasoline.

To complete the road trials, Shell used five identical pairs of vehicles. One vehicle in each pair was fueled with petroleum gasoline; the other was fueled with a mix of petroleum gasoline and Virent’s biobased fuel. Each car was then driven approximately 6,000 miles. At the end of trial the engines of all 10 cars were dismantled and inspected. Regardless of the fuel used, all engines were found to be in the same condition.

Aaron Imrie, Virent’s commercial manager of fuels, says that the successful completion of the trial is an important achievement for this company. “We had a lot of confidence that we would be successful in completing this first road trial,” he adds, noting that Virent’s

flood plain also has some of the most sensitive land in the country,” Jose says. “We call it a flood plain for a reason. They get flooded frequently. The land is marginal in the sense that it is frequently flooded and has a high potential for erosion when you do row cropping.”

Owners of these lands generally plant row crops, such as corn or soybeans. This means the soil is disturbed at least once a year. In the event of a flood, soil from the disturbed land is more easily eroded, impacting the quality of the land and river water.

Jose is proposing that this vulnerable land be used to produce biomass feedstocks, such as switchgrass, miscanthus, cottonwood or willow. He says the cultivation of these crops is less risky, as the land rarely has to be dis-

turbed for replanting. The biomass crops are also much more tolerant of flooding conditions than traditional row crops, which means that the farming community will be less vulnerable to losing their crops.

Jose is currently working to establish a consortium of stakeholders along the corridor. He is working to get the entire supply chain involved, from land owners producing the biomass, to the refiners who are processing that biomass into fuel, and the consumers who use it. “When we looked at this region, we could not find a lot of effort [being put] into bringing key players to the table to talk about issues related to the biobased economy,” Jose says. “If we can work together, we can make this bioeconomy happen faster.”

—Erin Voegele

renewable gasoline is a drop-in biofuel that is nearly identical to fossil gasoline on a molecular level. According to Imrie, the trial demonstrated that Virent’s renewable gasoline essentially performs identically to conventional gasoline. “That is exactly what we were hoping to see,” he says.

Additional testing will need to be completed to certify Virent’s fuel for deployment

in the U.S. That testing will be done through engagement with the U.S. EPA. “We’ve started those discussions,” Imrie says. “There is a fairly lengthy process for getting a new fuel approved in the U.S. At this point we’re ready to do what the EPA calls Tier 1 testing. That is similar to the fleet trials in the U.K…and it focuses primarily on the exhaust emissions as well as the evaporative emissions.” —Erin Voegele

PHOTO: VIRENT ENERGY SYSTEMS INC.

A Soggy Solution

Going the Distance Members of the Shell and Virent teams look over the fleet used in the road trial. november 2011 | Biorefining Magazine | 13

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Equipping the Cellulosic Future

Inbicon A/S, a Danish cellulosic ethanol technology developer, has signed an agreement with Metso Paper Sweden AB. Under the agreement, Metso will supply equipment for Inbicon’s biorefinery technology. The two companies will cooperate in designing and supplying full-scale industrial equipment by combing Metso’s fiber processing technology with Inbicon’s cellulosic ethanol technology.

Inbicon CEO Benny Mai notes that the agreement is important to his company and its future plans. “We have worked closely with Metso for some time now, which started with common testing of their equipment with our technology,” he says. “Further we are convinced that we both, with this agreement, have taken the final step in up-scaling the technol-

The DOE Looks in the Mirror

Department, Chu hold first-ever strategy review In his opening comments to the U.S. DOE’s first Quadrennial Technology Review, a report inspired by the Quadrennial Defense Review, Steven Chu, energy secretary for the DOE, told it like it is. “During this time of hard budget choices and fiscal challenges,” he says, “we must ensure that our work is impactful and efficient.” Or, as Chu infers, the DOE must spend wisely. Chu said the question is, “How should the department choose among the many technically viable activities it could pursue?” The QTR is here to help guide those decisions, and according to the DOE, the QTR could do so for a multiyear time frame.

The technology review was driven by six energy strategies, says Steven Koonin, undersecretary for science at the DOE, which in14 | Biorefining Magazine | november 2011

PHOTO: INBICON A/S

Inbicon, Metso to mesh technologies, design second-gen equipment

Scaling Up Inbicon has been operating a demonstration plant in Denmark since 2009. The equipment supply agreement with Metso will help move Inbicon’s cellulosic technology to commercial production.

ogy enabling bioethanol producers to build second-generation bioethanol refineries. We are now ready to deliver the process technology and Metso the equipment to commercial-

size refineries for second-generation bioethanol.” —Erin Voegele

clude increasing vehicle efficiency, electrifying the vehicle fleet, increasing building and industrial efficiency, modernizing the grid, deploying clean electricity, and deploying alternative hydrocarbon fuels. The technology for each energy strategy is looked at based on three criteria, maturity (technologies that could be deployed at commercial scale within a decade), materiality (technologies that could have national impact within two decades) and market potential (technologies that could be adopted by relevant markets, in a framework that is predicated on the combination of economics and public policy).

So what did the DOE conclude after the first ever review? To start, a lot of what we already know. “Reliance on oil is the greatest immediate threat,” the review stated, and because of that, the DOE concluded that it “is underinvested in the transportation sector relative to the stationary sector.” Specifically, the review says, “we found that too much effort in the department is devoted to research on technologies that are multiple generations away from practical use,” all at the expense of

work that could be done to influence the private sector in the nearest term.

“Since advanced biofuels do not yet have cost parity with petroleum products,” the review also mentioned, “their short-term economic viability will continue to depend upon government policies.” The DOE believes its role is to provide technical knowledge and analyses, such as the Billion Ton Study, for both government and private entities, including the fuels and automotive industries. And although the review noted the need to work on near-term solutions, it also pointed out the necessity of working on game-changing technologies in the transportation sector, providing engineered plants that house cellulosedegrading enzymes or catalysts for pyrolysisbased pathways as worthy endeavors.

