Next-Generation Biofuels: Field of Dreams, or Feasible?

Posted on September 7, 2009. Filed under: Advanced Biofuel | Tags: , , , |

By Keith Johnson

The Wall Street Journal

August 12, 2009

The U.S. pinned a big part of its hopes for future transport fuel on cellulosic ethanol, something that doesn’t even exist commercially today.

How feasible is the idea of producing 90 billion gallons of ethanol per year in 2030—enough to displace well over one-third of U.S. gasoline consumption—and keep it affordable? That’s what Sandia National Laboratories set out to answer.

The upshot? There are no theoretical barriers, but a host of practical ones, the laboratory found in a study soon to be published in Bioresource Technology.

Basically, cellulosic ethanol can’t compete with gasoline unless oil stays above $90 a barrel. Even then, the industry has a lot of work to do in order to produce large volumes and do so affordably.

The good news is that vastly increasing cellulosic ethanol production would be good for the environment, saving the equivalent of 25% of today’s emissions from gasoline, or the equivalent emissions from 87 coal-fired power plants.

To make 75 billion gallons of cellulosic ethanol a year (on top of the 15 billion gallons of corn ethanol, which will still be around) two things are paramount: Producers have to get better at squeezing more juice out of the same amount of biomass, and they have to make sure they’ll have all those plants available in the first place.

Improving yields is particulary crucial—the Sandia study generously figures average cellulosic ethanol yields will surpass anything that’s been demonstrated today, which “assumes significant technical advances over time.” Without such progress, the industry won’t ever be able to produce anything like 75 billion gallons.

But to do so affordably depends on the cost of oil, the cost of capital, and the cost of the agricultural feedstocks in the first place. The report concludes that, to be feasible, such a large-scale target means cellulosic ethanol producers must be insulated from volatile or falling oil prices; must have cheap and abundant feedstocks; and must have “manageable” capital costs. That should keep Washington busy.

Here are some of Sandia’s recommendations: “Potential policy options that warrant further investigation include well-planned market incentives and carbon pricing as well as federal investment in research and development and commercialization, especially when oil prices are low.”

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Biofuel Fraud Case Could Leave the EPA Running on Fumes

Posted on September 7, 2009. Filed under: Advanced Biofuel | Tags: , , , , , |

Cello Energy is unlikely to produce 70 million gallons of cellulosic biofuel next year, which means that the EPA will not meet its 2010 target of 100 million gallons
By Brendan Borrell
Scientific American

Grassoline it ain’t. After a jury ordered a leading cellulosic biofuel company to pony up millions for defrauding investors, the U.S. Environmental Protection Agency will likely come in 60 million gallons shy of its 100 million gallon target next year.

Late last month, a federal court in Mobile ordered Cello Energy of Bay Minette, Ala., to pay $10.4 million in punitive damages for fraudulently claiming it could produce cheap diesellike fuel from hay, wood pulp and other waste.

Cello’s owner, Jack Boykin, allegedly built a sham facility and lured pulp producer Parsons & Whittemore Enterprises to invest $2.5 million in an ownership stake in 2007. In court, Parsons & Whitmore CEO George Landegger said he was unimpressed with the company’s facilities, and a string of expert witnesses testified that fuel samples were derived from petroleum sources.

Neither Boykin nor his attorney, Forrest Latta, returned calls for comment, but in statements to the press following the trial, Latta has indicated that Cello’s technology has “global potential.” Another defendant, Khosla Ventures, a California firm that invested $12.5 million in Cello in 2007, was unavailable to comment.

Although it’s no surprise that investors might be dazzled in the rush to hop on board the biofuels bandwagon, the EPA appears to have been duped as well.

Cellulosic biofuel technology is still in its infancy, and the agency and Congress required gasoline blenders to purchase and sell just 100 million gallons next year, less than 1 percent of the nation’s proposed renewable fuel mandates. To encourage biofuel producers to meet that demand, the government would establish a credit scheme to set a floor on the wholesale price of $3.00 per gallon—about twice that of corn-based ethanol—if production fails to reach the 100 million gallon mark.

But David Woodburn, an analyst at ThinkEquity Partners in Chicago says that the agency had pinned its hopes on Cello and has not put in place the cellulosic biofuel credit system required to maintain that price point. “EPA was supposed to have prepared it in late June,” he says, “In the EPA’s eyes, they only need to implement that system if they see a shortfall coming…. Up to now on paper they’ve totally ignored this credit system.”

As reported in earth2tech, Woodburn first realized the EPA would fall short of its target when it released its draft regulatory impact analysis in May. This document listed firms that were to make cellulosic biofuel, and most were on the hook to produce one million or two million gallons by the end of 2010. Cello Energy, however, claimed that its Bay Minette facility would pump out 20 million gallons. The agency also had Cello down for new plants that would produce another 50 million gallons. Woodburn says he grew skeptical of the company after calls and e-mails to the company for verification were never returned.

EPA spokeswoman Cathy Milbourn says Cello estimates were “derived based on commercialization plans from the company. They never gave us volume—only size of the facilities and planned timeline.”

So, what’s the chance that Cello can still meet its target? “It seemed extremely unlikely three weeks ago before this jury verdict,” Woodburn says. “It seems extremely unlikely today. How can you create three additional plants and have them producing in 2010 when ground hasn’t been broken yet?”

Woodburn adds that Cello also faces another hurdle, which is that it has no distribution agreements: in other words, no one has promised to buy their biofuel. In the best-case scenario, he says, the nation will produce 39 million gallons of cellulosic biofuel next year and blenders will be on the hook to pay the government a $600 million or more for biofuel credits through a program that still does not exist.

