October 2011 Biorefining Magazine

INSIDE: FUNDING THE ADMINISTRATION’S $510 MILLION COMMITMENT october 2011

How Industry Experts, Insiders See the Future in This Uncertain Political Time Page 20

Plus

The Good Side of Government Policy

Page 26

And

Why Statutes Need to Catch Up With Next-Gen Developments Page 30

www.biorefiningmagazine.com

contents |

october issue 2011 VOL. 02 ISSUE 10

features

20

26

30

policy The Future of Biorefining Policy

industry The Good Side of Government

regulatory A Call for Statutory Clarity

Insiders discuss what to expect from Congress

BY ERIN VOEGELE

Programs and policies that have proven to work

BY LUKE GEIVER

Revisiting outdated and conflicting regulations

BY BRYAN SIMS

Contents DEPARTMENTS

contribution

4

Editor’s Note

9

Legal Perspectives

Policy Issue

BY RON KOTRBA

Patents in Transition

BY PAUL CRAANE

6

Advanced Advocacy

10 Business Briefs

There’s the Beef

BY MICHAEL McADAMS

7

Industry Events

Upcoming Conferences

& Trade Shows

8

People, Partnerships & Deals

12 Startup

Biorefining News & Trends

42

Ad Index

38

equipment The Power of Collaboration

BY SHERWIN DAMDAR

Talking Point

Depreciation Opportunities Sunset Dec. 31

BY SHERRY JEAN LARSON

october 2011 | Biorefining Magazine | 3

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editor’s note

Sometimes an issue of the magazine comes together in such a harmony that it amazes even me, the editor who develops the monthly theme, assigns the articles and solicits column contributions. This is one of those issues, and its focus is on one

POLICY ISSUE Ron Kotrba, Editor rkotrba@bbiinternational.com

of the hottest, most up-in-the-air topics right now: biorefining policy.

This is a very uncertain time in the policy arena. Rising national debt, the development of a super committee to do what Congress has failed to do, pay-go rules, changing appetite for biofuel subsidies in Congress with an administration whose directives favor development and funding of advanced biorefineries to produce fungible drop-in biofuels, and a contentious presidential election in 2012 altogether are making the passing of tax incentives and biorefining policy very difficult right now.

In this issue, our Biorefining Magazine editors and contributors cover it all. We bring you featured articles on what the future of biorefining policy appears to be, with comment from industry insiders who know better than anyone what the coming months and years may hold; government programs that have worked well, despite all the negativity that surrounds the federal political landscape right now; and regulations that must be revisited as biorefining technology and fuel products have developed faster than the regulations under which their uses are governed.

In Michael McAdams’ monthly column, he discusses the administration’s plan to help build out the biorefining industry with funding and commitment from the U.S. DOE, the USDA and the U.S. Navy, and how the legislative branch ties into this executive directive. Attorney Paul Craane gives us a Legal Perspective article on changes taking place within the U.S. Patent and Trademark Office, and how although the office is funded by user fees—not taxpayer dollars—it is not allowed to spend every dollar it collects and is still subject to congressional oversight.

Finally, Sherry Jean Larson with Christianson & Associates authors the Talking Point this month on expiring tax deductions that biofuel plant owners should cash in on before Dec. 31.

Thank you to the editors and contributors for highly relevant, cohesive material in this issue on policy.

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

ASSOCIATE EDITORS Erin Voegele dusts off her crystal ball this month and peers into the legislative unknown in “The Future of Biorefining Policy” on page 20.

4 | Biorefining Magazine | october 2011

Luke Geiver tells the positive story of federal policy and programs, and what has worked for whom, in “The Good Side of Government” on page 26.

Bryan Sims details concerns over outdated regulatory policies being outpaced by next-gen biofuel advances in “A Call for Statutory Clarity” on page 30.

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 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

october 2011 | Biorefining Magazine | 5

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advanced advocacy

There’s the Beef White House serves up a ‘Whopper’ and puts money where its mouth is

BY Michael mcadams

I

t was nearly a year ago that I asked the White House in the November issue of this magazine, “Where’s the beef?” Well, this August all of us got a “whopper” of an answer as the Obama Administration announced that the U.S. Departments of Agriculture, Energy and Navy will invest up to $510 million during the next three years to produce advanced drop-in aviation and marine biofuels to power military and commercial transportation. The new initiative is part of President Obama’s Blueprint for a Secure Energy Future, the Administration’s framework for reducing dependence on foreign oil. As the U.S. writes a check for nearly $1 billion to foreign countries to pay for oil every day—that’s right, $365 billion each year—drop-in biofuels could replace or supplement existing gasoline, diesel and jet fuels, and have a significant impact on America’s balance of payments by reducing our dependence on foreign oil.

I have expressed before that I believe the administration’s investment in commercializing advanced biofuels is a matter of national security.

Here are the facts. The U.S. Defense Department is a one of the world’s largest consumers of fuel, representing close to 2 percent of annual U.S. petroleum use. In 2008, DOD purchased $16 billion worth of fuel, using 119 million barrels (nearly 5 billion gallons) of petroleum. Together, with the private commercial airline industry, DOD uses 1.5 million barrels (63 million gallons) of jet fuel per day. Armed with just these few facts, you can see that our nation’s defense is at the mercy of the market just as much as we are when we pull up to the pump.

The departments subsequently issued a request for information (RFI) laying out the administration’s goals, assumptions, and tools and requesting specific ideas from industry on how to leverage private capital markets to establish a commercially viable drop-in biofuels industry.

The RFI specifically enumerates a number of relevant considerations in terms of their awarding support to a particular project. Some 6 | Biorefining Magazine | october 2011

of these include: the DPA is concerned with only domestic sources. Foreign capabilities will not be considered; a drop-in replacement fuel requires no change in systems configuration, engine architecture, fuel infrastructure or fuel handling; the maturity of specific technologies and biorefining operations that could be deployed to achieve commercial-scale production; recognition that 50 percent (1-to-1) is the minimum level of industry cost sharing that the government will entertain. There are many other points that are specifically itemized, which can be found at http://bit.ly/rojNJk. As you can see from the RFI document requirements, the administration ultimately wants to build or retrofit several domestic commercialor precommercial-scale advanced drop-in biofuel refineries to produce military spec fuels located throughout the U.S. for ready market access.

They should also have no significant impact on the supply of agricultural commodities for the production of food.

USDA Secretary Tom Vilsack said the day of the announcement,“By building a national biofuels industry, we are creating construction jobs, refinery jobs and economic opportunity in rural communities throughout the country. As importantly, every gallon of biofuel consumed near where it is produced cuts transportation costs and, for the military, improves energy security.”

He is preaching to the choir to those of you reading this column, but it’s an important stake in the ground for the future and to garner greater support from Democrats and Republicans alike.

The president added, “Supporting biofuels cannot be the role of government alone. That’s why we’re partnering with the private sector to speed development of next-generation biofuels that will help us continue to take steps towards energy independence and strengthen communities across our country.”

The joint plan calls for the three departments to invest a total of up to $510 million, with a cost share from private industry

of at least a one-to-one match for a total of more than $1 billion of investment. The USDA will work on securing feedstocks while the DOE will look for the right technologies. The Navy, which, as you know, is readying its Great Green Fleet, will be the customer. Fuel produced from the initiative also will be used by the private sector. But the government is emphasizing the needs of the military to have a strong source of domestic fuels.

The administration should be commended for continuing to demonstrate great foresight as it makes smarter investments in dropin advanced biofuels, investments that will ultimately strengthen America’s economic and national security. The president’s leadership in renewable energy will help in commercializing advanced biofuels and successfully deliver ready-to-use replacement fuels for jetfighters, battleships, as well as commercial airliners and cars on the road today.

The outstanding question for the package is the ability to fund the full $510 million. It appears at this point the Navy and the USDA have the money in place for the first phases of the project. The DOE, I am told, has put in $6 million and plans to anti up its share of a $170 million in year three. All of this will require those of us who believe in the program to call on Congress to support this approach and fully fund it moving forward. Not an easy task in the current environment, but one that is essential for us to move the industry forward at this time.

So ladies and gentlemen, get your pens and keyboards ready to write those trusty folks in Congress in support of this effort. We will need your emails, cards and letters, and visits back home when your members return, to reinforce the importance of building the advanced biofuels industry of the future, right here in the U.S. Author: Michael McAdams President, Advanced Biofuels Association (202) 469-5140 Michael.McAdams@hklaw.com

events calendar |

Bioheat Northeast Workshop

October 11, 2011

Hilton Americas – Houston Houston, Texas Presented by the National Biodiesel Board and Biodiesel Magazine, Bioheat Northeast will include agenda focusing on federal, state and local biodiesel oilheat mandates, ASTM specs, technical issues and solutions, biodiesel storing, blending, transporting, marketing and branding, reducing our carbon footprint, as well as an evening networking event and reception.

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

Northeast Biomass Conference & Trade Show

October 11-13, 2011

Steel City to Host Bioheat Northeast Show 10/11

Pittsburgh in the fall. That’s where you need to be to get the latest information on biodiesel-blended heating oil, the most promising residential heating alternative on the market. The oilheat industry has latched onto biodiesel as THE No. 1 green path forward for its industry. In order for this to happen—and in order for the oilheat industry to outperform natural gas on performance and environmental bases—there are technical questions that must be addressed. The experts presenting in Pittsburgh on Oct. 11 at BBI International’s Bioheat Northeast are the ones to answer them. The one-day workshop, in conjunction with the National Biodiesel Board and co-located with BBI’s Northeast Biomass Conference & Trade Show, will kick off with a general session conversation between NBB CEO Joe Jobe and the National Oilheat Research Alliance President John Huber. Following this, the seminar will feature four highly relevant panels in the Bioheat sector.

Policy: The policy environment for biodiesel-blended heating oil is strong on all levels: National, state and local. Learn from the experts what policy opportunities exist today, what to expect tomorrow, and how to maximize your company’s bottom line with biodiesel.

Technical: The biodiesel and oilheat industries have formed a Bioheat Technical Steering Committee to spearhead the technical effort needed to support higher levels of biodiesel in the Bioheat market. What are the industry plans for moving forward with higher levels of biodiesel in ASTM D396? What levels can be used in existing burners without changing equipment? What’s the industry’s progressive, “move forward” blend and why? How does biodiesel affect NOx in home heating oil applications? Come hear from this panel of industry insiders and technical masters to discover biodiesel-blended heating oil’s path forward.

Distribution: As an oilheat dealer, do you want to follow your industry’s call to make heating oil cleaner than natural gas, but don’t know where to start? Then this is a do-notmiss panel. Hear from those who have ridden the biodiesel learning curve and offer their experience and expertise to get you onboard with the revolutionary reinvention of heating oil. The essentials of success in this market will be revealed.

Markets and Use: Building managers and property owners, learn what your peers are doing to go green with Bioheat. While wood pellets or other biomass-derived heat and power are gaining popularity in industrial and niche applications, the seamlessness of integrating biodiesel-blended heating oil to green city buildings and complexes makes Bioheat a ready-to-use fuel. It’s about cleaning the air around you, being a responsible property owner and attracting the growing population of environment-conscious tenants. Hear from biodiesel suppliers and building owners who have made the switch to cleaner-burning Bioheat.