In addition to game-changing technology, the DOE will also support work done to gather and transport bioenergy feedstocks, but the same cannot be said for bioproducts. “DOE will not support the development of bioproducts,” the department says, at least not “in the absence of fuels production.” —Luke Geiver

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Establishing a uniform intermediate feedstock standard for algae

Like John D. Rockefeller accomplished with the creation of Standard Oil, Californiabased algae technology developer OriginOil Inc. believes that specification standards are necessary for the burgeoning algae industry.

To make this a reality, the company is working with the U.S. DOE’s Idaho National Laboratory to develop standards for converting biomass, including algae, in an effort to pro-

Powerful Names Unite

USESC urges support for alternative fuels, stronger infrastructure The only title missing from the member list for the United States Energy Security Council is a former U.S. President. The list is impressive and includes former Nobel Prizewinning scientists, U.S. Navy, Army, defense and agriculture secretaries, former senators, former major oil company executives and other familiar names such as Alan Greenspan, former chairman of the federal reserve, and Stephen Hadley, former national security advisor. Robert “Bud” McFarlane, former national security advisor during the Reagan administration, spoke with Biorefining Magazine about what all the big names add up to.

The simple answer is something we’ve all heard before: the USESC is concerned about the nation’s dependence on foreign oil, McFarlane explains. But that simple answer is more complex than many think. “Because that single fuel moves roughly 97 percent of all air, sea and land transportation, it is really the foundation—the lynch pin of our entire economy,” McFarlane says. The economic risk of purchasing so much foreign oil not only makes us vulnerable “to the whims” of

vide direction for designing equipment and products to meet this standard.

Working with the Pacific Northwest National Laboratory and National Renewable Energy Laboratory as part of the U.S. DOE’s Biomass Program, OriginOil’s collaboration with INL will focus on utilizing a process demonstration unit at INL to determine how algae could add energy content in combination with other feedstocks such as woody biomass and other herbaceous materials that are currently used in various biochemical and thermochemical processes.

While the original focus of the program was on terrestrial biomass, OriginOil plans to work with researchers at INL to extend the concepts to include algae, according to Paul Reep, OriginOil’s vice president of

technology intimately involved in the collaboration.

Reep says he envisions that once a correct formulation is established, the combined functional groups and net-energy value of the entire formatted feedstock comprised with portions of algae material will be greater than the sum of the individual parts.

“The big-picture idea behind this program is to set up a series of depots around the country where different types of materials that are more indigenous to one specific area could be combined with other indigenous materials from another area, and create uniform feedstocks that could then be shipped and transported to biorefineries,” Reep says. “It’s these depots that are the intermediate step in that going-to-thebiorefinery process.” —Bryan Sims

OPEC countries, but it also displaces an enormous amount of money away from the U.S. That oil money, he says, “is recycled back to purchase American companies and influence over the American government.”

But as bad as that sounds, there is good news. “Unlike 40 years ago when we faced this thing, today you really could introduce alternative fuels,” he says.

And that, McFarlane adds, is exactly why the USESC formed. “It is a matter of getting these alternatives to be viable options, not in terms of technology, but in terms of infrastructure and production levels,” adding that when he goes to hedge funds or investors BioBud Robert McFarlane will join a group of former high-level officials and urges them to invest in these to alter the energy landscape in the U.S. things, he gets the same answer.

“They say, Bud, we get it—they work list is impressive. As McFarlane explains, are all proven.” those networks include academic circles at To do their part in supporting alternative Stanford University, the science and technolfuels and achieve their goals of influencing ogy community linked to Lockheed Martin, Congress to do the same thing, McFarlane or through John Hofmeister, former Presiand the other members are tapping into main- dent of Shell Oil North America. “Wow,” stream media (The New York Times or The Wall McFarlane says, “there is somebody that will Street Journal) by writing op-ed pieces, doing get attention when the industry that is most interviews with magazines such as Biorefining opposed to competition is standing up and Magazine, or he says, by reaching out to the saying we have to do this.” We agree, Bud. networks the members are already connected —Luke Geiver to. Like the list of member names, that netnovember 2011 | Biorefining Magazine | 15

PHOTO: USESC

Upstream Standardization

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Studious by Nature

How a BP-sponsored grant will optimize biomass use Determining how best to use a type of biomass material and in what application is sort of like figuring out which herb or spice is appropriate for a dish being cooked in the kitchen. This was the corollary that five undergraduates from the University of Illinois at Urbana-Champaign originally drew when they titled a proposal, “The Engineering Spice Box,” for a $5,000 grant given by BP to the university’s Energy Biosciences Institute, an industry-university partnership sponsored by BP with UI and the University of California at Berkeley, to research engineering properties of biomass. The students wrote the grant to develop a virtual database that would explain to end users the properties of different types of energy crops such as sorghum, miscanthus,

Project Financing: the Insured Way

Insurance packages could be the next tool to mitigate technology risk If you’re worried about technology risk ruining a project’s ability to receive financing, don’t be—just get insured. That is what Mark Reidy, partner at Mintz Levin, and John May, managing director for Stern Brothers, would suggest anyway. The pair is working to develop an insurance package for advanced biofuels technologies that would help to mitigate the risk associated with novel technology. “The general idea is that you pay a premium of something like 5 to 10 percent of the Capex (capital expense) costs associated with the technology alone, and then,” May explains, “in return, you get a performance warranty that would last from project finance close through 5 years.” This would act in place of a technology wrap often given by an EPC contractor.

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switchgrass, willow and energy cane, and their value for advanced biofuel, biochemical and other forms of energy production.

According to Luis Rodriquez, a professor at UI’s agricultural and biological engineering department overseeing the student-run project, the grant is being used to examine the specific properties of biomass itself such as moisture, the breaking point of each crop (if the material is hard and brittle or elastic and flexible), the compressibility of each crop and the angle of repose (the angle at which the material falls naturally, which determines how much can be stored in a given area). The students have worked with BP for four years, previously focusing on developing drop-in advanced fuels from biomass. Rodriguez says the project has since shifted focus to broader upstream utilization of biomass.