Alternatively, the EPA could lower the cellulosic biofuel target when it finalizes the contentious renewable fuel standards in the fall, a decision that would defeat the whole idea of the goal in the first place.

Milbourn says the EPA is “continuing to assess the viability of not only Cello, but also the various other technologies and companies in supplying cellulosic biofuel.”

For George Huber, the University of Massachusetts Amherst chemical engineering professor who wrote Scientific American’s July cover story about cellulosic biofuels, Cello is a lesson to be learned. “There are no magic processes for conversion of biomass into liquid fuels,” he says, “If something sounds too good to be true, it probably is not true.”

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U.S. Biofuel Boom Running on Empty

Posted on September 6, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit | Tags: , , , , , , |

U.S. Biofuel Boom Running on Empty

By ANN DAVIS and RUSSELL GOLD

The Wall Street Journal

August 27, 2009

The biofuels revolution that promised to reduce America’s dependence on foreign oil is fizzling out.

Two-thirds of U.S. biodiesel production capacity now sits unused, reports the National Biodiesel Board. Biodiesel, a crucial part of government efforts to develop alternative fuels for trucks and factories, has been hit hard by the recession and falling oil prices.

The global credit crisis, a glut of capacity, lower oil prices and delayed government rules changes on fuel mixes are threatening the viability of two of the three main biofuel sectors — biodiesel and next-generation fuels derived from feedstocks other than food. Ethanol, the largest biofuel sector, is also in financial trouble, although longstanding government support will likely protect it.

[Turmoil in Biofuels Threatens Green Energy Revolution]

Earlier this year, GreenHunter Energy Inc., operator of the nation’s largest biodiesel refinery, stopped production and in June said it may have to sell its Houston plant, only a year after politicians presided over its opening. Dozens of other new biodiesel plants, which make a diesel substitute from vegetable oils and animal fats, have stopped operating because biodiesel production is no longer economical.

Producers of next-generation biofuels — those using nonfood renewable materials such as grasses, cornstalks and sugarcane stalks — are finding it tough to attract investment and ramp up production to an industrial scale. The sector suffered a major setback this summer after a federal jury ruled that Cello Energy of Alabama, a plant-fiber-based biofuel producer, had defrauded investors. Backed by venture capitalist Vinod Khosla, Cello was expected to supply 70% of the 100.7 million gallons of cellulosic biofuels that the Environmental Protection Agency planned to blend into the U.S. fuel supply next year. The alleged fraud will almost certainly prevent the EPA from meeting its targets next year, energy analysts say.

The wave of biodiesel failures and Cello’s inability to produce even a fraction of what it expected have spooked private investors, which could further delay technology breakthroughs and derail the government’s green energy objectives.

“If your investors are losing money in first-generation biofuels, I guarantee you they’ll be more reluctant to put money into more biofuels, including next-generation fuels,” says Tom Murray, global head of energy for German bank WestLB, one of the leading lenders to ethanol and biodiesel makers.

Domestically produced biofuels were supposed to be an answer to reducing America’s reliance on foreign oil. In 2007, Congress set targets for the U.S. to blend 36 billion gallons of biofuels a year into the U.S. fuel supply in 2022, from 11.1 billion gallons in 2009. That would increase biofuels’ share of the liquid-fuel mix to roughly 16% from 5%, based on U.S. Energy Information Administration fuel-demand projections.

Corn ethanol, which has been supported by government blending mandates and other subsidies for years, has come under fire for driving up the price of corn and other basic foodstuffs. While it will continue to be produced, corn ethanol’s dominant role in filling the biofuels’ blending mandate was set to shrink through 2022. Cellulosic ethanol, derived from the inedible portions of plants, and other advanced fuels were expected to surpass corn ethanol to fill close to half of all biofuel mandates in that time.

But the industry is already falling behind the targets. The EPA, which implements the congressional blending mandates, still hasn’t issued any regulations to allow biodiesel blending, though they were supposed to start in January. The mandate to blend next-generation fuels, which kicks in next year, is unlikely to be met because of a lack of enough viable production.

“I don’t believe there’s a man, woman or child who believes the industry can hit” the EPA’s 2010 biofuel blending targets, says Bill Wicker, spokesman for Sen. Jeff Bingaman of New Mexico, chairman of the Senate Energy Committee.

The business models for most biofuel companies were predicated on a much higher price of crude oil, making biofuels more attractive. A government-guaranteed market was also central to business plans.

But once blending mandates were postponed, oil prices plunged and the recession crushed fuel demand, many biodiesel companies started operating in the red. Even ethanol producers, which have enjoyed government subsidies and growing federal requirements to blend it into gasoline, have been operating at a loss over the past year. Numerous established producers have filed for Chapter 11 bankruptcy-court protection.

Critics of the biofuels boom say government support helped create the mess in the first place. In 2007, biofuels including ethanol received $3.25 billion in subsidies and support — more than nuclear, solar or any other energy source, according to the Energy Information Administration. With new stimulus funding, this figure is expected to jump. New Energy Finance Ltd., an alternative-energy research firm, estimates that blending mandates alone would provide over $33 billion in tax credits to the biofuels industry from 2009 through 2013.

Not all biofuels may be worth the investment because they divert land from food crops, are expensive to produce and may be eclipsed by the electric car. One fact cited against biofuels: If the entire U.S. supply of vegetable oils and animal fats were diverted to make biodiesel, production still would amount to at most 7% of U.S. diesel demand.

Producers and investors now are pushing for swift and aggressive government help. Biodiesel makers are lobbying to kick-start the delayed blending mandates immediately and extend biodiesel tax credits, which expire in December.