Register today for the one-day Bioheat Northeast workshop Oct. 11 in Pittsburgh at www.biomassconference.com/northeast.

Westin Place Hotel Pittsburgh, Pennsylvania With an exclusive focus on biomass utilization in the Northeast—from Maryland to Maine—the Northeast Biomass Conference & Trade Show will connect current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utilities, technology providers, equipment manufacturers, investors and policymakers.

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

Algae Biomass Summit

October 24-27, 2011

Hyatt Regency Minneapolis Minneapolis, Minnesota Organized by the Algae Biomass Organization and coproduced by BBI International, this event brings current and future producers of biobased products and energy together with algae crop growers, municipal leaders, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop—the world’s premier educational and networking junction for all algae industries.

(866)746-8385 www.algaebiomasssummit.org

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 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. Register by Oct. 4 and save $200.

(866)746-8385 www.biomassconference.com/southeast october 2011 | Biorefining Magazine | 7

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talking Point

Depreciation Opportunities Sunset Dec. 31 Cash in now on expiring tax deductions before it’s too late

By Sherry Jean Larson

A

re you are considering purchasing a biofuel plant or new equipment to expand or upgrade an existing facility? Don’t miss the opportunity to take advantage of depreciation deductions since these federal tax advantages sunset this year on Dec. 31.

Section 179 deductions enable small businesses to deduct 100 percent of the cost of an asset or portion of an asset in the year the asset is placed in service. To qualify for this deduction, the property must be tangible section 1245 property (not buildings) and can be new or used; income limitations may apply. Any excess section 179 is carried forward to future years. The section 179 expensing limits and thresholds are as follows: • For years beginning in 2010 and 2011, the expensing limit is $500,000.

This limit is reduced by the amount of which the cost of section 179 property placed in service in the tax year exceeds $2 million.

• For years beginning in 2012, the expensing limit is $125,000 and the threshold is $500,000.

• For tax years beginning after 2012, the expensing limit is $25,000 and the threshold is $200,000.

8 | Biorefining Magazine | october 2011

Bonus depreciation allows 50 percent of the cost of an asset to be deducted in the year placed in service. To qualify for this deduction, the property must be new and have a recovery period of 20 years or less. This would not apply to most buildings as they typically have a recovery period of 39 years. The expensing percentages and dates are as follows: • The 2010 Tax Relief Act provided for 100 percent bonus depreciation on new assets placed into service from Sept. 9, 2010 to Dec. 31, 2011.

• 50 percent bonus depreciation will be available on new assets placed into service from Jan. 1, 2012 to Dec. 31, 2012.

Regarding the 100 percent bonus depreciation, there is an election available for the tax year that includes Sept. 9, 2010, which allows a taxpayer to elect to use 50 percent bonus depreciation for dates both before and after Sept. 8, 2010.

What does this mean to biorefining plant owners? According to Wayne Lee, CEO of Lee Enterprises Consulting, “It means that those in the industry that are looking at purchasing equipment for expansion, renovation, and those buying plants, should all be exploring the opportunities that exist in 2011 that might not exist in the future.”

Christianson & Associates PLLP is a strategic partner of Lee Enterprises Consulting, and handles accounting services for the group’s clientele. “As the world’s largest biodiesel consulting firm, it is important to us to have someone

within our group that stays abreast of tax matters and upcoming changes,” Lee said. “These kinds of changes can have very significant impacts on our clients, and keeping us informed is precisely why we chose Christianson & Associates as a strategic partner,” he said. Lee notes that everyone in the industry should make certain to enlist the services of those accountants and attorneys that understand the tax code as it relates to biofuels.

Plant owners and purchasers should get competent advice to ensure that their purchases are structured correctly.

For those purchasing biofuel-related equipment, there is an opportunity available this year that will not be available after Dec. 31.

Author: Sherry Jean Larson Manager of Assurance and Advisory Services, Christianson & Associates PLLP (320) 441-5513 sherry@christiansoncpa.com

LEGAL PERSPECTIVE |

Patents in Transition The USPTO’s new workload raises a red flag—why can’t a user-funded agency just spend what it needs to keep up?

By Paul Craane

W

hen Congress returned from its August recess, it passed the America Invents Act. The act represents the most sweeping rewrite of the U.S. patent code in 60 years. The solution proposed by the act to many of the problems associated with the patent system is for the U.S. Patent and Trademark Office to assume greater responsibility for the quality of U.S. patents.

Congress, however, has not expressly coupled greater responsibility with increased funding. Because the USPTO already has a sizable backlog, such news is troubling. The director of the USPTO stated in a recent interview that if the office does not have complete access to the funds it collects, then the USPTO has “no hope of implementing this legislation.”

Without a doubt, the USPTO has made significant progress recently in reducing its backlog, but more than 680,000 applications are still presently pending. As a consequence, the time it takes for an application to make its way through the examination process from filing to issuance, appeal or abandonment is approximately three years. If you decide to appeal the examiner’s rejection of your application, then expect the process to take an additional three years from the filing of the appeal to the decision.

One of the fundamental changes brought about by the act is the shift from a first-to-invent patent system to a first-to-file patent system. In the future, most disputes between competing inventors will be resolved

simply by comparing application filing dates.

The earliest filer will obtain the right to seek a patent. Executing such a straightforward procedure should result in time- and costsavings for the USPTO generally, and for the newly-constituted Patent Trial and Appeal Board that will be responsible for handling inventorship disputes, in particular.

The act also gives the PTAB responsibility for three new programs that can be used to challenge an issued patent’s validity. If these programs are used extensively as alternatives to litigation, as intended, then this workload will represent a sizable burden for the PTAB, in addition to the considerable appellate backlog the PTAB will inherit from its predecessor, the Board of Patent Appeals and Interferences.

As to these three programs, inter partes review is essentially a reworking of an existing procedure, the inter partes reexamination. The BPAI, however, did not handle this program, so the new program represents a workload gain for the PTAB. The PTAB would also be responsible for post grant review, a completely new program that addresses a range of validity challenges that the USPTO has never decided previously. Additionally, the PTAB will be responsible for a transitional program used exclusively for challenging business method patents.

Furthermore, there will be a period during which existing programs dealing with inventorship disputes and validity challenges will co-exist with the new programs established by the act. For example, the USPTO will be handling inventorship disputes under the old first-to-invent law as well as the new first-to-file law for at least the next several years.

The USPTO is not funded like other agencies, but rather is funded by user fees, meaning that each applicant is assessed an amount that the agency determines is necessary for examination of the application.

According to such a system, one would expect that the USPTO could simply adjust fees to address the increased workload, as necessary.

The USPTO is not permitted, however, to spend every dollar that it collects. Like other agencies, the USPTO is dependent upon Congress to approve its expenditures through the appropriations process. Consequently, the same budget compromises that affect other federal agencies generally affect the USPTO in a similar fashion. Many commentators suggest that Congress has been essentially diverting USPTO funds to address other budget issues for some time now; the backlog suggests there may be some truth to these suggestions.

So where does that leave patent applicants? That depends on how strongly you trust the assurances of those in Congress who removed a provision of the act that would have given the USPTO the ability to avoid the appropriation process and spend all of the fees collected. The representatives who removed the provision asserted that such action was necessary to prevent circumvention of Congressional oversight and an outof-control USPTO. At the same time, the USPTO was promised whatever access was necessary to carry out its operations. With the country’s confidence in Congress at a new low, patent applicants may have good reason to be concerned instead of reassured.

Author: Paul Craane Partner Attorney, Marshall, Gerstein & Borun LLP (312) 474-6623 pcraane@marshallip.com

october 2011 | Biorefining Magazine | 9

business briefs People, Partnerships & Deals

Spain-based Neuron Bio recently announced it has commissioned a pilot-scale fermentation plant that will be used to scale up the production of yeast, bacteria and algae as part of its own research and development efforts. It will also be used to scale up biorefining processes for third-party companies. The pilot plant employs a batch process, and can produce 400 liters (106 gallons) of culture at a time. It also provides for the subsequent recovery and purification of the bioproducts cultivated in it.

Information released by the company states that it has invested €500,000 ($706,550) in the plant. The equipment will be installed provisionally in the the Ogíjares industrial park until construction of Neuron Bio’s new building in the Granada Heath-Sciences Technology Park is complete.

Nidus Partners LP announced that Denmark-based Novozymes has joined Nidus as a corporate partner. Novozymes will collaborate with Nidus and its other partners Bunge Ltd. and Monsanto Co. to select and develop early-stage energy technologies. Launched last September, Nidus takes a novel approach to commercialization by using its partners to identify market opportunities and experienced entrepreneurs to find and develop technologies that address these market needs. To date, Nidus has reviewed hundreds of technologies resulting in three startups: Electrochaea LLC, Six Convert LLC and Xtend Energy. Partners have a right of first offer for the innovations developed through Nidus. A limited number of additional partners with the appropriate market and technical expertise will be invited to participate in the partnership.

U.K.-based bioplastics company Biome Technologies plc has announced interim financial results for the six-month period ending June 30. According to the company, it ex10 | Biorefining Magazine | october 2011

perienced a 132 percent sales revenue growth within its U.K. bioplastics division, Biome Bioplastics, making the division profitable for the first time. Revenue for the entire Biome group increased by 55 percent during the period, to £10.4 million ($16.6 million). Its biodegradable and compostable bioplastic materials are made from renewable feedstocks, such as potato starch and cellulose. The company’s website lists a range of 10 bioplastic materials it has developed. Information published by Biome as part of its interim financial results states that its materials are produced at Biotec, an advanced manufacturing facility in Germany that has been developed as a 50/50 joint venture. The dedicated bioplastic production facility has an annual capacity of 20,000 tons.

The facility is currently operating at 60 percent of its capacity.

BioAmber Inc., through its subsidiary Bluewater Biochemicals, has identified Sarnia, Ontario, Canada, as the site for its first North American biobased succinic acid production facility. The plant will have an initial annual production capacity of 17,000 metric tons and is anticipated to be commissioned in 2013. Permitting work for the facility began in June. The company leveraged $35 million in combined grants and loans provided by the Ontario Ministry of Economic Development and Trade, Sustainable Development Technology Canada and the Canadian Sustainable Chemistry Alliance to locate its facility in Sarnia. BioAmber plans to double production capacity in Sarnia by 2014 through the introduction of a next-generation yeast being developed with Cargill Inc. While biosuccinic acid will be the product of focus for BioAmber at its Sarnia facility, the company also intends to produce 1,4 butanediol (BDO)—a chemical with a $4 billion existing market—using technology exclusively licensed from DuPont Applied Biosciences. At peak production, according to BioAmber, the goal is for the Sarnia plant to produce 35,000 metric tons per year of biobased succinic acid and 23,000 metric tons per year of BDO.

The algae and biochemical sectors are becoming more interwoven as Houston-based biochemical firm Glycos Biotechnologies Inc. and Ft. Collins, Colo.-based algae developer Solix BioSystems Inc. reported that their early-stage research and development collaboration yielded positive results, demonstrating the potential for Solix’s algae oil to be converted into a range of high-value specialty chemicals through GlycosBio’s novel microbial platform.