“Now, I think we’re looking at a wider suite of uses such as biomaterials, and certainly biopower is a big one as well,” Rodriguez tells Biorefining Magazine. “It’s that diversity that’s really necessary to get these things off the ground, and the students working with me are very aware of that, and I think that’s why

they decided to take this challenge upon themselves—to try to enumerate these engineering properties of biomass.”

Rodriguez adds that the students anticipate biomass properties will change, depending on the form the biomass is in, which will tell them how it could potentially be used in biorefining applications.

“If they’re successful, they should be able to distill a finite set of numbers describing the biomass with an understanding of those quantifiable values that we use to measure the biomass, one might be able to select from a number of preatreatment options whether it’s a chemical decomposition of the cell well and so forth,” Rodriguez says.

The research project will take approximately one year, and the funds will be used for research equipment and presentations. With the help of the BP grant, Rodriguez says the students will present their research in a display at a campus open house for the agricultural and biological engineering department.

—Bryan Sims

The idea, to mitigate risk stemming from technology that’s never been utilized at a commercial scale, is actually nothing new. “There are insurance companies out there that have already issued policy guaranteeing performance on technology for wind and solar,” May says.

“The question is, can we push it to get technology risk insurance for advanced renewables?”

That shouldn’t be a problem because Reidy says the project finance super team has already pulled out roughly 50 of the most promising bioenergy-based companies that had applied to various U.S. DOE loan guarantee programs and were still on the waitlist, all to help them seek out insurance packages from companies like AIG and others. Why? Because some believe the loan guarantee and government-backed finance programs that have helped previous advanced bioenergy projects receive the necessary funding are coming to an end, mainly because the congressional super committee with plans to make huge deficit cuts doesn’t bode well for government-based project finance renewal.

May’s work with first-generation biofuels plants, and his innovative financing approach based on bond-financing led the team to seek out new insurance packages. “Our focus is on

project finance debt and on the indisputable truth that whoever the player is at the early stage,” he says, whether it is a VC or a strategic investor, “they are not going to do all equity forever. Project finance debt is an inevitable thing that has to be accomplished.”

Given that truth, as May explains it, combined with what May learned from first-generation biofuels plants—that no project was high on the credit-quality scale—he and Reidy (and others on their team) set out to form the bond financing mechanism that was creditenhanced by government loan guarantees.

With the loss of those loan guarantees that essentially acted as credit enhancers to projects, May and crew needed to find an alternative to serve as a credit enhancer in the event that scheduled government dollars allocated to successful biorefining loan guarantee projects were nixed. “The more tools we have in our toolbox to mitigate risk,” May says, “the better likelihood of actually getting a project financing done.” And Mays has the proof to back up his stance on mitigating risk. “The reality is there is hope,” he says, because his team will be closing on an advanced biofuels project this year “that is going to be done in a replicable fashion.” —Luke Geiver

Renewable Cars Vehicles get greener with biobased components

Ford Motor Co. is working to increase the use of renewable materials in its vehicles. The carmaker recently announced it has teamed up with BASF to develop a caster oil-based foam product for use in the instrument panel of the 2012 Ford Focus. According to Ford, the castor oil blend is more durable, and minimizes component stretch to help optimize airbag deployment. The new foam also takes less time to produce, achieving higher manufacturing productivity.

“Castor oil from plants helps deliver sustainable interior foam that reduces petroleum

use while improving vehicle craftsmanship,” says Bari Brown, Ford advanced product development engineer. “It’s beneficial both for the customer and Mother Nature.” Over time, Ford plans to incorporate the castor oil-based foam into more products in its portfolio.

Ford also recently announced the introduction Replacing Petroleum Foam Ford Technical Leader of Plastics Research of new head restraint foam, Debbie Mielewski observes a polyol separation in the laboratory. in which 25 percent of the polyol is replaced with soy. The product was foam in the head restraints, while all Ford veintroduced in partnership with Lear Corp. hicles built in North America use biobased According to Ford, 75 percent of its North foam content in the seat cushions and backs.

American-built vehicles now feature biobased —Erin Voegele

Gateway to a Multi-Biomass Approach

PHOTO: AQUAFLOW BIONOMICS CORP.

Both companies are testing and evaluating projects that bring together Aquaflow’s unique algal capability using an integrated hydropyrolysis and hydroconversion (IH2) technology for the production of green gasoline, diesel and jet CRI acquired the exclusive global subliDiversified inputs in novel fuel. censing rights for the IH2 technology from thermochem platform Des Plaines, Ill.-based nonprofit organization Gas Technology Institute where the technoldrive commercialization ogy was originally developed.

According to GTI, IH2 technology is an Nonfood cellulosic materials such as corn advanced pyrolysis technology that uses lowstover or wood biomass may receive much pressure hydrogen together with a proprietary feedstock attention in the advanced biofuels catalyst supplied by CRI that removes virtually and biobased chemical projects, but compa- all of the oxygen found in biomass and pronies such as New Zealand-based Aquaflow duces finished cellulosic gasoline and diesel Bionomics Corp., together with Texas-based hydrocarbon blendstocks. No external hydrocatalyst developer CRI Catalyst Co., believe gen is required because what’s needed is prothat taking a multi-biomass approach to in- duced in process. Since the process produces clude algae in the mix will maximize the true its own hydrogen and a surplus of water to be biorefining potential to market. self-sufficient, the IH2 technology is capable of operating in a stand-alone configuration or can be integrated into existing industrial biorefining applications. According to GTI, yields have ranged from 26 to 46 percent depending on the feedstock used.