On Aug. 7 more than two dozen U.S. senators wrote to President Barack Obama to warn that “numerous bankruptcies loom” in the biodiesel sector. “If this situation is not addressed immediately, the domestic biodiesel industry expects to lose 29,000 jobs in 2009 alone,” the senators wrote, using estimates by the National Biodiesel Board.

Mr. Obama, who supported biofuels throughout his campaign, is working to roll out grants and loan guarantees for bio-refineries and green fuel projects, said Heather Zichal, a White House energy adviser. The pace of the disbursements should speed up this fall, administration officials say.

Obama officials defended the delay in biodiesel mandates. The EPA in May proposed rules that penalize soy-based diesel under the blending mandates, because deforestation from soybean cultivation is thought to offset the fuel’s environmental benefits. Obama officials say the EPA must perform a thorough environmental review before it can issue rules. The amount of biodiesel that was to have been blended in 2009 will be added to the amount required for 2010, so that no volume is lost, they add.

Any state help might be too late for GreenHunter Energy. In 2007, the company, led by energy exploration executive Gary Evans, acquired a Houston refinery that processed used motor oil and chemicals and retrofit it to make 105 million gallons of biodiesel a year from all manner of feedstocks, from soybean oil and beef tallow to, potentially, inedible plant matter. GreenHunter’s business model hinged on selling to a government-guaranteed buyer: GreenHunter has the capacity to make 20% of the 500 million gallons of biodiesel that Congress wanted to be blended into the 2009 fuel supply.

Until the mandate kicked in, GreenHunter and other biodiesel makers counted on exporting their output to Europe, a much bigger user of diesel.

GreenHunter opened in June 2008 as oil prices skyrocketed. By then, soybean oil prices were soaring, too, pinching refiners that had banked on using soy. Mr. Evans switched to inedible animal fats.

For about a month, when oil hovered above $120 a barrel and traditional diesel ran over $4 a gallon, GreenHunter says profit margins on turning animal fat into diesel rose as high as $1.25 a gallon. It wasn’t sustainable. The price of animal fat soared too, cutting margins again.

As the EPA continued to delay the blending mandates, the global downturn obliterated demand for regular diesel. Prices cratered. GreenHunter’s plant took a direct hit from Hurricane Ike in September. By the time the plant reopened in late November, the price of diesel had dropped by more than half, and GreenHunter was losing money on every gallon of fuel.

The European Union dealt the final blow this spring when it slapped a tariff on U.S. biodiesel, killing what had been the industry’s main sales outlet.

GreenHunter has since stopped producing biodiesel. The American Stock Exchange informed GreenHunter in May that the company was out of compliance with some listing requirements; the firm has submitted a plan to remain listed. Its stock has sunk to about $2 a share from a high of $24.75 in May 2008.

Bio-refinery carcasses are everywhere. GreenHunter’s lender, West LB, arranged $2 billion in ethanol and biodiesel loans, selling them to various investors beginning around 2006. Today, half of the $2 billion in loans have defaulted or are being restructured, according to people familiar with the portfolio. Publicly traded Nova Biosource Fuels Inc. filed for Chapter 11 bankruptcy reorganization in March.

Imperium Renewables, a biodiesel maker in Washington, is trying to hang on as a storage depot, its founder says. Evolution Fuels, an outfit that used to sell a biodiesel brand licensed by country singer Willie Nelson, has stopped production and said in a securities filing it may not be able to continue as a going concern. The company didn’t return calls for comment.

[Turmoil in Biofuels Threatens Green Energy Revolution]

Some senators have introduced a bill to extend biodiesel tax credits. A provision passed in the House grandfathers soy-based biodiesel into the blending mandates for five years.

Second-generation biofuels have had their own setbacks.

When seeking investors for Cello Energy in 2007, Jack Boykin, an entrepreneur with a background in biochemistry, said Cello had made diesel economically in a four-million-gallon-a-year pilot plant from grass, hay and used tires. What’s more, he told investors he had successfully used the fuel in trucks, according to testimony in a federal court case in Mobile, Ala. He said he had invested $25 million of his own money. An Auburn University agronomy professor advising the Bush administration on green energy endorsed his technology.

Alabama paper-and-pulp executive George Landegger and Mr. Khosla, the venture capitalist, separately invested millions in seed money into Cello and had plans to invest or lend more.

A lawsuit disputing the ownership stakes of investors produced Mr. Boykin’s revelation, in a 2008 deposition, that he had never used inedible plant material such as wood chips or grass in his pilot plant, despite claims otherwise. Construction of his full-scale facility in rural Alabama moved forward anyway.

This year, Khosla representatives took samples of diesel produced at the new Cello plant and sent them off for testing. The results showed no evidence of plant-based fuel: Carbon in the diesel was at least 50,000 years old, marking it as traditional fossil fuel.

The EPA wasn’t told about the test, and continued to rely on Mr. Boykin’s original claims when it asserted in the Federal Register in May that Cello could produce 70% of the cellulosic fuel targets set by Congress that are due to take effect next year.

The jury returned a $10.4 million civil fraud and breach-of-contract verdict against the Alabama entrepreneur in favor of Mr. Landegger, one of the investors. Work on the plant has been suspended. Several weeks after the verdict was delivered, Mr. Boykin presented evidence that he had tested fuel from the plant and it did contain cellulosic material. He is seeking a new trial.

Mr. Boykin declined to comment, but his lawyer, Forest Latta, said his client denies committing fraud. The carbon testing, he said, reflected only an early stage quality-control test during startup trials. It would be premature to conclude, Mr. Latta said in an email, that Cello’s fuel-making process is a failure. “This is a first-of-its-kind plant in which there remain some mechanical issues still being ironed out,” he wrote.