Solix’s crude algae oil, obtained from the company’s pilot facility located in the Southern Ute Reservation near Durango, Colo., was found to be nontoxic, easily metabolized and upgraded by GlycosBio’s proprietary biocatalysts at the company’s research facilities in Houston.

While the production of ethanol may not be a focus of the research and development collaboration, the alcohol acts as a viable springboard for getting to the basic building blocks of producing the chemicals such as isoprene, a chemical of specific interest for GlycosBio. Emeryville, Calif.-based Amyris Inc. has signed a multiyear supply agreement for several hundred tons of its renewable squalane with Nikko Chemicals Co. Ltd. for distribution in the Japanese market. Squalane, a highend moisturizing ingredient used in a range of cosmetics, is traditionally sourced from shark liver or refined olive oil. Amyris’ squalane, which is produced using its renewable platform building block farnesene—trademarked Biofene—is made using sugarcane of high purity and has better stability. According to Amyris, its biobased squalane is now EcoCert certified and has been successfully tested and integrated in end products by its partners and products. Earlier this year, Amyris received a purchase order from the company’s collabora-

business briefs |

tion partner Soliance, a French biobased ingredient provider to the cosmetic industry, for its biobased squalane. The company also produces biobased squalane as part of a manufacturing contract arrangement with Glycotech Inc. at a plant in Leland, N.C. North Carolina-based Avjet Biotech Inc., a developer of distributed refining systems and parent company of Red Wolf Refining, has released an overview of its biorefining process. The company’s patented RWR System uses a thermal catalytic process to refine triglycerides into biobased aviation fuels. The objective of the RWR process is to produce fungible drop-in replacement transportation fuels from a wide variety of renewable oils, including those sourced from oilseed crops, animal fats or algae. Fats, oils and lipids are mixed with hot water and hydrolyzed, breaking the fatty acids from the glycerin backbone.

A thermocatalytic process then deoxygenates the fatty acids. The two oxygens are driven off as carbon dioxide and unsaturated bonds within the fatty acid are saturated. The result is a straight chain, saturated hydrocarbon, an ideal molecule to reform into transportation fuels.

The next step is to change the structure of the molecule to either increase the flash point or suppress the freeze point. Some cracking is also done, which means some of the longer molecule chains are broken into shorter chains.

Competing processes are generally based on a technology that uses additional hydrogen to drive off oxygen from the triglyceride feedstocks. The RWR process has been specifically designed to be cost-competitive at smaller, distributed scales.

Novamont, an Italian company that produces a biodegradable plastic from waste materials, and Genomatica, a California-based biobased chemical maker, have formed a joint venture to build an industrial biorefinery to produce Genomatica’s butanediol (BDO) for use in Novamont’s bioplastic products. While Genomatica will provide an engineering de-

sign package and technology transfer help to Novamont, the terms of the agreement have put Novamont in charge of financing the future facility. The company will also purchase the BDO produced at the plant, which is expected to reach roughly 40 million pounds per year when it goes online by the end of 2012.

Novamont has indicated the company will convert an existing facility in Italy and will also run the facility once complete. The partnership between the two companies is not the first for either. Genomatica has already partnered with Tate & Lyle, Mitsubishi Chemical, Gruppo M&G and Waste Management. Novamont has partnered with Eni, an Italian oil and gas company, to build another biorefining facility, located at a petrochemical plant owned by Eni. Novamont has also opened a North American facility in Connecticut.

Lakewood, Colo.-based biorefining firm ZeaChem Inc. signed a memorandum of understanding with Chrysler Group LLC to accelerate the development and market adoption of cellulosic ethanol. One of the primary goals of the strategic alliance with Chrysler is to help the company promote positive consumer perception about the concept of cellulosic ethanol. ZeaChem’s first commercial plant, expected to have an annual capacity of 25 MMgy, is planned for location adjacent to its 250,000-gallon-per-year demonstration facility near Boardman, Ore., currently under construction and intended to use woody biomass as feedstock. The company is also considering Michigan or Canada as potential sites for future commercial production facilities where abundant concentrations of woody biomass are plentiful. The company stated that the Boardman biorefinery project is progressing on time and on schedule for a fall start-up, adding that the first phase of construction was 80 percent completed in late July. The biore-

finery will produce and test quantities of ethyl acetate by the end of the year with significant volumes of cellulosic ethanol volumes projected to follow shortly thereafter. Testing of its acetic acid is expected to follow.

UOP LLC, a Honeywell company, announced that it has begun construction in Hawaii of a biofuels demonstration unit that will convert forest residuals, algae and other cellulosic biomass into green transportation fuels using rapid thermal processing (RTP) technology. Backed by a $25 million U.S. DOE award, the Honeywell UOP Integrated Biorefinery will upgrade biomass into high-quality renewable gasoline, diesel and jet fuel. The project is part of the DOE's efforts to help spur the creation of the domestic biofuel industry, drive domestic job creation and reduce U.S. dependence on foreign oil. The project will also support the Hawaii Clean Energy Initiative goal to achieve 70 percent clean energy by the year 2030. Located at the Tesoro Corp. refinery in Kapolei, the Integrated Biorefinery will be used to demonstrate viability of the technology, test the fuels produced and evaluate the environmental footprint of the fuels and the process technology. The project is scheduled to begin initial production in 2012 and be fully operational by 2014. The RTP technology converts biomass into a pourable, liquid biofuel. This liquid biofuel will then be upgraded to green transportation fuels using hydroprocessing technology from Honeywell's UOP. In 2008, UOP partnered with Ensyn Corp. to form a joint venture business, Envergent Technologies LLC, to offer RTP technology and equipment.

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.

october 2011 | Biorefining Magazine | 11

PHOTO: UNIVERSITY OF VIRGINIA

startup

Biorefining News & Trends

Algae Forecasters Environmental engineering professors Andres Clarens, center, and Lisa Colosi, right, have teamed up with commerce professor Mark White to investigate how algae may offer the biofuel of the future.

Exploring the Algae Tradeoff

UVa researchers look at energy yields, GHGs and the financial appeal of algae Lisa Colosi might be an assistant professor of civil and environmental engineering at the University of Virginia, but she knows what it is like to be a 1-acre farmer and an environmentally conscious driver. Colosi, along with a team of researchers at UVa, has completed a report that details whether algae-derived sources are more energy efficient and greenhouse gas (GHG) friendly compared to biofuels from switchgrass or canola. The purely hypothetical report based on engineering calculations and database impact factors indicates that although algaebased biofuel contains more energy per acre, the GHG levels are higher than other biofuels.

“We have this clear tradeoff,” Colosi says. “If I’m going to have a 1-acre farm and I wish to know what I should grow so 12 | Biorefining Magazine | october 2011

that I can make biofuels to drive a certain distance in my car,” she adds, “I actually get the most, or the largest amount of usable transportation energy, if I grow algae.”

Why? Because algae grow quicker and can be harvested multiple times a year. But, on the flip side, she says, if a person is concerned about their environmental impact incurred while driving, algae isn’t as favorable as other biofuels. Why? Because the more time a fuel is handled (heated up, stirred, upgraded) the more energy is used, she says, taking away from the overall energy efficiency related to that biofuel—an occurrence commonly associated with algae-based fuel.

“From our perspective, we are intrigued by the fact algae gives better overall energy yields, but we are puzzled by the fact that it doesn’t do as well on an environmental per-

formance basis,” she says. But that isn’t all the team at UVa is intrigued by. “We are also interested to see how the energy analysis tracks with the financial analysis because there is very interesting decision-making when environmentally the right thing to do is A, and financially the right thing to do is B.” Although Colosi and her team are still working to figure out the GHG impact shortfall of algae, the more important work may have nothing to do with GHGs but instead, money. Colosi says they are working to find out if current algae systems will be attractive enough “for people to make a living on,” and, if they aren’t, what policy or implements can be introduced to make sure they are. —Luke Geiver

The Next Phase

Virent selected to advance in the NABC program The National Advanced Biofuels Consortium, led by the U.S. DOE’s National Renewable Energy Laboratory and Pacific Northwest National Laboratory, has selected Virent Energy Systems Inc. to advance to stage two of its cellulosic biomass feedstock-to-biofuels program.

Working with 17 partners representing industry, academia and national laboratories, the NABC is working to investigate the effectiveness of a variety of process strategies that have the potential to convert corn stover or wood chips into drop-in biofuels.

Virent successfully created renewable gasoline from both feedstocks during stage one

of the project, and has been selected to move forward. According to Andrew Held, Virent’s director of feedstock development, the second phase of the program kicked off in September, and is expected to last 24 months.

“What is happening, is the [process] strategies that have been advanced to stage two are initiating the project scope, with the intent that at the end of phase two the NABC can make a recommendation to the DOE regarding technologies that are ready to be advanced to a pilot-ready or a process demonstration unit scale,” Held says.

Held also notes the participation in the NABC has been beneficial to his company as a mechanism to create constructive collaborations, and for generating a meaningful supply of deconstructed biomass materials that Virent can use to demonstrate and optimize its conversion processes. Although the NABC project focuses exclusively on renewable gaso-

Build-Out Bust or Boom?

Taskforce on Homeland Security and serves on CNA’s miliChallenges, opportunities loom as tary advisory board. biorefining industry develops biojet “We’ve got to step forward and start infrastructure producing some of When the U.S. DOE, USDA and the U.S. these different types of alternative fuels to Navy jointly launched a bold effort together solve some of the technical issues that are with the private sector in August to invest associated with them and to incentivize inup to $510 million over the next three years dustry to get involved,” Eickmann explains.

According to Gary Luce, CEO of to build or retrofit existing industrial facilities for drop-in biofuel production, the news Houston-based Terrabon Inc., the federal was generally well-received by the biorefining program should prompt private equity and community. Questions remain as to whether debt financing entities to more stringently evaluate where funds the investment is enough to support this are to be directed to commitment over the long-term and, even support project and if it is, the one-to-one matching fund ratio technology developfrom the private sector may prove challengments for drop-in ing, especially during a recovering economy. biofuels. Terrebon op“It may not be a lot [of money] in terms timizes a proprietary of changing the energy environment of biorefining technolthe country, but it’s a good start,” says Ken Eickmann, a retired lieutenant general who At Ease Ken Eickmann, ogy called MixAlco to convert biomass into worked at the Aeronautical Systems Center at a retired lieutenant general, says while biochemicals such as Wright-Patterson Air Force Base. Eikmann is $510 million won’t acetic acid, ketones currently deputy director of the Center for change the energy of the and alcohol-based jet Energy Security at the University of Texas, environment U.S., it’s easily a good fuel and gasoline. state vice chairman for the Texas Engineers start.

PHOTO: VIRENT ENERGY SYSTEMS INC.