Since last year, GTI and CRI have collaborated on refining GTI’s IH2 technology when GTI received funding from the U.S. DOE’s Energy Efficiency and Renewable Energy Office of BioAlgae Allure Aquaflow director Nick Gerritsen (foreground) and Paul mass Program under the integrated Dorrington, chief technical officer, believe a mix of feedstocks that biorefinery initiative to support includes algae will drive the commercialization of advanced biofuels.

a pilot project in Des Plaines. Aquaflow and CRI have supported this development with their participation in the DOE-funded project.

Other participants, besides CRI and Aquaflow, are Cargill Inc., Johnston Timber, Blue Marble Energy, National Renewable Energy Laboratory and Michigan Technological University.

Outside the scope of the DOE-funded project, GTI anticipates scaling up to a 1-ton-perday pilot facility, which is expected to open in 2013 with commercial introduction of the technology expected by 2014.

“Initially, we’ll focus on setting up a demonstration facility, most likely in the U.S., and from this base we will expand into the project opportunities currently in the Aquaflow pipeline across a number of geographies,” says Aquaflow director Nick Gerritsen.

Gerritsen says Aquaflow and CRI have developed a strong partnership and a shared vision for the future of renewable fuels, adding that the agreement with CRI is the culmination of four years of work that Aquaflow has been doing behind the scenes.

“Aquaflow is one of the first companies in the world to take this broader approach to incorporate algae in feedstocks to enable the near-term production of drop-in fuels and chemicals,” Gerritsen says. “This approach gives us the flexibility to develop a multibiomass feedstock mix specific to available resources worldwide. We believe this is a significant advance for algal biofuels over lipid extraction approaches to diesel and jet fuel.”

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PHOTO: FORD MOTOR CO.

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Valero Energy Corp.’s investment in the advanced biofuels sector benefits startups and lends an increased aura of confidence to the industry

By Erin Voegele

While members of the first-generation biofuels industry and those in the petroleum industry have too often been poised as competitors, the growing presence of petroleum companies in the advanced biofuels sector is actually helping many startups expedite the scale-up process. One company that has traditionally

been active in petroleum refining has been particularly supportive of second- and third-generation biofuel companies.

Valero Energy Corp. has made investments in a variety of biorefining operations that target the production of a wide range of fuel molecules.

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fuels technologies,” Day says. “We have some investments with companies that are making things like synthetic fuels from algae, or making fuels from landfill waste. We have some investments in companies that are working on cellulosic ethanol technologies, and we are working with a company called Darling International to process a type of renewable diesel fuel at one of our petroleum refineries.”

Day explains that Valero doesn’t do a lot of research and development itself; however, the refiner does make a lot of investments with companies that are actively pursuing the development of new technologies. To date, Valero has made investments in the Darling International Diamond Green Diesel project, Solix Biosystems, Mission NewEnergy Ltd., Terrabon Inc., ZeaChem Inc., Mascoma Corp., Enerkem Inc., Algenol LLC and Qteros Inc.

Motivating Factors

According to Day, a primary motivation behind Valero’s investments is its desire to take part in the future of the fuels industry.

“We want to make sure that whatever comes next, Valero is part of it,” Day says. “I don’t thing anybody is certain yet what the fuel of the future will be, but all these technologies are very exciting and any of them has a chance to be an important part of the way Americans make transportation fuel.”

“We think of ourselves as a fuels manufacturer,” Day continues. “We take in a raw material, whether it’s petroleum, corn, animal fat, wood pulp or switchgrass. We turn that raw material into valuable clean burning transportation fuels. We are not an oil company, we are a fuels manufacturer. Whatever the future is going to be, Valero wants to be part of that future.”

According to Day, Valero looks for investment opportunities with companies that have good track records, both in terms of the research they have completed and their business model. “For proprietary reasons I can’t really get into specific factors that we look at, but we do a lot of research and are very selective in making our investments,” he says.

The renewable fuels standard has also

PHOTO: Terrabon Inc.

Valero first entered the biofuels space several years ago, and purchased a total of 10 corn ethanol plants. “We realized that ethanol was going to be an important part of the fuel mix going forward in this country; that the demand for ethanol wasn’t going away,” says Bill Day, Valero’s executive director of media relations. “So, Valero looked for a couple of years for opportunities to get into the ethanol production business. We were required as a refiner to have ethanol in our gasoline.”

Although Valero is an independent petroleum company, Day stresses that his company does not consider itself an oil company.

“We are a fuels company,” he says. “We figured we might as well be on the production side of [the biofuels industry], rather than just the buying and blending side.” After purchasing 10 plants out of bankruptcy, Valero is now one of the nation’s largest ethanol producers.

Since then, the company’s interest in biofuels has expanded to include next generation technologies. “We are making some selective investments in next-generation bio-

Proving a Process Terrabon operates a demonstration scale plant in Bryan, Texas.

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PHOTO: ZeaChem Inc.

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Building a Biorefining Future ZeaChem’s cellulosic technology can be used to produce a wide variety of fuels and chemicals.

been a factor motivating Valero. Valero first got into the biofuels business because the company anticipated that demand for ethanol would be increasing. “With the renewable fuels standard being in place, we saw a growing demand for ethanol,” Day says.

Regarding the corn ethanol plants Valero purchased, Day notes that his company was able to improve the facilities and increase their efficiencies by increasing the output of the 10 plants by a total of 100 million gallons. “Those plants have been profitable in every quarter since we brought them back in 2009,” Day continues. “That’s something that we are proud of. We were able to take something that was kind of a questionable business model for some of the companies, and turn it into a profit center for Valero.”

The refiner’s first generation plants may also offer opportunity as the industry moves to second-generation technologies. “With each of the plants that Valero bought out of the bankruptcy, one of the things that we liked…was that they are all relatively new,” Day says. “They have up-to-date technology, and they are on sites that allow for expan-

sion. One of the things that we have looked at is that as cellulosic technologies become available, we could add those technologies as bolt on equipment to the existing corn ethanol plant—not to replace corn ethanol production with cellulosic [production], but to add it on and do it in conjunction.”