Margo Oge, director of the EPA’s office on transportation and air quality, says the agency is “looking into the whole case of Cello.” Mr. Khosla declined to discuss Cello, but said he doubts the 2010 cellulosic fuel mandates can be met. “All projects, even traditional well-established technologies, are being delayed because of the financial crisis,” he said in an interview.

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The Cellulosic Ceiling

Posted on September 5, 2009. Filed under: Advanced Biofuel | Tags: , , , , , , |

By Ryan C. Christiansen
Ethanol Producer Magazine
From the August 2009 Issue

The renewable fuel standard calls for 100 MMgy of cellulosic biofuel to be blended into the nation’s fuel in 2010, ramping up to 16 billion gallons per year in 2022. Will the U.S. produce enough to satisfy the mandate?

By 2022, the U.S. EPA expects the domestic biofuels industry to produce more than 32 billion gallons per year of renewable fuel. However, less than half of that fuel is expected to be corn-based ethanol. The majority, 16 billion gallons, will be cellulosic biofuel. The Energy Independence and Security Act of 2007 defines cellulosic biofuel as renewable fuel produced from any cellulose, hemicelluloses, or lignin that is derived from renewable biomass and has life-cycle greenhouse gas (GHG) emissions that are at least 60 percent less than the baseline life-cycle GHG emissions. The EPA predicts that, in the long run, those 16 billion gallons of cellulosic biofuel will be cellulosic ethanol. However, EISA’s definition for cellulosic biofuel leaves open the possibility that the mandate can be met by other fuels.

Federal Investments
The goal of ultimately producing billions of gallons of cellulosic biofuel has a hefty price tag. Between 2002 and 2008, the U.S. DOE’s Energy Efficiency and Renewable Energy Biomass Program, established to develop and demonstrate biomass feedstock and conversion technologies for integrated biorefineries and to ensure cellulosic ethanol can be produced cost-effectively by 2012, was allocated more than $800 million in federal funding. Since 2007, the DOE has announced more than $1 billion in multi-year investments in cellulosic biorefineries and since 2006 the USDA has invested almost $600 million to develop biofuel technology.

The bulk of the DOE’s investments began in February 2007 when it announced plans to invest $385 million in six biorefinery projects over four years for a total cellulosic ethanol production capacity of 131 MMgy. Combined with the industry cost share, the projects equated to more than $1.2 billion in investments. Projects identified for funding included an 11 MMgy Abengoa Bioenergy SA plant in Kansas, a 14 MMgy Alico Inc. plant in Florida, a 19 MMgy BlueFire Ethanol Fuels Inc. facility in California, a 30 MMgy Poet LLC plant in Iowa, an 18 MMgy Iogen Corp. plant in Idaho, and a 40 MMgy Range Fuels Inc. plant in Georgia.

In May 2007, the DOE announced it would provide up to $200 million over five years to support the development of small-scale cellulosic biorefineries. The first $114 million was allotted in January 2008 for four projects. The companies identified for funding included ICM Inc., Lignol Energy Corp., Pacific Ethanol Inc., and Stora Enso Oyj. The remaining $86 million was allotted to RSE Pulp & Chemical LLC, Mascoma Corp. and Ecofin LLC in April 2008. In July 2008, the DOE announced an additional $40 million investment for two more companies – Flambeau River Biofuels LLC for its project in Wisconsin and Verenium Corp. for its demonstration-scale facility in Louisiana. Seven of the nine plants were funded for cellulosic ethanol and two for cellulosic diesel.

On the research side, both the DOE and the USDA also provided funding to companies and universities. In March 2007, the DOE invested $23 million in five projects to develop highly efficient fermentative organisms to convert biomass material to ethanol; the companies and organizations identified for funding included Cargill Inc., Verenium, E. I. du Pont de Nemours and Co., Mascoma, and Purdue University. In June 2007, the DOE and USDA together awarded $8.3 million to 10 universities for biomass genomic research. During that month, the DOE also announced a $375 million investment in three new bioenergy research centers, including the DOE BioEnergy Science Center, the DOE Great Lakes Bioenergy Research Center, and the DOE Joint BioEnergy Institute.

To close out the year, the DOE awarded $7.7 million in December 2007 to four projects to demonstrate the thermochemical conversion process of biomass-to-biofuels. Then, in February 2008, the DOE invested $33.8 million in four projects to develop improved enzyme systems to convert cellulosic material into sugars suitable for the production of biofuels. The companies identified for funding included DSM Innovation Center Inc. (a partner with Abengoa), Genencor, a division of Danisco A/S, Novozymes A/S, and Verenium.

In March 2008, the DOE and USDA awarded $18 million to 18 universities and research institutes to develop biomass-based products, including biofuels.

To meet renewable fuel standard targets, the U.S. EPA says cellulosic ethanol plant startups must begin in earnest with a few small plants during 2010-’11 and must continue at an increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years.
SOURCE: U.S. EPA

Finally, in May 2009, the DOE announced that it would provide $786.5 million from the American Recovery and Reinvestment Act to accelerate advanced biofuels research and development and to provide additional funding for commercial-scale biorefinery demonstration projects. Of the total, $480 million will be distributed among 10 to 20 projects for pilot- or demonstration-scale integrated biorefineries that produce advanced biofuels, bioproducts, and heat and power in an integrated system, which must be operational within three years. In addition, $176.5 million will be used to increase the federal funding ceiling on two or more demonstration- or commercial-scale biorefinery projects that were selected and awarded funds within the past two years. Also, $110 million will be used to support new research. Finally, $20 million has been set aside for optimizing flexible fuel vehicle technology, evaluating the impact of higher ethanol blends on conventional vehicles, and upgrading refueling stations to be compatible with ethanol blends up to E85.