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A Cellulosic Achievement Virent employees work at the company’s demonstration plant to produce cellulosic gasoline.

line, Virent is working to develop process technology that can produce a range of fuels and chemicals. “Virent has the viewpoint that to make us economical at scale, and to make a meaningful contribution to the marketplace, biorefineries need to be capable of taking in more than one feedstock and producing more than one product,” he says. —Erin Voegele “One of the challenges with this [federal investment] is just as private companies try to interface in with federal programs, it’s a different operating mentality,” Luce tells Biorefining Magazine. “If the government is putting up $500 million and the capital markets have to match that, then it’s not really about the advanced biofuel developers, it’s about whether the capital markets see the structure in such a way that’s worth their risk to deal with the government risk in the implementation of the program.”

In July, Terrabon was awarded a $9.6 million grant by Logos Technologies Inc. and the Defense Advanced Research Projects Agency to create 6,000 liters of jet fuel using its MixAlco process. Luce says that his company’s alcohol-based jet fuel is undergoing certification process and anticipates breaking ground on a commercial production facility sometime next year.

“What this [federal program] will do is separate the men from the boys,” Luce says, “because I think the capital markets will allocate their equity a little bit differently than the federal government will.” —Bryan Sims

october 2011 | Biorefining Magazine | 13

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Aiding Algae Development

PHOTO: ROGER CHANG, UNIVERSITY OF CALIFORNIA-SAN DIEGO

“We did this by integrating funcResearchers reconstruct the genome scale tional annometabolic network for a model alga strain tation of its genome as A project led by Roger Chang, a Ph.D. well as using sequence-based analysis and candidate in the bioinformatics and systems literature curation and large-scale transcript biology program at the University of Califor- verification experiments,” Chang says. “While nia-San Diego, could lead to significant bene- we were doing this, we gave special attention fits for the algae biofuels industry. Chang and to precise representation of photon usage, his colleagues have reconstructed the genome and also chemical accuracy of representing scale metabolic network for the model alga lipid species.” species Chlamydomonas reinhardtii. The results According Chang, prior research has of the project where recently published in the well-established that these metabolic netscientific journal Molecular Systems Biology. work reconstructions and computational methods have become instrumental in engineering efforts, both in terms of developing production strains and for developing bioreactors. “Using computer-aided approaches like this enables preA New Network Roger Chang, a Ph.D. candidate in the bioinformatics and systems diction of specific biology program at the University of California-San Diego, has reconstructed the genome genetic manipulascale metabolic network for the model alga species Chlamydomonas reinhardtii.

tions that can be used to increase production of desirable chemical products and also productions of more cost-effective growth conditions for these strains and industrial applications,” he says. “Where our network fits in is that it’s the first such network to be developed for a eukaryotic algae. So, it sort of represents establishing these sorts of capabilities within the study of eukaryotic algae. It’s also the first to enable specifically the analysis of light source parameters that are used for growth.”

It is unlikely that Chlamydomonas reinhardtii will be used to generate production strains, Chang notes, because it is a laboratory model species. Other known strains of algae are known to be more productive. “As a model eukaryotic algae, the most knowledge exists for this system, which is why we chose it in the first place,” he adds. “Having enabled computer-aided analysis of metabolism in this alga, we expect it to serve as a development platform for the whole industry, and likely set sort of a new precedent for incorporating computational analysis into engineering designs for biofuels, whether it be for this species, or other alga, or other photosynthetic species.” —Erin Voegele

MV-22 Osprey Flies High on Biofuel On Aug. 10, the Blackjacks of Air Test and Evaluation Squadron (HX) 21 successfully flew a Marin Corps MV-22 Osprey at altitudes of up to 25,000 feet on a 50/50 blend of camelina-based and petroleumbased JP-5 aviation fuel. The test flight took place at Naval Air Station Patuxent River, Md. “This is the first Marine Corps and tilt rotor aircraft to fly on biofuels,” said Navy Secretary Ray Mabus. “This brings us one step closer to reducing our dependence on foreign oil and becoming more energy secure and independent.”

The MV-22 Osprey is a multimission 14 | Biorefining Magazine | october 2011

aircraft flown by the Marine Corps that combines the functionality of a helicopter with the long range Take-Off A U.S. Marine Corps MV-22 Osprey lifts off from Naval Air Station Patuxent River, Md., during a successful biofuel test flight. and high speed of a turboprop aircraft. first at improving our warfighting capabil“As these types of biofuel certification ity and reducing our vulnerabilities, but they tests continue on the Osprey and other air- will also increase our energy efficiency and craft, we continue to make steady progress help lead the nation toward a clean energy toward the energy goals I laid out in October economy.” —Erin Voegele 2009,” said Mabus. “Those goals are aimed

PHOTO: U.S. NAVY

The U.S. Navy, Marine Corps complete test flight in Maryland

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More Bio-Bang for the Buck The biorefining IPO phenomenon explained

Kior Inc. is trading between $14 and $16 a share, but if Kior’s common stock doesn’t quite have what a trader is looking for, several other biorefining companies are currently available. Gevo Inc. is going for around $10, Amyris around $20, and Solazyme is in the high $11-per-share range. What does the stock pricing for each biorefining company say about the industry? Not much, but the fact that so many biobased companies are currently available on the stock market does.

Cindy Thyfault, president and CEO of Westar Trade Resources, a company that helps biorefining companies seek out and obtain funding, has been following all of the com-

panies that have gone public in the past two years. “What I’ve learned is that you have to show a long track record of investment up to the point of the IPO,” she says, adding that most of the companies that have gone public have had at least $100 to $150 million in investment money. In addition to a successful IPO, she also points out that a company needs to show the backing of some serious venture capitalists, but it’s her last point that might show why the biorefining sector is poised for growth. A company, she says, “has to show a broad range of products, not just fuels.”

Although Thyfault mentions that some investors are uneducated on the number of technologies and products biorefining firms can offer today, her assertion that an IPO must be preceded by the possibility of multiple product offerings could indicate one reason for the IPO trend in the industry. Under the general assumption that venture capitalist investment dollars are tight, the idea of invest-

ing in a single company that can generate revenue via multiple markets might make sense.

California-based butandiol company Genomatica announced it was going public in August, and the firm can produce biobased alternatives for at least nine different chemical products. Solazyme can produce renewable diesel, airplane deicing fluids and skin care products, and Amyris, like Solazyme, can produce fuels along with a large suite of other products that includes malaria-fighting drugs.

Given the number of product and market offerings in which these types companies can operate, the reason so many biorefining companies have issued IPOs seems pretty clear.

Of course, these innovative firms need the funding dollars an IPO brings, but if these companies know that they can offer more bang for the buck to investors looking to spend wisely, why wouldn’t they join the IPO craze? —Luke Geiver

2 Simple Reasons for 1 Major Absence

When the U.S. DOE released the updated version of the Billion Ton Study, the algae world had reason to be alarmed. The 2011 version, like the first version released in 2005, provides a detailed analysis of the potential biomass available for bioenergy use throughout the U.S., and most importantly to algal biomass developers, the report did not include algal biomass as a viable option for biomass utilization. A source at DOE said that although algal biomass met most of the original criteria created for the 2005 study, “it did not meet this new criterion.” The new criteria, in part, were based on a countylevel study of available biomass. For algal biomass, the source says, “there was insufficient information and data to estimate and project the availability of algal feedstocks at a county scale with any degree of accuracy.”

Unlike the existing millions of metric tons of agricultural residues and woody biomass, the source says very little algae is being produced today at a commercial level. “As a result, actual field data on the productivity for a variety of different possible algae strains is not available,”

the source tells Biorefining Magazine. “But that doesn’t mean the DOE believes al- Until Then Large commercial algae ponds, such as these in southern California gae isn’t worth the effort.” photographed by satellite, need to become more commonplace before the U.S. The DOE Biomass DOE will consider algae biomass viable.

Program is funding an initial strategic national assessment of the resource fuels is in the several billion gallons range. The potential of algae grown for biofuels, although combination of results from the PNNL study the source says this set of studies will require and the early work done by the DOE, while additional work as agronomic data for the pro- encouraging, are in the early stages, with more ductivity of different algal strains under differ- work needed before “there is enough credible ent climate and cultivation system environments public data to consider algal biomass grown for are developed. “This data will be complex as biofuels to the same level of detail as lignocelproductivity will need to be evaluated under dif- lulosic feedstock in the Billion Ton Update.” ferent daily and seasonal temperatures and solar Of course, many algae developers may resource regimes,” adding, “the aquatic algal argue that at some level algae biomass is availcultivation and processing systems are still be- able (on a small scale), but regardless, the recent ing designed, which may further add or subtract biomass update appears to show two things. from current productivity estimates.”

One, the devil, in this case, really is in the details The study will be based, or at least start, on and lack of detailed data available at the county a Pacific Northwest National Laboratory study level. And two, the algae industry simply needs conducted earlier this year by Mark Wigmosta to produce more biomass to avoid skirting the and his team at PNNL. The study indicates that line of being in, or being out. —Luke Geiver the U.S. potential for algae used for renewable october 2011 | Biorefining Magazine | 15

PHOTO: PNNL

The 2011 U.S. DOE’s Billion Ton Study left out algae—here’s why

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Columns of Support At the National Clean Energy Summit 4.0 in Las Vegas in August, Vice President Joe Biden praised the efforts of five innovative cleantech companies that obtained seed funding from the U.S. DOE’s Advanced Research Projects Agency-Energy in 2009 and 2010, and attracted more than $100 million in outside private capital investment to advance their commercialization efforts.

Among those receiving both private and federal funding was Colorado-based biotech outfit OPX Biotechnologies Inc., which was awarded a $6 million grant by the DOE in April 2010 and subsequently secured $36.5 million in a Series C investment round in July.

OPXBio’s immediate focus is the production of biobased acrylic acid, an estimated $8 billion market that’s growing 3 to 4 percent per year. Acrylic acid is a key chemical building block used in a wide range of consumer goods including paints, adhesives, diapers and detergents.

Together with project partners, the National Renewable Energy Laboratory and Johnson Matthey Catalysts LLC, OPXBio is leveraging federal funding to concurrently

develop its second product, a biodiesel-like fuel processed from carbon dioxide and hydrogen via a fermentation pathway.

Biden said the private sector financing reflects the progress companies such as OPXBio have made over the past two years toward developing new technologies that could transform the way Market Penetration OPXBio intends to break into the $8 billion acrylic acid market with Americans use funding help from the ARPA-E program. and produce energy.

“These five companies are swinging ment by the federal government can pay big for the fences, pioneering new technolo- dividends down the road and bring into the gies that could help answer the energy chal- market groundbreaking new technologies.” lenge and create jobs,” Biden says. “They —Bryan Sims illustrate how a small but strategic invest-

Nutracea Up Big on Biorefining

been removed, and create a value-added product. For second quarter 2011, 70.6 percent of the revenue generated by the company came from Nutracea’s efforts to provide rice bran-based human nutrition and animal feed.

According to the company’s second quarter statements, biorefining related revenues increased “due to the overall favorable pricing environment and increased volume in animal feed and oil products.” Compared to the same period in 2010, revenues are up 21.8 percent, based on plant efficiencies as-

This value-added producer has rice bran to thank

Arizona-based Nutracea is in the business of rice bran, and because of the biorefining segment of the company, business is good. In the early 1990s, the company found a way to effectively process bran, the outer portion of a rice kernel after the husk has

Biorefining percent of revenues, second quarter ending June 30 Source: NUTRACEA

16 | Biorefining Magazine | october 2011

2011 $6.8 million 70.6 percent

2010 $4.2 million 56 percent

sociated with a shift in sales mix and higher plant production throughput driven by volume contributed to the margin expansion, according to the company. Nutracea has targeted several markets including nutraceuticals, animal nutrition, rice bran oil, meat inclusion and as a food ingredient, and the company has operating facilities in Louisiana, Montana, Arizona and Brazil.