While cellulosic biofuel technologies are still working to reach full commercial production, it is highly possible that Valero could add them to its existing ethanol plants in the future. When cellulosic technology is available and when it can be done on a large commercial scale, we’ll have the sites already in place that that have the necessary infrastructure and already have the personnel, Day says. “All of that Waste-to-Fuel Leader Terrabon CEO will be ready to go.”

Impacts of Investment

Valero is poised

Gary Luce says that Valero’s investment in his company brings strategic value and credibility to Terrabon’s projects.

to experience obvious benefits through its investments in advanced biofuels technologies. However, the companies the refiner partners with are also able to leverage a range of advantages that a traditional venture capital group might not be able to provide.

Terrabon is one such biorefining company that is benefitting from Valero’s investment. The company is working to scale up a technology that ferments biomass feedstock—primarily municipal solid waste— into organic acids that can be further refined into chemicals and fuels. Terrabon has been operating a 150,000-gallon-per-year demonstration plant since 2009 and expects to have a 5 MMgy commercial plant operational by 2013.

According to Terrabon CEO Gary Luce, Valero signed on to invest in his company right after the first phase of its demonstration scale facility was up and running. At that time, Terrabon was focused on converting energy crops—sorghum—into biofuels, Luce says. “What they wanted to do was take the organic acids that we were creating and actually create a fuel that they could test in november 2011 | Biorefining Magazine | 23

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PHOTO: ZeaChem Inc.

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Demonstrating Success ZeaChem’s 250,000 gallon demonstration plant in Boardman, Ore., is scheduled to begin operations during the fourth quarter of 2011.

their labs. That’s what we did, and that’s kind of where they came into the process.”

Luce notes that Valero is slated to be an off-take partner for its future commercial-scale refinery. But, Luce points out that the company offers benefits far beyond the purchase of fuels. “I think from a strategic standpoint, there is a different level of value they add,” he says. “One is just credibility. Those guys are smart, so it gives credence to our technology. They also have a big presence in the energy space, so as we are trying to figure out how to deploy our production into the market; what the mechanics of marketing are; and what the regulations and rules are that we need to make sure we have qualified through, they work with us on that.” Luce stressed that Valero has worked with Terrabon to support a USDA loan guarantee and other government funding opportunities.

There are also technical advantages. “They can take a look at our engineering designs and offer access to other market participants [such as] EPC firms or other types of vendors,” Luce says. “They make great introductions [to those parties].” While venture capital funds are primary looking for strong returns on investment, strategic investors like Valero are also concerned with how an investment can impact their value chain, Luce says. For example, the fact that Valero has positioned itself through its investments to potentially off-take cellulosic and advanced biofuels will bring added benefits to the company beyond investment returns as the volume requirements of the RFS2 ramp up.

Luce also points out that having a strong industry investor like Valero onboard with your project can drastically improve your ability to finance a project. The industry now is evolving to a point for many, like us, Luce says, where technology really isn’t an issue anymore; finding equity to build a plant isn’t really an issue anymore. “The real issue is how do you get debt on one of these plants,” he says. “One way that you try to credit enhance a project is with [feedstock supply and off-take agreements].”

In addition, Luce says that as a true independent refiner, 24 | Biorefining Magazine | november 2011

industry |

Valero offers a different perspective and different expectations than a global, vertically integrated “Big Oil” company. “They are true independent refiners, so they really better understand, I think, their market costs and how they participate,” Luce says. “They have been a [strong] partner as we have moved along.”

Valero has also invested in ZeaChem, which uses a specialized microorganism to convert biomass into a wide range of chemical and fuel molecules. The company is currently developing a 250,000 gallon per year demonstration plant, and is targeting to begin development of a 25 MMgy commercialscale plant in 2012.

Valero made a strategic investment in the company during its Series B round of funding, which took place a couple of years ago. “We found Valero is very, very helpful,” says ZeaChem CEO Jim Imbler, noting that part of the relationship between the two companies will include an off-take agreement for fuel.

“What has been great about Valero as a

partner is they are extremely focused on first commercial,” Imbler says. “They want to see things get built that make money. They’ve been a big help to us in a number of things; getting validation, getting engineering advice.” Like Luce, Imbler stresses that venture capitalists are primarily focused on the exit, Valero is more concerned with the entrance.

“Your VCs are looking for how do we get the most money out of this investment,” Imbler continues. “About the time they are realizing what they want to do, Valero is just starting to get excited, because Valero wants to own operations. What you have with a strategic [investor] is generally a very long-term outlook, a very stable outlook, a very disciplined outlook, and somebody who can provide you with some good feedback.”

“I find that having those kinds of companies in our deal is very, very helpful,” Imbler says. “There are very rigorous, very disciplined, they are very execution oriented, all things that kind of fit our style, and they are also very focused on making molecules that make money. That’s a good thing for people

to focus on. I think sometimes in startups people can get to excited about the love for the science or the technology, but really at the end of the day, you better make something that somebody wants to buy and you better be able to do it for less than they want to pay for it.”

Investments from strategic investors are obviously benefiting the biorefining sector, and Valero is showing no signs of slowing down. Day confirms his company is continuing to seek out new investment opportunities. “We are looking all the time,” he says.

“We evaluate many, many projects. We don’t get involved in all of them that we look at, but we do evaluate a lot, and not only with our existing business lines, but we are also interested in whatever is coming next.”

Author: Erin Voegele Associate Editor, Biorefining Magazine (701) 540-6986 evoegele@bbiinternational.com

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|

PROGRESS

BP’s Tropical BioEnergia biofuels joint venture was established by Santelisa Vale, the second-largest sugarcane crusher in Brazil.