Scaling up
To meet renewable fuel standard targets, the EPA says cellulosic ethanol plant start-ups must begin in earnest with a few small plants during 2010-’11, increasing pace thereafter with larger plants. The EPA says the rate of growth for the cellulosic ethanol industry should be similar to that of the corn starch-based ethanol industry in recent years, beginning with 40 MMgy plants from 2010-’13, increasing to 80 MMgy during 2014-’17 and 100 MMgy and upwards during 2018 and beyond. The EPA projects that approximately two billion gallons per year of new plant construction will need to come online between 2018 and 2022. In total, approximately 180 plants will need to be completed by 2022.

However, with only a few months to go before petroleum blenders must begin to use cellulosic biofuels, there are no commercial-scale plants ready to deliver the fuel. Since the DOE’s initial February 2007 funding announcement, very little money has actually been distributed to selected projects. Two of the first six companies to be awarded DOE money – Alico and Iogen – have dropped their applications. Lignol announced in February that it was discontinuing its project as a result of instable energy prices, capital market uncertainty and general market malaise. Meanwhile, subsidiaries of Pacific Ethanol filed for bankruptcy in May.

Abengoa and Poet say they are on track to begin production, but not until 2011. Only Range Fuels, which received an additional $80 million loan guarantee from the USDA in January (the first-ever USDA loan guarantee for a commercial-scale cellulosic ethanol plant), expects to begin producing at near-commercial scale during 2010, with plans to complete the first phase of its planned 40 MMgy facility in Soperton, Ga., early next year.

According to Range Fuels CEO David Aldous, the plant is expected to be mechanically complete during the first quarter of 2010 and commissioning will begin soon thereafter. The plant will produce ethanol from wood chips, he says, and will be scaled up gradually from an initial 20 MMgy capacity. The EPA is predicting that Range Fuels will supply 10 million gallons of cellulosic ethanol toward the cellulosic biofuels mandate in 2010.

Aldous says Range Fuels’ technology is unique. “It is proprietary technology,” he says. “There are a lot of companies that are doing thermal front-end processes, whether they are pyrolysis or gasification, and there are a lot of other companies using different kinds of back-ends, converting the syngas into ethanol, (but) we use a proprietary catalyst on the back end and we use a proprietary technology on the front end.” Prior to leading Range Fuels, Aldous was executive vice president for strategy and portfolio at Royal Dutch Shell plc and also served as president of Shell Canada Products. He is also the former CEO for the Shell Group’s catalyst company, CRI/Criterion Inc.

Meeting the Mandate
To help meet the 100 MMgy cellulosic biofuels target for 2010, the EPA says there will be 24 pilot- or demonstration- scale plants and seven commercial- scale plants producing cellulosic ethanol or cellulosic diesel in 2010. However, ethanol will satisfy only 28 percent of the total cellulosic biofuels mandate. The EPA says the only companies that will produce more than one million gallons of cellulosic ethanol during 2010 are Verenium, Western Biomass Energy LLC, Fulcrum Bioenergy Inc., RSE, Southeast Renewable Fuels LLC, and Range Fuels.

The majority of the cellulosic biofuels volume (72 percent), the EPA says, is projected to come from cellulosic diesel. A small portion (3 million gallons) will be produced by Flambeau River Biofuels at its 6 MMgy plant in Park Falls, Wis., while the majority of all cellulosic biofuels that will be produced, the EPA says, will be cellulosic diesel from Cello Energy (pronounced “sell-oh”), which has a 20 MMgy plant in Bay Minette, Ala. The EPA says to expect 20 million gallons from the Bay Minette plant, as well as 16.67 million gallons from each of three future 50 MMgy plants, which are expected to be swiftly built—two in Alabama and one in Georgia—at locations to be determined.

Feedstock for Cello Energy’s operation can include plant biomass, waste wood, and other organic materials, as well as plastics and used tires. The company uses a catalytic depolymerization technology, the EPA says, to convert the feedstock into short-chain hydrocarbons that are polymerized to produce diesel fuel that meets ASTM standards at a cost between 50 cents and $1 per gallon. The process is reported to be 82 percent efficient and the only energy input is electricity. Allen Boykin, president of Cello Energy, told EPM that the catalyst used by the company is a proprietary catalyst that takes approximately 22 to 25 minutes to convert garbage into fuel oil using a continuous process.

Boykin says Cello Energy’s technology has been in the making for 12 to 15 years. His father, Dr. Jack Boykin, a chemical engineer who served as a Lieutenant in the U.S. Navy from 1961 to 1965, is CEO of Cello Energy and has been conducting the research. Allen says he became involved in 2002 to help bring the system to commercial-scale. Allen says bench-and pilot-scale testing was previously conducted in Prichard, Ala.

Imports to Meet Targets
The EPA admits that because cellulosic ethanol production technology is still developing, production plants will be considerably more complex and expensive to build than corn starch-based ethanol plants, thus requiring much more capital funding as well as design and construction resources. “Although technologies needed to convert cellulosic feedstocks into ethanol (and diesel) are becoming more and more understood, there are still a number of efficiency improvements that need to occur before cellulosic biofuel production can compete in today’s marketplace,” the EPA renewable fuel standard report says. “Additionally, because cellulosic biofuel production has not yet been proven on a commercial level, financing of these projects has primarily been through venture capital and similar funding mechanisms, as opposed to conventional bank loans.”

Alternatively, the EPA suggests that usage targets might be met using cellulosic biofuel that is produced internationally, for example, from feedstocks such as bagasse or straw.