Although the company has endured a reorganization play, Nutracea is still a prime example of a company that has taken financial advantage of a number of markets with a biobased approach. W. John Short, CEO of the company, says, “Our investments in biorefining are starting to pay off handsomely. We expect continued improvement.”

—Luke Geiver

PHOTO: OPX BIOTECHNOLOGIES

Leveraging private and government funding to accelerate growth

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Cracking Cellulose

Magazine. “Once cellulose becomes availConverting cellulosic sugars to advanced able and once you can convert it efficiently biofuel just got more efficient enough through to more soluble sugars For years, scientists around the world into ethanol, then you’re in business because have tried to figure out how to efficiently the availability of cellulosic biomass is just break down plant-based material to better ac- vast.” cess fermentable cellulosic sugars for converAccording to Walton, Novozymes dission to advanced biofuels. Two researchers at covered the TaGH61 enzyme a few years ago, the University of York in the U.K. have dis- but the Danish enzyme developer was unable covered a novel method for overcoming the to fully unlock its true potential for degradchemical intractability of cellulose that allows ing cellulose. Walton and Davies managed to for efficient conversion to ethanol. determine the full structure of the TaGH61 Working with sci- enzyme and figure out how it works. More entists in Novozymes importantly, the researchers found a way to laboratories at Davis, initiate oxidative degeneration of cellulose by Calif., and Bagsvaerd, using copper on the enzyme in order to overDenmark, as well as come the chemical inertness of the material. researchers at the Uni“Imagine ironing your clothes,” Walton versity of Copenhagen explains. “The enzyme is shaped like the iron and the University of and sits down on the cellulosic surface, which Cambridge, profes- are comprised of long chains of polyglucose Breakthrough sors Paul Walton and that are difficult to break down. What happens Researcher Gideon Davies, York University Gideon Davies at is that the enzyme essentially forms a very reprofessor, helped York University’s de- active copper oxygen species that cleaves the develop an enzyme secreted from the partment of chemistry cellulose, we think, at random points.” brown rot fungus to identified the molecudegrade cellulose When polyglucose chains are cleaved chains into fermentable lar mechanism behind by copper, according to Walton, soluble sugsugars. an enzyme secreted by ars peel away from the surface of the cellubrown rot fungus— losic surface that ultimately end up in solucalled TaGH61—that’s capable of degrading tion where traditional cellulases can then be the cellulose chains of plant cell walls to re- utilized for fermentation into biofuels and lease short-chained sugars. Their work is pub- other biochemicals. Walton says that the malished in the Proceedings of the National Academy jority of cellulose obtained and used for the of Sciences. research was derived from pretreated corn “This now unlocks the potential of en- stover that was used as a substrate in tests. zyme degradation of cellulose for cellulosic The enzyme, he adds, isn’t capable of deconethanol production,” Walton tells Biorefining structing lignin.

Novozymes’ copper-dependent TaGH61 enzyme is a breakthrough in cellulose degradation and is a key feature of its Cellic CTec products. In July 2010, the company launched its new Cellic CTec2 enzymes that can break down cellulosic biomass such as corn cobs, wheat straw, sugarcane bagasse or wood chips for conversion to cellulosic ethanol.

“Fully understanding the mechanism behind GH61 is important in the context of commercial production of biofuel from plant waste and a true scientific paradigm shift,” says Claus Crone Fuglsang, managing director for Novozymes’ research labs in Davis. “This discovery will continue to drive advances in production of other biobased chemicals and materials in the future.” —Bryan Sims

New Funding Source Launched in Russia

According to WAM, the TCT Fund will invest primarily into medium and small-size companies from Europe, particularly Germany, as well as the U.S., that have a proven record in clean technologies and are looking to expand their business. The fund will focus on a wide range of renewable and clean energy projects. Projects the fund already has earmarked for investment include those related to waste-to-energy processes and the growing and refining of biofuels. —Erin Voegele

tech fund with a specific mandate to focus on the needs of the RusTatarstan, Wermuth Asset Management sian Federation, in announce the Tatarstan Clean Tech Fund general, and Tatarstan, in particular.

The Fund will be seeded with €110 milTatarstan, a Republic of the Russian Federation, and Wermuth Asset Management lion ($157 million) by its founders and seeks GmbH launched the Tartarstan Clean Tech to raise an additional €90 million to reach its Fund in July. According to information re- target size of €200 million over the coming leased by WAM, it will be the first ever clean- 18 months.

Random Cleavage York professor Paul Walton says the new enzyme cleaves the cellulose at random points, allowing access to sugars.

october 2011 | Biorefining Magazine | 17

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policy

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policy |

The Future of

Biorefining Policy

Uncertainty from a challenging political environment, focus on debt reduction and cuts to tax incentives could slow the industry’s progress

By Erin Voegele

This summer’s intense political standoff regarding the debt ceiling and reduction clearly indicates how difficult it is to get anything done in Washington right now, especially when it comes to programs and incentives that require additional spending. With the nation already gearing up for what promises to be an intense 2012 presidential race, it could be more than a year before federal lawmakers seriously address the extension, revision and funding of incentives and programs that benefit biorefiners.

The biodiesel blender tax credit and Volumetric Ethanol Excise Tax Credit are set to expire at the close of 2011. Even more important to second-generation producers, the tax credit for cellulosic ethanol production is set to expire at the close of 2012. Congress has yet to authorize funding for the next fiscal year, which starts Oct. 1, for the Energy Title programs of

october 2011 | Biorefining Magazine | 21

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policy

the Farm Bill, which includes the Biomass Crop Assistance Program. Furthermore, it remains unclear if Congress will reauthorize those programs in the next version Farm Bill. In other words, many of the programs, policies and incentives that the biorefining industry is relying on to help spur development and growth may soon be on Congress’ financial chopping block.

Bringing one bright spot to the policy mix right now, the U.S. Department of Defense seems to be stepping up its efforts to support the development of renewable fuels.

Tax Policy

While some in the industry doubt that a Congress so focused on debt reduction will extend VEETC and the biodiesel tax credit, Greg Jenner, a partner in Stoel Rives LLP’s tax practice, offers a unique take on the situation. “We are probably not at the point yet where Congress is ready to look at fundamental tax reform,” he says. “So, I would say that the chances of the various provisions getting extended are fair to good for awhile, but I think we are reaching a point where Congress is going to have to make some tough choices, including fundamental tax reform. If that happens, I think the prospects for those incentives

will go down tremendously. Fundamental tax reform is by its nature inconsistent with providing all these incentives through the tax code.”

Jenner helped write the Tax Reform Act of 1986, which was the last time Congress fundamentally reformed our nation’s tax structure. As a part of that type of reform, incentives are virtually wiped out of the tax code.

“The way the dynamic works is that nobody will tolerate giving up their incenSupporting tives if other people Cellulosics Brooke Coleman, are retaining theirs,” executive director of Jenner says. “It bethe Advanced Ethanol Council, notes a comes either we’re multiyear extension of all going off the cliff the cellulosic biofuels tax credit would help together, or nobody provide certainty for goes over the cliff. In investors. other words, it fails.

The nature of a fundamental restructuring of the tax code is these incentives go away.

They have to go away, otherwise you can’t do reform.” However, Jenner adds that, over time, incentives do creep back into the tax code.

That being said, Jenner stresses that federal lawmakers likely wouldn’t consider making such significant changes to the tax structure until 2013. This year is nearly over, and in 2012 the focus will be on the presidential election. There tends to be little appetite for major legislation in an election year, Jenner says.

Although the tax credit for cellulosic biofuels is on the books through the end of 2012, there is already concern that it may not be addressed for renewal next year.

“We are talking about a tax extension situation that will be during an absurdly contentious presidential reelection year,” says Brooke Coleman, executive director of the Advanced Ethanol Council. “That is no small problem. The other problem for our industry is even when you get tax incentives incrementally extended for one more year, or two more years, it doesn’t erase the uncertainty of what happens when it expires.”

Those looking to invest in the advanced biofuels sector need certainty those credits will be around long enough to benefit their projects. A one- or two-year extension simply isn’t enough.

The type of action the congressional super committee might be willing to take is less clear. The super committee was cre-

Project Area

Counties/ Location

Feedstock

BCAP Area 1

39 in Kansas and Missouri

Perennial native grasses and forbs, such as Switchgrass, Big Bluestem, Illinois Bundleflower and Purple Prairie Clover. Also allowed are existing suitable stands of native grasses, legumes and forbs.

BCAP Area 2

8 in Arkansas

Miscanthus giganteus (Giant Miscanthus); only the planting of rhizomes of the “Illinois Clone,” a sterile cultivar of Giant Miscanthus is authorized for this project area.

BCAP Area 3

9 in Missouri

Miscanthus giganteus (Giant Miscanthus).

BCAP Area 4

7 in Missouri

Miscanthus giganteus (Giant Miscanthus).

BCAP Area 5

4 in Ohio; 3 in Pennsylvania

Miscanthus giganteus (Giant Miscanthus).

BCAP Area 6

5 in Oregon; 1 in Washington

Camelina.

BCAP Area 7

5 in Kansas; 1 in Oklahoma

Perennial native grasses and forbs, such as Switchgrass, Big Bluestem, Illinois Bundleflower and Purple Prairie Clover.

BCAP Area 8

17 in California; 17 in Washington; and 56 in Montana.

Camelina.

BCAP Area 9

1 county in Oregon

Hybrid poplar trees.

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Information sourced from the USDA Farm Service Agency

Current BCAP Project Areas

PHOTO: U.S. NAVY

policy |

BioPowered The U.S. Navy, along with the USDA and U.S. DOE, is committed thus far to the tune of $510 million to develop drop-in aviation and marine biofuels to power its fleet.

ated by the Budget Control Act of 2011, which was passed in August to raise the debt ceiling. The committee is tasked with crafting a deficit reduction bill, which will then face an up or down vote in the Senate and House of Representatives. Once the bill reaches the congressional floor, lawmakers cannot filibuster or modify it with amendments.

While the super committee could eliminate tax incentives for biofuels in the bill it crafts, Jenner says he thinks that is unlikely.

“The one thing that I could see them taking on would be corn-based ethanol,” he said.

“I could see that, but I wouldn’t bet on it.”

“We are in a fairly volatile time, but at this point there doesn’t seem to be any consensus on where we go—other than the fact that we’ve got to do something to fix the budget program,” Jenner says. If we are unable to get a handle on the budget, we will be in a long era in which Congress

cannot afford to create new incentives, he adds, or even renew old ones.

BCAP and Beyond

Tax credits are not the only federal incentives out there to support the biorefining industry. One obvious alternative includes the programs contained within the Energy Title of the most recent Farm Bill.

Many of these programs, including BCAP, have been specifically designed to help the advanced and cellulosic biofuels industries move towards commercial production.

