biorefining magazine - november 2010

NOVEMBER 2010

INSIDE: RAMPANT BRANDING AND REBRANDING IN THE BUSINESS

www.biorefi ningmagazine.com

The San Diego Algae Culture Flourishes

Page 28

PlusLegislating an

Incentive for Biobased Chemicals

Page 24

ANDFinancial Advice for Project Developers

Page 32

Step into TomorrowToday

NOVEMBER 2010

INSIDE: RAMPANT BRANDING, AND REBRANDING IN THE BUSINESS


The San Diego Algae Culture Flourishes

8

PlusLegislating an

Incentive for Biobased Chemicals

Page 24

ANDFinancial Advice for Project Developers

Page 32


NOVEMBER 2010

INSIDE: RAMPANT BRANDING, AND REBRANDING IN THE BUSINESS


The San Diego Algae Culture FlourishesPage 28

PlusLegislating an Incentive for Biobased ChemicalsPage 24

ANDFinancial Advice for Project Developers2


NOVEMBER 2010 | Biorefi ning | 3

NOVEMBER ISSUE 2010 VOL. 01 ISSUE 03

DEPARTMENTS

4 Editor’s Note Too Little? BY RON KOTRBA

6 Advanced Advocacy Where’s the Beef? BY MICHAEL McADAMS

7 Industry Events Upcoming Conferences & Trade Shows

8 Talking Point Ethanol Water Usage: How Much? BY DAN STEPAN

CONTRIBUTION

32 Financial Advice for Project DevelopersFunding a biorefi nery means more than getting capitalBY ROBERT BAILEY

9 Legal Perspectives More Uncertainty as GMO Issues Heat Up BY ANNA J. WILDEMAN

10 Business Briefs People, Partnerships & Deals

12 Startup Biorefi ning News & Trends

POLICYLegislating an IncentiveHow BIO proposes building the biobased chemicals market BY ERIN VOEGELE

INDUSTRY Marketing the MarketWhy branding strategies prevail in biorefi ningBY BRYAN SIMS

ALGAE An Algae Scene Worth SeeingSan Diego’s algae hub revealedSTORY AND PHOTOS BY LUKE GEIVER

CONTENTS

2420 28

CONTENTS |

4 | Biorefi ning | NOVEMBER 2010

| EDITOR’S NOTE

For ages it seems, ethanol groups have been pushing for the U.S. EPA to authorize higher blends of ethanol. When I was senior writer for Ethanol Producer Magazine nearly two years ago, I followed this issue pretty closely. Knowing the potential liabilities OEMs could face in warranty costs if extensive testing isn’t completed, documented and validated, I have always been a proponent of mak-ing sure rigorous testing is completed. So when EPA announced its conditional E15 waiver in October, stating the agency approves E15 for 2007 and newer vehicles, I thought it was a good fi rst step in what could otherwise be a long, drawn-out waiting period. The agency expects the 2001-’07 approval later this year or next.

The Renewable Fuels Association’s Bob Dinneen has gone on record saying, “EPA’s scientifi cally unjustifi ed bifurcation of the U.S. car market will do little to move the needle and expand ethanol use today. Limiting E15 use to 2007 and newer vehicles only creates confu-sion for retailers and consumers alike. America’s ethanol producers are hitting an artifi cial blend wall today. The goals of Congress to reduce our addiction to oil captured in the renew-able fuel standard cannot be met with this decision.”

Some associations are sure to dislike the ruling, but for ethanol advocates to express dissatisfaction for what is a step in the right direction is, to me, confounding. The issues of contention about the conditional waiver include confusion at the pump, misfueling, air quality violations, OEM warranty issues and more.

How, I wonder, can ethanol advocates then be in support of blender pumps—and all of the potential liabilities that could arise from them—and not this measure?

Clearly the blend wall must come down to create any domestic market demand for cel-lulosic ethanol. I see this fi rst step as a conservative but prudent approach by EPA to give ethanol advocates what they ultimately want.

Anna J. Wildeman, attorney with Michael Best & Friedrich, authored this month’s Legal Perspective column, “More Uncertainty as GMO Issues Heat Up,” which delves into the touchy global debate

on using genetically modifi ed organisms for advanced biofuel applications.

Author of “The Bil-lionaire’s Little Black Book,” Solutions Radio broadcast host and fi nancial advisor Robert Bailey wrote this month’s feature-length contribution article, “Financial Advice for Project Developers.”

RON KOTRBA, [email protected]

TOO LITTLE?

CONTRIBUTING WRITERS

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

In the Talking Point column titled, “Ethanol Water Us-age: How Much?” Dan Stepan, senior research manager at the Energy & Envi-ronmental Research Center, cautions would-be advanced

biofuel producers that process water con-sumption, especially for ethanol, must be reduced to fulfi ll two simultaneous goals: energy security and continued existence.


EDITORIAL

EDITOR Ron Kotrba [email protected]

ASSOCIATE EDITORS

Erin Voegele [email protected]

Luke Geiver [email protected]

Bryan Sims [email protected]

COPY EDITOR

Jan Tellmann [email protected]

ART

ART DIRECTOR

Jaci Satterlund [email protected]

GRAPHIC DESIGNER

Sam Melquist [email protected]

PUBLISHING

CHAIRMAN

Mike Bryan [email protected]

CEO

Joe Bryan [email protected]

VICE PRESIDENT

Tom Bryan [email protected]

SALES

VICE PRESIDENT, SALES & MARKETING

Matthew Spoor [email protected]

EXECUTIVE ACCOUNT MANAGER

Howard Brockhouse [email protected]

SENIOR ACCOUNT MANAGER

Jeremy Hanson [email protected]

ACCOUNT MANAGERS

Chip Shereck [email protected]