Indeed, as much as 21 billion gallons per year of cellulosic biofuel might be produced outside the U.S. by 2017, the EPA says, the majority from bagasse, but also from forest products, and mostly from Brazil.

A recent report from Novozymes describes how Brazil might produce more than two billion gallons of cellulosic biofuel from bagasse by 2020, which would represent an additional $4 billion in export revenue for that country. Like in the U.S., the development of cellulosic biofuels in Brazil will depend on the industry’s ability to attract the needed investments and political support, Novozymes says.

Despite a slow start for cellulosic biofuels in the U.S., some in the industry are bullish about the future. “Advanced biofuel companies are ready to deploy their technology and begin meeting the requirements of the [RFS],” says Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial and Environmental Section. “Now that the rules of the program are finally moving forward and the Obama administration has demonstrated a firm commitment to the industry, companies are prepared to build the next generation of biorefineries.”

Ryan C. Christiansen is the assistant editor of Ethanol Producer Magazine. Reach him at rchristiansen@bbiinternational.com or (701) 373-8042.

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Shell’s Cellulosic ‘First’ Is More of a Second

Posted on June 14, 2009. Filed under: Advanced Biofuel, Blender's Tax Credit, Field-to-Pump | Tags: , , , |

Shell’s Cellulosic ‘First’ Is More of a Second

By Ian Austen

The New York Times

June 13, 2009

 

Much fanfare attended the arrival in Ottawa earlier this week of Luis Scoffone, Royal Dutch Shell’s vice president of biofuels. Mr. Scuffone flew in from England and descended, along with John Baird, Canada’s transport minister, on a large Shell station at Merivale Road — an undistinguished avenue of strip malls and big box stores.

It was here, at a single pump, Shell said in a news release, where customers could become “the first in the world to fill their tanks with gasoline containing advanced biofuel made from wheat straw.”

That was news to MacEwen Petroleum, however — a small regional service station chain based in Maxville, Ontario.

MacEwen apparently beat the multinational giant to the punch almost five years ago at a station in downtown Ottawa. And it did so, it seems, using ethanol from Iogen, a cellulosic ethanol maker also based in Ottawa, which recently became half-owned by Shell.

The attraction of cellulosic ethanol is that it’s made from agricultural and forestry waste materials rather than crops grown to produce fuel. That, its promoters hope, will allow it to escape the food-versus-fuel debate which has plagued ethanol made from corn and other crops.

Iogen, which also is supplying the ethanol for Shell’s month-long promotion, uses enzymes to break down wheat straw and make about 60,000 liters of ethanol a month at its demonstration plant in Ottawa.

In an interview following the Shell news conference, Brian Foody, Iogen’s president and chief executive, acknowledged that some of the production not needed by Iogen in the past for testing has gone into the pool of ethanol used for gasoline blending.

“There have been molecules from our plant that have made their way into cars,” Mr. Foody said.

 

Gas stationIan Austen/The New York Times MacEwen Petroleum, a small service station operator in Ottawa, said it was selling cellulosic ethanol five years ago. It also said it has been approached by Iogen about supplying ethanol for a MacEwen pump that sells an 85 percent ethanol blend, pictured above.

 

But executives at MacEwen, which was once a major Iogen customer, said they were a bit surprised, and somewhat amused, by the claims from Iogen and Shell.

When Ottawa hosted the 2004 Grey Cup, the Canadian Football League’s championship, MacEwen and Iogen offered a week long, cellulosic ethanol promotion at a busy station near an expressway in downtown Ottawa.

MacEwen was an early promoter in Canada of ethanol-blended gasoline. Marcel Labelle, the company’s vice president of sales and supply said “we were particularly careful about putting only their product in” the gasoline sold at that station’s ethanol blend pumps during the week preceding the football game.

The effort was publicized in a news release, and official Grey Cup vehicles, which were fueled at the MacEwen station, bore photos of wheat straw, the Iogen logo and the slogan: “Fueled with low CO2 cellulose ethanol.”

Outside of that promotion, Mr. Labelle said that MacEwen regularly purchased most of Iogen’s production during 2004 and 2005 and blended it, at varying levels, into gasoline.

“When we were doing this, the major oil companies wouldn’t touch ethanol,” Mr. Labelle said. “It was taking refined product out of their system. They’ve been caught out. And I’m sure Shell doesn’t want to be embarrassed.”

Kirsten Smart, a spokeswoman at Royal Dutch Shell in London, qualified the company’s earlier claim in an e-mail message on Friday:

“We believe this is the first customer offering where over a month long period consumers can knowingly purchase gasoline with a 10 percent blend of cellulosic ethanol, and the first time it has been actively marketed.”

Phil von Finckenstein, a spokesman for Iogen, said in telephone conversation and by e-mail that MacEwen only offered “a low-level blend” in 2004, not the 10 percent cellulosic mix now on sale at Shell. He added that the pumps were primarily for Grey Cup vehicles. “The public was happenstance if they got the fuel,” Mr. Finckenstein said.

Mr. Labelle, after consulting company records, agreed that early customers may have received slightly less than 10 percent cellulosic ethanol because there initially was some residual gasoline blended with corn ethanol in the station’s storage tanks.

But that gas station is replenished more than once a week, Mr. Labelle said. So many motorists received gasoline only blended with cellulosic ethanol.

Iogen, Mr. Labelle said, has approached MacEwen about supplying ethanol for a pump at the downtown station that sells an 85 percent ethanol blend, which is used mostly by federal government vehicles. If something comes of those talks, Mr. Labelle said he expected the cellulose marketing machinery to kick in again.

“Once they are done with us,” he said, “they’ll issue another press release.”