While BCAP got off to a somewhat rocky start, it finally began to gain traction this year. In July, the USDA announced four new BCAP project areas, bringing the total to nine project areas spanning an estimated 330,000 acres. Now, as the program finally seems to be hitting its stride, its future has become increasingly uncertain.

Funding for the current fiscal year has

already been allocated, and Congress has yet to authorize funding for the program in fiscal year 2012 beginning Oct. 1. According to Todd Atkinson, chief of staff at the USDA’s Farm Service Agency, the House has passed an agricultural appropriations bill that would zero out funding for BCAP. The Senate has yet to act on its version. Following an action by the Senate, the bills will move to a conference committee, where they are reconciled. It’s impossible to guess whether the final legislation will include funding for BCAP. Congress will also soon begin work on the 2012 Farm Bill, which may or may not include the reauthorization of the Energy Title programs.

According to Brent Erickson, vice president of the Biotechnology Industry Organization’s Industrial & Environmental Section, it would set back progress in the biorefining industry if Congress does not authorize additional BCAP funding and october 2011 | Biorefining Magazine | 23

policy

reauthorize the program. “I think it would be really unfortunate,” he says. “We’re at a point where the [cellulosic and advanced biofuels industries] could become a reality and we need to help farmers who would produce those crops.”

Coleman agrees, and adds that it would be detrimental to eliminate programs that haven’t had sufficient time to benefit the industry. When the Energy Title was written, Coleman says it would have been impossible for lawmakers to anticipate we were about to enter a global recession that would push back development in many industries, including cellulosic biofuels. “The Farm Bill anticipated that the cellulosic ethanol industry would be [building out] to commercial scale,” he says. However, a lack of available capital led many projects to be delayed several years. “Letting these programs die on the vine just because the industry didn’t accelerate fast enough during a global recession to take advantage of them is just totally shortsighted,” Coleman says.

Mary Rosenthal, executive director of the Algal Biomass Organization, adds that eliminating programs like BCAP would run counter to Congress’ imperative of job creation and economic development, to which both parties seem to be committed. “It’s our job to make the case that the return on the investment in these programs is significant,” she says.

Ideally, ErickAdvancing Algae son says BIO would Mary Rosenthal, like to see Congress executive director of develop a robust the Algal Biomass Organization, stresses tax credit for all adthe importance of vanced biofuels, foleducating members of Congress on the many lowed by a robust enbenefits of advanced ergy title in the Farm biofuels.

Bill. “That would not only help get commercial-scale biorefineries built, but also get the bioenergy infrastructure built in terms of the crops that we are going to need, which are really the crude oil in a sense, to [feed] these biorefineries that we are going to build to make fuels and chemicals.”

24 | Biorefining Magazine | october 2011

The Military Advances

While the future of congressional action is unclear, the Department of Defense is stepping up its efforts to support the advanced biofuels sector. In mid-August the USDA, U.S. DOE and Navy announced that they will invest up to $510 million over the next three years in partnership with the private sector to produce advanced dropin aviation and marine biofuels. The initiative has been developed in response to a directive issued by President Obama last spring as part of the Blueprint for a Secure Energy Future, and is being steered by the White House Biofuels Interagency Work Group and Rural Council.

To accelerate the production of biobased jet and diesel fuels, Secretary of Agriculture Tom Vilsack, Secretary of Energy Steven Chu and Secretary of the Navy Ray Mabus have developed a plan to construct or retrofit several drop-in biofuel biorefineries. Under the plan, the three departments’ $510 million investment will be matched with at least a one-to-one cost share by private industry.

“I think this has been a real paradigm shift where the military services have realized that, from a strategic point of view, biofuels are very important in terms of cost and security of supply,” Erickson says. “We are seeing a lot of robust interest on the part of all of the services now in trying to get biofuels developed. It’s really important that we have domestically produced fuels for our national defense efforts, so the fact that the DOD is now throwing its weight behind biofuels, I think is going to give the industry a boost.”

Rosenthal also notes that the initiative will be beneficial to industry. “It’s a shot in the arm, for sure, although I’m not alone in wishing it could have been at least double that,” she says. “But we’re grateful.

For years the military has led in testing and sending a strong signal to the market that it will be the first customer. By bringing significant investment capital to the table, I expect that it will accelerate the development of several cutting-edge biorefineries that can produce renewable fuel at competitive prices.”

Shortly before the announcement was

PHOTO: U.S. NAVY

|

Fighting for Renewables Secretary of the Navy Ray Mabus is an outspoken supporter of advanced biofuels.

made, Mabus appeared on Platts Energy Week, where he talked about the Navy’s goals and ambitions for biobased fuels.

During that appearance, Mabus noted that he has testified before congressional hearings in an effort to encourage the revision of military offtake agreements for fuels.

The military is currently limited to five-year off-take agreements. A longer contracting horizon, of up to 30 years, could provide some market certainty that biorefining companies could leverage in an effort to secure capital.

According to Erickson, BIO has been very actively advocating for a revision of the military’s contracting abilities. “If you are going to get financing for a biorefinery and you can go to the bank and say you’ve got a 20-year contract with the Department of Defense, that is going to go a long way to help get financing,” he says.

Rosenthal calls the revision critical.

“Right now, the projects are too big for traditional venture capital,” she says. “With the debt markets and institutional funds still treading water in this investment climate, something must be done. A 15-plus year offtake agreement from the U.S. gov-

policy |

ernment significantly reduces the risk for private investment, so I think you’d see a number of facilities be built sooner if there was this provision.”

Congress is one avenue through which that revision could be implemented, but Erickson notes it’s not the only option.

“Some people have suggested that President Obama needs to make a presidential finding under the Defense Production Act,” Erickson says, “so that he could make biofuels a special category of strategic product, which would give it all sorts of special privileges in contracting and raising its visibility, and making it a strategic commodity.”

No matter what actions Congress ultimately takes or does not take over the next year, the biorefining industry will face a challenge in educating Congress on the technologies have proliferated and there benefits of biofuels, and in working to are so many different advanced technoloovercome uncertainty associated with the gies right now,” Erickson says. “It’s been current political environment. “Congress- a challenge and will continue to be a chalmen, who are very busy, just tend to think lenge, to educate policymakers on how adabout biofuels asEthanol being Ad ethanol, but 7:43 the AMvanced LWC627-RJS-0445 #1 1/1/11 Page 1 biofuels are being produced, what

Those looking to invest in the advanced biofuels sector need certainty those credits will be around long enough to benefit their projects. A oneor two-year extension simply isn’t enough.

technologies are being used, how they impact specific lawmakers states.”

Rosenthal adds that another challenge is that too many members of Congress think that tax credits and incentives are a handout rather than an investment. “We all need to keep making the economic case for investments in new technologies,” she says.

“As far as ABO is concerned, we need to make sure that Congress knows that our industry is a 50-state job-creating engine.

We are literally striking oil in all 50 states, except ours comes from above ground and our wells never run dry.”

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

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industry

Let It Grow Miscanthus farmer Tom Beach, left, and Scott Coye-Huhn, Aloterra Energy, inspect a young field of the energy crop halfway through the growing season.

PHOTO: TIM DRISCOLL

26 | Biorefining Magazine | october 2011

industry |

The

Good Side of

Government For all the gripes, some government-backed programs are working

By Luke Geiver

Cindy Thyfault is more excited about the biofuels industry than she’s ever been. That is

saying a lot for Thyfault, and more importantly, the biorefining industry. She has seen the boom years of the ethanol and biodiesel build-out, all as the founder of Westar Trade Resources, a Texas-based company specializing in the development of cutting-edge technologies and the financial solutions that make such technology economically feasible. “I think technology is really advancing,” she says. “I see new technologies that are amazing every day, technologies that are finding ways to become more efficient.” And she should know—when Sapphire Energy received $54.5 million from the U.S. DOE, the algae company had Thyfault and her team at Westar to thank. The same can be said for Ineos Bioenergy, Coskata Inc. and Enerkem, all Westar clients that used Thyfault’s services to help in the process of seeking out and receiving government-linked funding.

october 2011 | Biorefining Magazine | 27

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industry

Thyfault may know the financial ins and outs and project-to-policy match game that goes with government-based bioenergy funding more than anyone, but she isn’t alone in her optimism about the growing biorefining industry. Thyfault speaks with Biorefining Magazine about the programs that have worked to fund the economic needs of companies such as Coskata or Enerkem; the positive indications she sees amidst a dysfunctional Congress heading into a critical year when the Farm Bill could be potentially overhauled; and simply, to get a positive perspective from someone who has firsthand knowledge of why the political agenda in the U.S. doesn’t always equate to the financial well-being of anyone linked to biobased products and the energy production industries. But just to make sure, we spoke to others in the industries who’ve dealt with government funding, and response is simple: it’s hard work seeking funding, but the end result can transform a technology or idea into a thriving company.

Because of BCAP

But for all these success stories, there is always the strongly held and sometimes warranted belief that amounts given to date are just not enough.

PHOTO: ALOTERRA ENERGY

One of the programs Thyfault believes has worked is the Biomass Crop Assistance Program. “The program has had some success in payments to producers,” she says, “but the goal of that program has been to incentivize cellulosic ethanol production.

It’s not been successful in incentivizing advanced biofuels because the plants haven’t been built yet.” But according to Scott CoyeHuhn, director of business development for Aloterra Energy, an Ohio-based energy crop developer, that doesn’t matter. “Aloterra Energy,” he says, “was formed because of BCAP.” Coye-Huhn and his partners at Aloterra come from the oil and gas industry, and before BCAP’s inception in 2008, he says his team already had their eyes on energy crop production. “When we saw BCAP pass,” he says, “we knew that was a game changer.”

For the Aloterra Energy team, that meant buying and designing crop handling and planting equipment, buying miscanthus gigantus seed and even a farm to plant and test different varieties of switchgrass.

In June, everything changed for Aloterra. USDA’s Agriculture Secretary Tom Vilsack announced four BCAP project areas, one of which included 5,344 acres spread throughout Ohio and Pennsylvania. As the sponsor for that region, Aloterra Energy in one day became an energy crop company, and changed from a BCAP supporter to a BCAP beneficiary. And the biomass conversion facility in Ashtabula, Ohio, that the company developed became a soon-to-be bioenergy hotspot and, as Coye-Huhn can attest, a job creator. “We are already creating

Farm-Funded Aloterra Energy changed from a BCAP supporter to a BCAP beneficiary when USDA Secretary Tom Vilack announced new project areas, including one in his own Ohio backyard where Aloterra Energy’s farm is located.

28 | Biorefining Magazine | october 2011

jobs in Missouri, Arkansas and Ohio,” he says, “and we have some very large manufacturing contracts that we are about to announce. There are a lot of really exciting things in the works because BCAP has kind of set the table for all of these companies that have just been waiting for somebody to come out with energy crops.”

For Coye-Huhn, people are starting to see the positives and believe in the story of companies like his. “This is about more than just going green,” he says. “This is about America’s next economy.” Alex Johnson, CEO of Synterra Energy, would agree with Coye-Huhn and his beliefs on the impacts of bioenergy and the possibilities brought forth from government involvement. After working on a hydrolysis and syngas approach to produce renewable diesel and other biobased products for nearly five years, Johnson spoke with Biorefining Magazine about plans the company has already made to build a biorefinery in Ohio, possibly followed by a facility in California.