PHOTO: BP PLC

28 | Biorefining Magazine | november 2011

PROGRESS |

The

BP Biofuels

Story

Perspectives from the president on RFS2, Florida and green beginnings

By Luke Geiver

The call from President Obama for the U.S. to develop a clean energy economy seemed like the perfect rallying cry for rival energy crop companies and competing advanced biofuel developers, giving virtually everyone in the bioenergy world an idea to agree on. That idea, to move away from nonrenewable

energy sources, to create jobs through wind farms, solar complexes, biomass power plants or biorefinieries seem to include the oil majors. But Sue Ellerbusch, president of BP Biofuels North America, didn’t care, and she didn’t need a call for action from the president. Ellerbusch, who has been with BP for 20-plus years mostly in the chemical and the fuels industries, joined the biofuels business five years ago at BP when she says it was about a dozen people in the U.K. trying to figure out who or what they wanted to be. “I came to the U.S. four years ago to really make what we wanted to be on a piece of paper a reality,” she tells Biorefining Magazine.

november 2011 | Biorefining Magazine | 29

PROGRESS

That reality for Ellerbusch, who admits she gets passionate about and excited to explain, is all about cellulosic ethanol production and her team’s quest to make it happen in the U.S. Ellerbusch discusses her passion, her role as president of a company whose name doesn’t seem to fit with the word biofuels and what she believes BP’s presence in the biofuels landscape can mean for the country—and how it might play into that idea of a clean energy economy. She talks about the story of Highlands Ethanol and what it reveals about BP Biofuels’ dedication to the advanced biofuels industry.

Green Beginnings

The best way to describe the landscape of Highlands County, Fla., is with images of vast green, grassy fields, grazed through by roaming cattle or matted down by heavy rain, scrub trees scattered across the land in no relevant pattern and marsh acres mingled throughout. The story of Ellerbusch and her team starts there—sort of. Through a partnership that includes one of the country’s largest landowners, BP Biofuels is working to build a cellulosic ethanol facility that many may not even know of, which will put roughly 20,000 acres previously unused or unable to sustain consistent agricultural practice into use as an energy cane farm, and a location for a 1,000-ton-per-day, 36 MMgy cellulosic ethanol plant. The facility represents the center of Ellerbusch’s current universe.

Chuck Grawey, general manager for the Highlands project, says the venture is made up of the best of both worlds, and he even says that the team is solving problems that other competitors don’t even know they have yet. As Grawey infers, the work at Highlands is a team effort, and although the facility will be the first advanced biofuel production site ever constructed in the U.S. by an oil major, the story of BP Biofuels is also about a demonstration facility in Jennings, La., and a global technology research and development site in San Diego. Or, as Ellerbusch says, the story of Highlands shows that even companies with a “B” and a “P” in the name believe that cellulosic biomass has a place in the renewable fuel pool. To the critics, Ellerbusch says: “This is an industry that is ready to be built up, and the technology is

30 | Biorefining Magazine | november 2011

viable today. We are making cellulosic ethanol in Jennings so we know it can work,” she says.

“We are proving that the feedstocks exist and you can farm this and make it very viable—and I want people to know that.”

The facility in Jennings, which BP bought from then partner Verenium for $98.3 million, gave Ellerbusch and her team a unique opportunity, she says, which was also something they were focused on well before the disaster in the Gulf.

In addition to the 1.4 MMgy demo facility, BP also acquired the rights to research and development facility in San Diego, now named BP Biofuels Global Technology Centre. “With Model to Follow Like all oil refineries, the East plant of the Texas City, Texas, BP refinery takes in crude oil and pumps out a host of energy products.

San Diego and Jennings, we have the ability to prove things out at a small research so that we can bring this industry to material scale and then we can bring it to an operat- scale as soon as possible,” she says. ing facility and scale it up, and learn about operations that then transfer to an engineer- Major Perspectives Say what you will about the oil major’s ing team.” She says the engineers can then use all that information in combination with involvement with biofuels, but according to BP’s long heritage of engineering and con- Ellerbusch, the story of Highlands highlights structing refineries across the world to de- what the energy giant thinks about biofuel sign and build the Highlands facility. “It is a use in the future. That story, however, isn’t unique capability in the industry,” she says, just about what she and Grawey think—it’s “and one that we are trying to continue to about what they’ve learned.

Twenty years spent in the chemicals and build on and leverage within the U.S.” It’s that sentiment that helps reveal the fuels business didn’t leave a lot of time for passion of Ellerbusch and why her role as Ellerbusch to spend in the agricultural secpresident could last longer than the time it tor, but her time in Florida, San Diego and takes to build the facility in Florida. “We can Jennings has helped her catch up. “I didn’t build a series of units along the Gulf Coast know anything about farming before I came

PHOTO: BP PLC

|

PROGRESS |

into this role,” she tells Biorefining Magazine, “and I’ve been tremendously impressed about the quality of people in that industry, their entrepreneurial nature and their real desire to bring a domestic energy source to the U.S.” Lykes Bros. Inc., an agricultural partner in the Florida project and also one of the largest private landowners in the U.S., is one of the farming groups that Ellerbusch says her team has learned a lot from. Joe Collins, vice president of Lykes Bros., says he knew about growing energy crops for a long time, and the partnership with BP gave his company a reason to grow in Florida. Along with Lykes Bros., Ellerbusch says other farmers and landowners in the U.S. that she has met with have been really interested in trying to find a way to help create the new 12- to 15foot tall energy cane farming approach, an effort that is a project in itself, she says. And it makes sense, given Ellerbusch’s indication of the impact of what such a farming approach and fuel production area could mean to the communities that adopt such practices; jobs and the resulting regional economic impact that come from them, or, as she characterizes it, the most exciting part about her biofuels work.

The team in Florida will have planted 1,500 acres by year’s end, and completed the

preparation for 3,500 acres. Even as Ellerbusch was learning, she explained that owning the intellectual property and technology rights to the entire technology process, combined with her company project’s own farming model, does certainly give BP an advantage that very few other advanced biofuels companies can match. But she still sees the importance of partnering.