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

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What’s Stopping Us? The Hurdles To Commercializing Cellulosic Ethanol

Posted on March 5, 2009. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , , |

What’s Stopping Us? The Hurdles To Commercializing Cellulosic Ethanol

by Todd Alexander & Lee Gordon, Chadbourne & Parke

RenewableEnergyWorld.com

March 5, 2009

 

Although current efforts to produce cellulosic ethanol are frequently referred to as being near fruition, considerable uncertainty remains about the speed with which cellulosic ethanol will become commercially viable. So far, no company has been able to produce cellulosic ethanol in mass quantities at a cost that can compete with starch- or sugar-based ethanol.

 

The RFS requires that fuels produced from non-corn feedstocks that have 50% lower lifecycle greenhouse gas emission than petroleum fuels – called “advanced biofuels” – beginning in 2009 and fuels produced from cellulose, hemicellulose or lignin that have 60% lower lifecycle greenhouse gas emissions than petroleum fuels – called “cellulosic biofuels” – beginning in 2010, form an increasing percentage of the RFS. As a result of these increases, by 2022, advanced biofuels are scheduled to represent 58.3% of the RFS, and cellulosic biofuels are scheduled to represent 76.2% of the advanced biofuels, the balance of the RFS being met by earlier generation ethanol and biodiesel fuels.

 

However, the U.S. Energy Information Administration recently released a report projecting that renewable fuels will not be able to meet the 36 billion gallon federal mandate by 2022. Yet, because cellulosic ethanol has the potential to improve the environmental benefits of using biofuels significantly, efforts to achieve its commercialization continue.

 

Developers of cellulosic ethanol facilities, however, have found it difficult to commercialize their new technologies due to what has been termed the “valley of death.” The valley of death is a period in the development of a new technology when it is susceptible to failure due to the developer’s difficulty in raising additional cash to fund its commercialization. During this period, a developer faces an increasing demand on existing cash, as cash is spent on development, and a decreasing ability to raise additional cash, due to the project’s lack of demonstrable positive future cash flow.

 

Venture capital investors tend to provide financing to developers once the technology has been shown to be commercially viable, just before the upturn in cash flow is experienced. Private equity investors are typically interested in investing in companies that are already operating and established in the market, rather than developers that have an as-yet unproven technology.

One way of moving a technology through the valley of death is for a developer to enter into a strategic joint venture with an established company. By doing this, the developer can use the cash flow of the established company in order to raise additional cash for commercialization of the new technology.

 

However, using a strategic joint venture requires identifying companies that are willing to accept the risk associated with the new technology and have access to sufficient cash to support additional development costs or can guarantee debt financing for the developer. Several oil companies have invested recently in cellulosic ethanol, including BP in a strategic alliance with Verenium, Marathon Oil in Mascoma, Royal Dutch Shell in Iogen and Valero Energy in ZeaChem.

 

In addition, developers have increasing access to loans and guarantees from the U.S. government, which is another possible route through the valley of death. For example, the Department of Energy has provided funding for nine small-scale projects and four commercial-scale projects, including an additional $76.3 million (after an initial $3.7 million investment) for POET to develop a cellulosic facility. Also, the Department of Agriculture recently announced that it provided its first loan guarantee of $80 million to Range Fuels under the $250 million biorefinery assistance program to support commercial-scale advanced biofuel facilities.

 

Another possible hurdle to the commercialization of cellulosic ethanol is the uncertainty surrounding access to feedstocks. Although the Department of Agriculture administers programs to promote the production of biomass crops, it is unclear whether these programs will convince farmers that a market for biomass crops will develop. Many of these crops may take several years to establish before a marketable crop is available for production, and until such time, it may be difficult to predict whether these crops will be commercially viable.

 

Without knowing whether biomass crops can be produced at commercial yields and prices, and in the absence of a market for these crops, it may be difficult for developers of cellulosic ethanol facilities to procure binding feedstock agreements.

 

In addition to market certainty for feedstocks, the production and transportation costs for feedstocks (residual non-food parts of agricultural crops, residual parts of forestry and waste products and biomass crops) on a commercial scale are largely unknown. Feedstocks that contain significant amounts of lignocellulose tend to be bulky, which may present difficulties and additional costs in terms of harvesting, collecting, transporting and storing these feedstocks.

 

Much of the marginal land that has been identified as being a major source of feedstocks for cellulosic ethanol production lacks access to populated areas where ethanol would be used, which may further increase transportation costs. Projections of the amount of available feedstocks are based on the assumption that feedstocks can be harvested at increased per-acre yields, which in certain instances would require additional spending on new harvesting machinery. Also, the projections do not necessarily take into account the impact that such harvesting may have on continued increases in per-acre yields for agricultural crops, due to the removal of harvest residue that would otherwise fertilize the next year’s crops.

 

All of these additional costs will remain difficult to quantify until cellulosic ethanol facilities enter commercial production.

 

Another risk to large-scale commercial production is what has been termed the “blend wall.” Currently, most ethanol gasoline fuel blends contain no more than 10% ethanol (a fuel known as E10). Blenders stop at 10% because the automakers take the position that using higher percentages of ethanol will void most vehicle warranties. Given that current U.S. consumption of gasoline is estimated at 142 billion gallons a year, absent an increase in the percentage of ethanol that can be blended with gasoline, the total annual market for ethanol in the U.S. is expected to reach the blend wall at a maximum of 14 billion gallons of ethanol. The RFS is scheduled to increase beyond the current blend wall in 2012 and provides an incentive to increase ethanol production even though there may be no one to buy the additional ethanol in practice.