All of those plans, Johnson says, happened because of a $25 million DOE biorefinery grant that made the necessary research and development build-out steps possible.

The 9007 energy grant and loan program used by Synterra was a successful program, Thyfault says. And the business and industry loan guarantee program under the USDA (the same program used by the likes of Coskata, Enerkem and Ineos to fund their facilities) has also been a successful program that people can look to for positive reinforcement that—while government funding may seem unattainable or not worth pursuing—there are success stories.

One of those with hopes for a profit-

industry |

able future is HCL CleanTech, a company that has an interesting past. The North Carolina-based company has developed a hydrochloric acid hydrolysis process to convert biomass into fermentable sugars, an idea that stems from World War II. According to the company, during the war, Germany developed a hydrochloric process to create fermentable sugars and, after the war, the U.S., Russian and British armies all sent teams of engineers to study the way the process was used by Germany. After gaining access and reviewing the government documents on the process, HCL CleanTech was formed to prove that a modern version of the process would be more efficient and economical. In

tion of our sugars for their use in renewable fuels,” he said. “It will finance part of our pilot plant operations that are scheduled to create 15 to 20 skilled jobs in the very shortterm.”

Those jobs will help the company make the refined cellulosic sugars “the hottest new commodity” on the market, according to Lavielle, and although he infers that there is no other company like HCL CleanTech, he does say others can learn how to approach or think about government-based funding. “Each stage in the life of a company requires different kinds and amounts of financing. At an early stage, more than just pure financing, the DOE programs help you focus your activities, audit your processes and engage with the right partners.”

PHOTO: ALOTERRA ENERGY

Policy in Action

Big Backing The Ohio State University President E. Gordon Gee speaks at the Aloterra farm about the importance biorefining holds for the state.

June, the company was awarded $9 million to further develop the hydrochloric acid hydrolysis conversion method.

“Being selected by the DOE is very important to us,” says Philippe Lavielle, president and CEO of HCL CleanTech (also formerly with Genencor). “The selection process in itself is a way to obtain an outsider’s view on your technology and your process, and is like a seal of respectability.”

Now, Lavielle says the company can become the company he and others believe it can be. “The DOE-funded program will help us optimize the process and the specifica-

Because of the allocation of BCAP funding to Coye-Huhn’s sponsored region, he can now utilize the work of a 40,000-member-strong group of energy crop farmers Aloterra has enlisted in their movement to make miscanthus production a reality. And as he tells Biorefining Magazine the morning before the president of Ohio State University was set to visit its farm and speak before a crowd on the near-term promise of Aloterra’s efforts, everyone, including politicians, is starting to

see that.

But for all these success stories, there is always the strongly held and sometimes warranted belief that amounts given to date are just not enough. “I think the government has been trying to provide support,” Thyfault says. “Where I think they have tried to build a bridge, it is really only like a little hand bridge, and we really need a San Francisco bridge.”

Thyfault points to the plans by the DOE, Navy and USDA to join in a financial funding agreement, providing up to $510 million of matching dollars to renew-

able jet-fuel producing companies looking to build a facility, expand a demonstration plant or perform any other task that would allow those government entities to make good on their promise to utilize any renewable jet fuel that they can. According to Thyfault, the U.S. airline industry uses 16 billion gallons of jet fuel a year and it wants to buy 8 billion gallons of renewable jet fuel right now. But, for roughly $100 million, a plant could only produce 10 to 20 MMgy of renewable JP-8. Although, as she says, the push by the Navy, USDA and DOE is not going to make much of an impact, “what they are hoping to do is get the first plants built and then multiply that, but there is still a tremendous need.”

Coye-Huhn’s dealings with Washington might, however, show what many companies in the biorefining industry can expect when seeking out government-based funding (or what many most certainly already know). The process was grueling, he explains, but it was that way for both sides.

According to Coye-Huhn, the people in Washington spent many weekends and long nights trying to work out the details to make the BCAP program in his area all work, and to him, this shows that both sides are hoping for the same result.

There is no doubt that the process takes time, and Thyfault indicates that the bridge from where the biorefining industry is now to where it wants to be might be too small for the huge demands and promise of the industry. But, as each company finds a way to get that next round of funding or tweak that microbe in just the right way, those companies need to realize that, as CoyeHuhn says about his own financial future, “this is much bigger than energy crops.”

In his estimations, the bioenergy developments of today are similar to an economic paradise of the past—the tech boom of the 1990s.

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

october 2011 | Biorefining Magazine | 29

|

REGULATORY

Change Needed In a new study, University of Illinois law professor Jay P. Kesan, right, and Timothy A. Slating, a regulatory associate with the University of Illinois Energy Biosciences Institute, argue that regulatory innovations are needed to keep pace with technological innovations in the advanced biofuels industry.

PHOTO: UI NEWS BUREAU, L. BRIAN STAUFFER

30 | Biorefining Magazine | october 2011

REGULATORY |

A Call for

Statutory

Clarity

Is the current regulatory regime hindering commercialization of advanced biofuels?

By Bryan Sims

When the Clean Air Act was created by Congress in 1977, most of its statutory regulations and definitions were devised to accommodate the introduction and commercialization of corn-based ethanol, the only economically viable fermentation-based alcohol permitted to be sold and distributed in the gasoline pool at the time. Since then, the CAA has undergone a few amendments related to oxygen content limits and emission control levels allowed in certain vehicles—primarily centered on E10— with the most significant coming in 2007 when the renewable fuel

october 2011 | Biorefining Magazine | 31

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REGULATORY

standard was created as part of the Energy Independence and Security Act. As the sole federal authority regulating the lawful commercialization of new fuels and additives, the U.S. EPA subsequently approved E15 for 2007 and newer vehicles last October, and in January expanded it to include 2001 and newer vehicles.

Today, in an industry that’s working to produce high-performance, fungible, dropin molecules, some on the cusp of commercialization, many involved in the biorefining sector contend that the current regulatory regime needs to be altered to allow advanced

that were never even thought of when we Choosing the Right did the original amendment to the CAA in Certification Path 1990.”

Determining the extent of how timeWhile reaching the CAA may be a high consuming and expensive it can be to get regbar to climb, Timothy Slating, regulatory as- ulatory approval for biobutanol fuel blends sociate at the University of Illinois Energy through the EPA, and be in compliance Biosciences Institute and lead author on a with the guidelines of the CAA, depends on paper titled “Making Regulatory Innovation which path a biobutanol company pursues to Keep Pace with Technological Innovation,” get its fuel certified, Slating says. Under exwhich will appear in an upcoming issue of isting regulations, biobutanol can lawfully be the Wisconsin Law Review in March, agrees blended with gasoline in compliance with the that getting regulatory approval to com- CAA in a concentration of roughly 11.5 to mercialize new biofuels blends is currently 12.5 percent by volume, depending on the a time-consuming and costly process. In the density of the finished fuel. Slating refers to paper, Slating, along with co- this as the “default” regulatory path to comauthor Jay Kesan, professor of mercialization.  on the web law at the University of Illinois Because the CAA requires detailed emisand program leader within the sions testing and certification for on- and To view the paper “Making Regulatory Innovation Keep Pace with Technological Innovation” by Timothy A. Slating Energy Biosciences Institute, off-road vehicles and engines, Slating notes & Jay P. Kesan, visit http://papers.ssrn.com/sol3/papers. focus on biobutanol and discuss that the act also makes it unlawful for a fuel cfm?abstract_id=1805008 how regulatory innovations are or an additive manufacturer to commercialneeded to keep pace with tech- ize a fuel that isn’t “substantially similar” biofuels, such as biobutanol, to compete with nological innovations in the biofuels indus- to the fuel that the EPA uses in this emisparity in the marketplace. The rapid evolu- try. Additionally, the authors discuss how the sions certification process. Since the CAA tion of advanced biofuels technologies may current regulatory framework might be bur- doesn’t explicitly define what constitutes a have outpaced the current regulatory frame- densome for existing biobutanol developers “substantially similar” fuel, the EPA has iswork that might have otherwise facilitated trying to get their product to market. They sued its “Substantially Similar Rule,” which the introduction and commercialization of also outline suggestions about how the cur- lays out detailed requirements that finished those fuels, which begs the questions: do we rent system could be simplified as an avenue fuels must comply with to be considered need to revisit the RFS2, and do we need to mitigate barriers to entry. “substantially similar” to certification fuel. to modify the CAA? According to Michael McAdams, president of the Advanced Biofuels Association, answering the latter may be critical.

“As we enter this period in the country, in which we are having serious discussions about what our energy mix is going to be or if we’re going to take a portfolio approach, we may have to, by necessity, revisit the CAA and other policy tools because the technology has moved so rapidly that they’re out of date,” McAdams tells Biorefining Magazine.

To not make changes to essentially allow advanced biofuels unfettered access to the infrastructure, McAdams argues, creates entry barrier for fuels that are, in many instances, better-performing. “This is one example of the way we’ve set up a system of rules to govern gasoline, which was primarily premised with one molecule that we used in gasoline other than a hydrocarbon, which was ethanol,” he says. “Now, we have a series of other molecules, including hydrocarbon RVP Waiver Issue Reid Vapor Pressure is a measure of a fuel’s volatility. E10 ethanol receives a 1-pound waiver, molecules made from renewable feedstocks but add butanol to E10 and the waiver disappears.

32 | Biorefining Magazine | october 2011

PHOTO: GEVO INC.

REGULATORY |

True Believer Gevo is one of the companies leading the biobutanol commercialization effort to reform regulatory issues that may slow down use of advanced biofuels, such as those produced in this Gevo biorefinery. Gevo was the first company to have its isobutanol registered with the EPA nearly a year ago.

Specifically, one of the requirements found in the rule says any fuel containing alcohol cannot have more than 2.7 percent oxygen by weight. It is this oxygen weight limitation that governs the amount of alcohol-based biofuels that can lawfully be blended in gas.

But where it gets complex, Slating says, is that although the rule specifies an oxygen-by-weight percentage limitation, this does not translate into a concrete volumetric blending limit for the new finished fuel.

“Essentially, even if a fuel blend contains a set volumetric percentage of a biofuel, the blend’s oxygen weight limitation will fluctuate as the density of fuel naturally changes,” he explains, “so if you’re commercializing via this default path, the blending limit for biobutanol is based on this oxygenate limit, which roughly equates to anywhere between an 11.5 to 12.5 percent by volume limitation.” Slating further explains that “while the EPA has registered some forms of biobutanol with a producerrecommended blending concentration of 12.5 percent, the commercialization of a 12.5 percent blend would only be lawful as

long as it contained no more than 2.7 percent oxygen by weight.”