“I think this is an industry that will be built off of partnerships,” she says. “We chose to purchase our partner out, but when we first came together, we had envisioned the possibility of being in biofuels, but we never really had a way of getting there because we didn’t know the technology, we didn’t have any projects, and we didn’t have any feedstocks—so we found somebody that did.” She believes the partnerships between the oil majors that have already developed will only continue, a trend she says “is another proof point for the legitimacy and ability of this industry starting to form.”

It might seem like a perfect world for Ellerbusch, given the resources she has that include nearly every project developer’s wish-list items: an R&D facility, a large demonstration-scale facility to test out the work at the R&D facility, a farming model and the land to grow, and the heritage of a company with a nearly unrivaled ability to build

facilities that take something in and churn product out, product that can affect a global marketplace, on top of two letters—BP— that would seemingly excite anyone to work with her team for name recognition alone.

But Ellerbusch explains that this would be wrong because even BP needs to know that its products have a secure endpoint. “This is a nascent industry and we do need to see stability,” she says. “We are not going to invest with the hope of something—we need to see that there is a viable market.” The main thing they hope to see, she says, is a stable federal renewable fuel standard. And for other companies without the B and P in their name, they need this too.

“We need to see a clear path to the fact that there will be required volumes, targeted volumes for cellulosic,” she says. And for those who argue cellulosic fuels will never be, she would point to corn-based ethanol.

“Give it some time,” she says. “They had 30 years and we have had four,” referring to her work at BP. From her perspective, very few game-changing technologies are born overnight, so she wants people to realize that the industry is still in its infancy. “Don’t think you can kick us out of the house and tell us it’s time to feed ourselves, we are not ready to do that yet, we need a little bit of support.”

An oil major asking for support, however contradictory, seems to fit the status quo, but Ellerbusch argues that what her team is doing isn’t about the now, it’s about the tomorrow, a time when each site will create more than 200 permanent jobs and 600 to 800 construction jobs during the build.

“I just ask people to believe in the idea that you have companies like us and others that are really making progress,” she says. The Highlands facility will begin major construction in 2012, which means the story of BP Biofuels is far from over. One could say it has only just begun.

PHOTO: BP PLC

Author: Luke Geiver Associate Editor, Biorefining Magazine (701) 738-4944 lgeiver@bbiinternational.com

With Purpose A road tanker refuels at the renewables demonstrator site, Hornchurch Connect, Essex, U.K. november 2011 | Biorefining Magazine | 31

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PROFILE

Sky’s the Limit Greg Keenan, vice president of business development and engineering for Virent Energy Systems Inc., recognizes the inherent benefits of an emerging biorefining company like Virent aligning itself with a major oil company like Royal Dutch Shell.

PHOTO: VIRENT ENERGY SYSTEMS INC.

34 | Biorefining Magazine | november 2011

PROFILE |

Synergy by

Design Shell’s collaboration with Virent Energy Systems is propelling the firm to new heights in biorefining

By Bryan Sims

Forming a strategic partnership, joint venture or collaborative agreement with a major oil company isn’t a new concept for emerging biorefining firms in the effort to deliver advanced drop-in biofuels and biobased chemicals to the commercial marketplace. In fact, for many the move is a necessary—not an

optional—business decision. This was precisely the approach Madison, Wis.-based Virent Energy Systems took when it established a strategic partnership with Royal Dutch Shell in 2007 as Virent and Shell Hydrogen LLC, a Shell subsidiary, first launched a five-year joint development project to develop biomass-derived hydrogen systems designed for fueling station applications, says Greg Keenan, vice president of business development and engineering for Virent.

november 2011 | Biorefining Magazine | 35

|

PROFILE

“Historically, strategic partnerships have been always been a part of Virent’s business plan right from the beginning,” Keenan tells Biorefining Magazine. “We initially viewed it as we need to find partners to validate and really be the voice of the customer. I think that’s one of the great parts of the partnership we have with Shell.”

Co-founded in 2002 by Randy Cortright, Virent’s current chief technology officer, and James Dumesic, professor at the University of Wisconsin-Madison, Virent deepened its relationship with Shell and refocused its business strategy in 2008 to produce advanced biofuels such as drop-in biogasoline and light and heavy biobased distillate fuels such as diesel and biojet fuel, in addition to biobased chemicals, derived from soluble plant sugars via its patented catalytic BioForming technology. Invented

by Cortright and Dumesic, Virent’s BioForming technology platform combines aqueous phase reforming (APR) and traditional petroleum refining technologies to generate hydrocarbon molecules that look and perform similar to petroleum-based fuels and chemicals.

In June 2010, Virent closed on a $46.4 million Series C equity round led by Shell

with strong participation from existing partners such as Cargill Inc. and Honda.

With its new equity stake, Shell acquired a seat on Virent’s board of directors. The fiPetroleum Prowess nancing followed a Virent CEO Lee Edwards, with 25 years milestone in March of experience in the in which Virent anoil industry, says Shell nounced the suchas enabled Virent to achieve significant cessful startup of its milestones.

10,000-gallon-peryear “Project Eagle” demonstration facility in Madison.

Understanding that the company’s current and future successes and milestones aren’t exclusively reliant upon its strategic partnership with Shell, Keenan points how fast and more efficient the company is able to grow and mature alongside a major oil company like Shell. When Virent initially engaged Shell, he says, Virent only had about 20 people on staff. Keenan says today the company has roughly 120 employees, and he adds that Virent spent a lot of time and resources early on putting together a solid proof-of-concept prior to approaching

Shell that, in the end, would ultimately provide a competitive advantage for the young biorefining firm.

“From 2007 to 2009, Virent went from proof-of-concept to product demonstration,” Keenan says. “That’s unheard of in this industry. A company like Virent can’t do that by itself. It really was a combined effort.”

When the company first started testing its biogasoline, according to Keenan, the fuel could only be used in lawnmowers and that’s it. But, through technical validation and analysis, Virent was able to move quickly and optimize its fuel product because of Shell’s robust technical and market resources, not only domestically, but also globally.