 

Unless the percentage of ethanol that can be blended with gasoline is increased, through a change in either the types of vehicles sold in the U.S. or the automaker’s warranty position, additional production of commercial cellulosic ethanol will be difficult to absorb into the motor vehicle fuels pool. This concern is heightened by the fact that most, if not all, cost projections for producing cellulosic ethanol using current technology show that the fuel is not cost competitive with starch- and sugar-based ethanol.

 

 

Todd Alexander is a partner at Chadbourne & Parke LLP based in its New York office. His practice includes representing developers, private equity groups and lenders in project financings, including the financing of wind farms, utility-scale solar projects, gasification facilities, 2nd generation biofuels projects, biomass and landfill gas facilities, and smart grid applications.

 

Lee Gordon is an associate at Chadbourne & Parke LLP based in its New York office. His practice includes representing developers, private equity groups and lenders in a variety of renewable energy, biofuels and conventional energy projects.

 

 

 

About Renergie 

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On  April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

 

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Verenium Cranks Up Demo Plant — What Next?

Posted on January 11, 2009. Filed under: Field-to-Pump, Hydrous Ethanol | Tags: , , , , , |

Verenium Cranks Up Demo Plant — What Next?

by Katie Fehrenbacher

http://www.earth2tech.com

January 9, 2009

 

 

Remember cellulosic ethanol startup Verenium? Last we heard the company had started the commissioning phase of its cellulosic ethanol demo plant in May 2008, and it had big plans to start construction of a 30-million-gallon-per-year commercial plant in the middle of 2009. Well, a glowing story on the company came out in USA Today this week, which says the company just this week “cranked up” the demo plant. Verenium spokesperson Morgen Grandjean provided a few more details to us in an email and said the commissioning phase of the demo plant is 75 percent completed. The plant is currently producing small amounts of cellulosic ethanol at this time, but “the plant has not been running continuously.”

 

The USA Today article makes no mention of plans for a commercial scale plant. Instead, the story says Range Fuels’ commercial plant is expected to be the first in the U.S. later this year. Verenium’s Grandjean told us in an email that the company is “still slated to break ground on our first commercial facility in the second half of this year.” So, either the company failed to tell the USA Today reporter that information, or the reporter failed to include it. We would guess that, if the company does start construction of a commercial plant in the “second half of this year,” it will be more towards the end of 2009.

 

The USA Today story also doesn’t mention some financial hurdles facing Verenium: In December, the company put out an announcement that said it wasn’t in compliance with NASDAQ rules for maintaining a minimum market capitalization. The company had until this week to regain compliance; if it was unable to meet that deadline it could appeal or apply for transfer to the Nasdaq Capital Markets. We’re not sure what the company’s moves were.

 

The company has been spending very heavily. That’s not surprising given that Verenium is just turning on its demo plant and hasn’t started any considerable production yet, but for just the three months ending Sept. 30, 2008, the company reported a net loss of $133.24 million. And that loss was way up from the same period for 2007, in which the company reported a loss of $20.50 million. At this point the company has little revenue coming in; for the quarter ending Sept. 30, the company reported revenues of $16.38 million.

 

One thing Verenium does have in its corner is the promise of more funding from its partnership with biofuels bigwig BP. The deal with BP provides Verenium with $45 million in payments over the first 12 months of the agreement, and $2.5 million per month over an 18-month period. The deal created a special purpose entity called Galaxy Biofuels, which will have access to Verenium’s technology and will be jointly owned by BP and Verenium.

 

Verenium is actually better off than many companies trying to pioneer cellulosic ethanol in this difficult economic climate. BlueFire Ethanol told Reuters recently that it is delaying groundbreaking on its cellulosic ethanol plant in Lancaster, Calif., for several months.

 

Verenium’s coverage in the USA Today article positions cellulosic ethanol as a solution that is just around the corner. The article says: “Simply put, the nation will soon be running its cars, at least partly, on debris,” and also emphasizes that while corn-based ethanol makers are struggling, cellulosic ethanol makers are laying the groundwork for the next revolution. The cellulosic ethanol companies are struggling with many of the same things that the corn guys are facing in 2009 — especially access to capital. And even if those challenges are conquered, cellulosic ethanol won’t make much of a dent in the fuel supply for many years to come.

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally.  On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice.  On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

 

 

 

 

 

 

 

 

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Second-Generation Ethanol is Delayed

Posted on January 1, 2009. Filed under: Hydrous Ethanol | Tags: , , , , , |

My Top 10 Energy Stories of 2008

The Oil Drum

Posted by Robert Rapier on December 29, 2008

 

The following is an excerpt from Robert Rapier’s “Top 10 Energy Stories of 2008” on the Oil Drum. Top energy story No. 6, “Second-generation ethanol is delayed,” is worth reading in its entirety.

 

Second-generation Ethanol is Delayed

The story this year was supposed to be “2nd generation ethanol production begins“, but alas the over-promise, under-deliver meme that I have been critical of continues. Range Fuels had initially intended to start producing in 2008, but that was delayed to 2009 and now production isn’t forecast to begin until 2010. Meanwhile, other 2nd generation ethanol companies continue to promise the world, including Coskata who claims they can make ethanol for “under US $1.00 a gallon anywhere in the world.” (I took a good look at those claims here.) Finally, according to this source (another here), of the six cellulosic ethanol projects selected to receive $385 million in federal funding in February 2007, almost two years later only one plant is actually under construction (Range Fuels).

 

About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally.  On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice.  On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops. 

 

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    About

    Renergie created “field-to-pump," a unique strategy to locally produce and market advanced biofuel (“non-corn fuel ethanol”) via a network of small advanced biofuel manufacturing facilities. The purpose of “field-to-pump” is to maximize rural development and job creation while minimizing feedstock supply risk and the burden on local water supplies.

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