Another path would be to file a fuel waiver application to allow a blend higher than what is allowed under the Substantially Similar Rule. Regulations provide a mechanism whereby biobutanol producers can pursue a fuel waiver from the EPA to allow higher blending limits than what current regulation allow, but this can be a time-consuming and costly process due to extensive data submission to the EPA regarding how the fuels and additives interact with on- and off-road vehicles. While it may be legal to blend 16 to 17 percent biobutanol with gasoline based on preexisting waivers granted in the 1980s that allow some alcohol-based fuel blends to possess 3.7 percent oxygen by weight, Slating doubts that the EPA would permit the commercialization of 16 to 17 percent biobutanol blends under these waivers. But, since the EPA has a long history of granting alcohol-based fuel waivers on condition that the final blend contain no more than 3.7 percent oxygen by weight, Slating and Kesan contend that the default path should allow

alcohol-based fuels to contain up to 3.7 percent oxygen by weight.

“All the EPA would have to do is issue a new Substantially Similar Rule to update their interpretation of the term ‘substantially similar,’” Slating says. “Essentially, if they changed the 2.7 percent oxygen weight limitation in the rule to a 3.7 percent oxygen weight limitation, then the default path would allow for the lawful commercialization of 16 to 17 percent biobutanol blends in finished gasoline, which would facilitate the introduction of increased volumes of biobutanol into the marketplace.”

Thankfully, for current biobutanol producers, like Colorado-based Gevo Inc., the commercial success of its product isn’t exclusively dependent on how the regulation shakes out, according to Jack Huttner, executive vice president of commercial and public affairs. Huttner is also vice chairman for the Advanced Biofuels Association. Gevo is focused on producing isobutanol, a specific type of butanol isomer, derived from starchbased feedstock like corn, but its product can not only be used as an alcohol-based additive october 2011 | Biorefining Magazine | 33

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REGULATORY

Despite the murky regulatory framework currently facing advanced biofuel developers, McAdams remains optimistic that the EPA will bring clarity and renewed regulatory guidance to help commercialize advanced biofuels. assurance that there will be no unnecessary delay or cost in the fuel waiver process to get their product sold and distributed into the fuel infrastructure.

“It wouldn’t be an across-the-board fast-track review process,” Slating explains, adding that the proposed regulatory change

would reduce impediments biobutanol companies often confront during the application round.

1-Pound Waiver Issue

Another issue at the forefront of discussion by advanced biofuel developers like Gevo and supporting organizations such as the ABFA is specific language found in the CAA that prohibits the blending of biobutanol in E10 gasoline. Currently, fuel that contains between 9 and 10 percent ethanol is granted a 1-pound waiver on Reid Vapor Pressure, a common measurement of gasoline’s volatility, measured in pounds per square inch (PSI). In order to control emissions of volatile organic compounds (VOCs), the CAA amendments of 1990 require all gasoline be limited to max RVP of 9 psi during the summer high-ozone season, which the EPA established as running from June 1 to Sept. 15. Some states have elected to require even more stringent restrictions to achieve local clean air goals.

According to Huttner, this is problematic for biobutanol producers because when

PHOTO: GEVO INC.

in gasoline, but also in chemical applications and as aviation fuel. In addition to Gevo, other biorefining companies such as Cobalt Technologies and Butamax (a joint venture between DuPont and BP) are also leading the biobutanol commercialization effort.

Gevo, however, was the first company to have its isobutanol registered with the EPA nearly a year ago.

“Clearly, there are rules and language that were put in place before there were viable alternatives to ethanol,” Huttner says. “Now that we believe there are viable alternatives, we’re going to review all of those because unless they are changed, those would be barriers to new market entry. Now that Gevo and some of our peer group companies are moving to market, this issue has come to the forefront of our activity.”

Slating and Kesan also suggest that a fast-track review process be created for new fuel waivers that involve biofuels with established fuel pathways for purposes of RFS2 compliance. The authors argue that if RFS2 is going to incentivize the deployment of advanced biofuels, then producers will need

Making Product Gevo is retrofitting this corn ethanol plant in Luverne, Minn., to produce biobutanol, an advanced fuel whose entrance to market faces regulatory barriers.

34 | Biorefining Magazine | october 2011

REGULATORY |

Revisiting Policy Michael McAdams, president of the Advanced Biofuels Association, says the Clean Air Act of 1990 and other policy tools may have to be updated since corn ethanol is not the only renewable fuel around anymore.

another alcohol such as biobutanol, which has a lower RVP than ethanol, is blended with E10 gasoline, the ethanol gets diluted to less than 9 percent, rendering the finished fuel noncompliant with the 1-pound waiver. “Right now,” Huttner says, “you basically can’t blend E10 with any other alcohol.”

To further illustrate how problematic this regulation is for existing advanced biofuel producers, McAdams provides the following scenario that highlights the point. “Say I’m a gas station owner and my tank in the ground with 89 octane is empty,” he says. “I now have a butanol supplier in my distribution network and they’ve got gasoline with butanol in it. I want to drop that half-a-load of 89 octane gasoline with butanol on top of the halfa-load of 89 octane gasoline I’ve got with ethanol. From a blending standpoint, one can do that. But when you put that half a tank of butanol on top of E10 gasoline, you end up with 5 percent ethanol. The requirement is 10 percent ethanol blended with gasoline to get the 1-pound waiver. So when you blend the low RVP butanol in a tank on top of E10, you’re now out of compliance.

Wouldn’t it make sense to change it to where you didn’t have to have 10 percent ethanol if you blended it with other molecules?”

Despite the murky regulatory framework currently facing advanced biofuel developers, McAdams remains optimistic that the EPA will bring clarity and renewed regulatory guidance to help commercialize advanced biofuels. “I have great confidence that the folks who work in the section of the EPA that has jurisdiction over this can thoughtfully work through this with the industry,” McAdams says. “They have a track record of over 20 years working with stakeholders. They’re as good as any agency in the federal government, and I have great confidence that they’ll work with us to address some of these issues, because they believe in advanced biofuels.”

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

october 2011 | Biorefining Magazine | 35

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equipment

CONTRIBUTION

The Power of Collaboration A tech firm, seal maker work together to reduce biorefining commercialization costs

By Sherwin Damdar

The Energy Independence lons of biofuels by 2022. Today, and Security Act of 2007 estab- just 12 billion gallons are produced annually lished a goal of 36 billion gal- in the U.S. Closing this gap will require inThe claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biorefining Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

38 | Biorefining Magazine | october 2011

novation in the entire biofuels supply chain, not just feedstocks.

ThermoChem Recovery International, headquartered in Baltimore, Md., is commercializing the conversion of biomass into a broad range of end products. The company has developed proprietary gasification technology for both liquid and solid

equipment |

The temperatures at which gasification occurs, typically above 850 degrees Fahrenheit, drastically limit the available sealing options. When TRI was developing its initial commercial-scale units, there was no compressible sealing material suitable for use in this process. Graphite-based gaskets begin to oxidize above 850 degrees, eventually leading to rapid leakage. The only other option was a metal-sealing solution that required an extremely high-surface finish and higher-than-achievable bolt load requirements. This escalated the sealing costs of the project, and in one instance required on-

Biofuels and Wax Using extreme-, high-temperature seals engineered and manufactured by Garlock Sealing Technologies, TRI will gasify biomass and convert the syngas into renewable diesel and paraffin wax using FischerTropsch technology.

PHOTO: TRI

TRI and Garlock Sealing Technologies collaborated on testing hundreds of these new gaskets in an extremely demanding application for an extended period of time.

PHOTO: TRI

biomass that allows biorefineries to be feedstock-flexible in converting biomass to fuels, chemicals, power and energy.

The gasification process involves extreme temperatures to convert materials containing carbon, such as coal, petroleum coke (petcoke) or biomass, into synthesis gas. This so-called syngas has half the energy density of natural gas, and can be burned directly in boilers, internal combustion engines or gas turbines for power generation.

It also can be used as an intermediate to produce other chemicals such as hydrogen and methanol. By using the Fischer-Tropsch process, it can be transformed into a synthetic petroleum substitute.

The Future A rendering of TRI’s biorefinery in the Wisconsin Flambeau Rivers paper mill where Garlock Sealing Technologies’ seals will be incorporated. october 2011 | Biorefining Magazine | 39

equipment

line leak sealing when this gasket leaked.

Subsequently, TRI began working on a pilot facility in Durham, N.C., to demonstrate the feasibility of producing syngas, Fischer-Tropsch diesel fuel and high-value paraffin waxes from a wide range of biomass feed stocks. Its fully integrated design included a biomass feeding and gasification system, primary gas clean-up, syngas compression, secondary gas clean-up and Fischer-Tropsch liquids and wax production.

TRI took its performance requirements to Palmyra, N.Y.-based Garlock Sealing Technologies, which concurrently was engaged in a development program for an ultrahigh-temperature gasket for service in applications with temperatures ranging from 850 to more than 1,800 degrees. These gaskets would potentially solve many of the fluid sealing problems encountered in the Norampac project in Niagara Falls, N.Y., which included the need for a high surface finish on industrial flanges and the ability to accommodate lower bolting loads on the gasket. TRI and Garlock Sealing Technologies collaborated on testing hundreds of these new gaskets in an extremely demanding application for an extended period of time. Garlock Sealing Technologies regularly visited the TRI plant to confirm the gaskets were performing as designed and to gather feedback for further improving their performance.

TRI has since been able to successfully demonstrate the production of syngas, diesel fuel and paraffin waxes at its pilot plant,

PHOTO: TRI

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Demo Unit TRI’s pilot facility in Durham, N.C., where Garlock and TRI tested hundreds of new gaskets made for extremely high temperature processes.

and is currently involved in the development of several large-scale, commercial projects.

The first is the Flambeau River Biofuels project in Park Falls, Wis., a demonstration biorefinery. When completed, it will gasify 1,000 dry tons of woody biomass per day to produce renewable hydrocarbon fuels, electricity and steam for the host paper mill.

The second is NewPage Corp.’s biorefinery in Wisconsin Rapids, Wis., which is capable of gasifying 500 dry tons of woody biomass per day for hydrocarbon fuels and steam for the host paper mill.

Garlock Sealing Technologies recently commercialized its extreme-, high-temperature gaskets used in these projects. Trademarked THERMa-PUR, they are designed to seal connections in applications with extremely high temperatures. By working

closely with TRI, the company was able to field test and verify that its new gaskets exhibited long-term, reliable sealing.

The gaskets are made of a proprietary, nonoxidizing material with low organic fiber content and a flexible fiber core, allowing them to withstand extremely high temperatures, both continuous and in thermal cycling conditions. They also provide hydrophobic and electrical insulation properties to resist moisture absorption and the potential for galvanic corrosion between flanges of dissimilar metals.

Collaborations such as the one that facilitated Garlock Sealing Technologies’ ability to produce its new gaskets can help reduce the cost of commercializing renewable energy projects by providing the necessary supporting technologies and innovative solutions to challenges. As a result, the nation will be able to accelerate biofuel production, close the gap between targeted and actual levels, and move us all closer to energy independence and a greener future.

Author: Sherwin Damdar Senior Product Engineer, Garlock Sealing Technologies (315) 597-4811 Info@Garlock.com

New Site The Flambeau River paper mill is where Garlock’s high-temp seals will be put to the test commercially.

40 | Biorefining Magazine | october 2011

Control Room Any seal leaks at Flambeau River will be identified here.

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