“Back in 2007, when we solidified our partnership with Shell, there was a stigma on small start-up biorefining companies that it was risky to align themselves with big energy companies…that they would get lost in the shuffle or get squashed,” Keenan says. “We decided that was a risk we were willing to take and the rewards far outweighed the risks. We actually saw it as, if we didn’t partner with an energy company, that would be riskier than partnering with an energy company.”

PHOTO: ROYAL DUTCH SHELL

Multi-Pronged Benefits

Cane Claw Shell is no stranger to investing in biofuels such as with Raizen, a joint venture between Shell and Brazilian sugarcane and ethanol producer Cosan. Raizen can process 62 million metric tons of sugarcane into ethanol annually.

36 | Biorefining Magazine | november 2011

While the partnership between Virent and Shell may be primarily driven by commercializing Virent’s technology and its bioproducts, Virent CEO Lee Edwards points to three broad categories where Shell has enabled Virent to accomplish milestones over the course of the partnership. Edwards took the helm as Virent’s CEO in 2009 after a 25-year career holding several different executive positions while working for BP. Edwards is also chairman of the Advanced Biofuels Association.

The first, Edwards says, is access to funding for Virent to be able to invest in research and development in order to demonstrate scalability, yield and commercial benefit of the company’s technology.

“Our relationship with Shell has been strong and increasing since 2007,” Edwards says. “That, in part, is reflected in the funding that they’ve done to help our research and development and, most recently in May

PHOTO: VIRENT ENERGY SYSTEMS INC.

PROFILE |

Primed Performance Virent’s proprietary BioForming technology combines aqueous phase reforming and traditional petroleum refining technologies to produce drop-in advanced biofuels such as gasoline, diesel and jet fuels at its 10,000-gallon-per-year “Project Eagle” demonstration unit located in Madison, Wis.

2010, invested in our company as an investor. That’s clearly provided resources that we desperately need to deliver the full potential of the technology.”

It’s this added funding, Edwards says, that enables biorefining firms such as Virent to accelerate a development cycle in order to meet joint, prescribed milestones.

“We respect the size, strength and thoroughness of Shell, but as a startup, we are urgent and must move quickly and learn as quickly as possible so that we can continue to make progress,” Edwards says. “We work with the understanding that the nature of the risks and the investment uncertainties for big oil companies like Shell and others all need to be balanced with the urgent startup mentality that we need to prove and move rather than be complacent and just wait.”

The second is, given that Virent and Shell are collaborative partners, a large company like Shell understands the energy markets on a global basis like no other regarding long-term planning perspectives, intimate understanding of the supply chain, economics, engineering and technology, particularly as a global player in refining and marketing, something that Edwards says “is important because they provide a great deal

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of capability that doesn’t come from Virent expenses, but comes from their willingness to co-invest to help us, based on programs that we’ve worked on together with their technology teams based in Houston, Amsterdam and the U.K.” Edwards adds, “They’ve also been helping us a great deal on engineering and design. In some cases we would pay for this through third parties and in other cases you wouldn’t be able to access the capability that companies like Virent can access through strategic partnership collaboration.”

Admitting that it may be a bit esoteric, Edwards says how his third point illustrates that his company’s partnership with Shell provided it a significant degree of endorsement of potential and confidence within the biorefining sector; something that gives Virent an edge within a competitive and emerging market.

“In other words, it enables Virent to accelerate and attract additional investors who may see [the partnership] as a risk-mitigator—‘Well, if Shell is investing it’s easier for me to say yes because of the nature of what we’re doing and the scope of the opportunity that I see in Shell in terms of being a long-term investor in deploying the technology at scale.’”

PROFILE |

Another important area Edwards highlighted as a valuable benefit that comes with working alongside a major oil company is that Shell has extensive wherewithal when it comes to policy, and not just in the U.S. Shell is actively involved in energy policy globally and while Virent is focused on initially deploying its technology commercially in the U.S., Edwards says that with Shell’s help, it will be more educated on compliance issues prior to deploying its technology and delivering its future product to unfamiliar markets abroad.

“As a global player, they have a combination of market opportunity for new manufacturing and products that new customers will ultimately want, and they also have compliance obligations that are emerging based on regulatory and policy mandates,” Edwards says. “Their interest is to remain compliant and be able to offer new products given their strategic interest in providing transportation fuels to the marketplace, and biofuels in general is a new opportunity for growing their own margins in manufacturing.”

Milestone Achievements

Although Virent has already completed a number of significant milestones in its young history, the most notable accomplishment to date thanks to its collaboration with Shell, according to Kennan and Edwards, come from those that have validated Virent’s biogasline for performance testing in realworld applications. These types of tests, according to Keenan, are tangible examples of how Virent’s vision is coming to life because of its partnership with Shell.

For instance, Virent and Shell conducted a summer-long testing program in 2010 where Virent’s biogasoline was blended into fuel supplied by Shell to fuel 10 different vehicles, which compared Virent’s product to traditional petro-based gas. Shell used five identical pairs of late-model European cars for the road trial. Five cars used a baseline Shell gasoline. Each car was driven several thousand miles over the course of 2010. After the test, each engine was disassembled and inspected. The test determined that Virent’s biogasoline didn’t cause any harm to the vehicles in comparison to Shell’s baseline fuel. Virent followed up the test with another in August that included Virent’s biogasoline blended into fuel supplied by Shell to Scuderia Ferrari for the last three races of the 2010 Formula One championship.

“I think the use of the fuel in a very technical application such as in the Ferrari Formula One racecar was a highlight for the company because it really demonstrated the fuel we’re producing is truly a replacement drop-in molecule that has high quality,” Kennan says. “That was very exciting.”

According to Edwards, Virent intends to build on successful milestones such as these to accomplish more in the future with Shell. “We’re naturally restless,” Edwards says. “We want to keep making progress and move on to the next challenge.”

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

november 2011 | Biorefining Magazine | 39

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