Marty Steen [email protected]

Bob Brown [email protected]

Gary Shields [email protected]

Andrea Anderson [email protected]

Dave Austin [email protected]

CIRCULATION MANAGER

Jessica Beaudry [email protected]

SUBSCRIBER ACQUISITION MANAGER

Jason Smith [email protected]

ADVERTISING COORDINATOR

Marla DeFoe [email protected]

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| ADVANCED ADVOCACY

Last month I mentioned the importance November has to the advanced biofuels industry. As I write this, we are just days from a

national election that holds far-reaching implications not only for the future of our nation, but for our industry as well. In the weeks leading up to this impor-tant event, we have heard a very vocal White House talk about its commitment and work to further develop advanced biofuels. In fact, the President spent one of his entire weekly addresses on the national importance of investing in clean energy, saying, “There is no indus-try with more potential to create jobs now, and growth in the coming years than clean energy.” Another message from the White House stressed “poli-cies that will catalyze the tremendous potential of renewable domestic biofu-els.” But then there was the Rolling Stone interview in which the President noted, “One of my top priorities next year is to have an energy policy that begins to address all facets of our overreliance on fossil fuels.”

The “Ah-ha” moment—many of you may remember the Wendy’s Ham-burgers commercials in the 1980s in which a gray-haired grandmother stub-bornly inquires about the meat behind the larger-than-life advertising. I would be remiss not to take this opportunity to borrow that line from Clara Peller and ask the White House, “Where’s the beef?”

In January 2009, we welcomed President Obama to the White House amongst one of the largest crowds in the

history of any Presidential Inaugural in almost “rock star” fashion. Initially the new administration attempted, in what I would describe as a frenetic pace, to ad-dress an extremely broad array of issues, from pumping money into the economy via the American Recovery Act, to tack-ling health care and climate change, and reforming the fi nancial system.

But it was the $800 billion American Recovery Act that turned Washington into a near carnival-like atmosphere. Ev-ery conceivable person with an idea for “clean energy” descended on the town to attempt to sell his idea or equipment to create “green energy” jobs in America. It may be years before we know just what the return on investment is from the billions of dollars spent by the U.S. DOE and other agencies in this space. But the advanced biofuels industry got pennies, not dollars, when compared to electric vehicles, transmission initiatives under the banner “smart grid,” and a whole host of ideas aimed at reinventing the electric industry. That had many in Washington referring to the DOE as “all electric all the time.”

Even as Congress turned its atten-tion to offshore drilling, and introduced separate pieces of legislation to convert American’s automobile fl eet to utilize electric vehicles as well as a signifi cant push for conversion to natural gas, there was little political capital spent on ensuring the advanced biofuels industry had the means necessary to get to the all important commercialization phase. That is a real shame for a nation, and a White House, looking to strengthen our energy and economic security.

So now what? The “Ah-ha” mo-ment looking ahead. What are we likely to see and how should we react? In my judgment, it is diffi cult to think that some of the tax provisions will be revisited in the lame duck session of Congress that begins Nov. 15. If, as pundits suggest, the Republicans take back the House and close the gap in terms of number of seats in the Senate, will there be any interest in continuing on the path laid down by the Demo-cratic leadership prior to adjournment? Or are they simply going to say we have a new mandate and push many of the outstanding issues into a new session of Congress? Are budget issues now really the primary concern and, if so, does that mean extending or creating new tax credits or programs?

If the Republicans do take over the House, all the committee chairmanships will change. Already there are discus-sions as to who would take some of the most coveted slots and who would staff them. This looks to me to be new territory for the industry. We will need to defi ne what it is we are and what type of difference we can make with more limited resources. This will take a col-lective effort across all of the biofuels industry. The segmented approach will NOT deliver the goods. Next month, I’ll take a look at the new legislators in Washington who will lead our policy discussion into 2011 and 2012.

Author: Michael McAdams President, Advanced Biofuels Association

(202) [email protected]

Where’s the Beef?A collective effort in Washington needed as leadership changesBY MICHAEL McADAMS


Seattle to Host Regional Biomass Show

As the birthplace of grunge and the Mecca of coffee and rainy weath-er, Seattle will host BBI International’s Pacifi c West Biomass Conference

& Trade Show, Jan. 10-12, at the Sheraton Seattle Hotel. Four panels centered on biorefi ning are sure to pique some interest.

Biorefi ning technologies are helping breathe new life into the struggling pulp and paper industry. With a focus on local and regional projects, one panel, titled, A Game Changer: Energy Production in the Beleaguered Pulp and Paper Industry, will feature speakers with expertise in capitalizing on pulp and paper waste streams. An estimated 500 pulp, paper and paperboard manufacturers do business in Califor-nia alone, equating to great biorefi ning potential.

The world is waiting for an economically effective process for growing, harvest-ing and converting algae into advanced biofuels and biobased chemicals, and the West Coast may have a solution. With an abundance of R&D algae work underway, the West Coast provides a glimpse into the future of algae including efforts devoted to strain characteristics, genome sequencing, harvesting methods and others. The Algal Research, Development and Commercialization in the Pacifi c West panel will include insight from leading university-based algae specialists on the current state of algae development, along with successful strategy approaches in use today explained by some of the leading algae industry developers and producers.

From a value proposition, some argue that regional biomass supplies are best used as inputs for advanced biofuels and biobased chemicals refi ning, not simple combustion for heat and power. In Converting Woody Biomass and Ag Waste into Biobased Fuels and Chemicals: Our Progress, some of the region’s most involved biorefi ning players will discuss the enhanced value biorefi ning can bring to biomass feedstock, how utilization of forest residues for biorefi ning applications can specifi -cally improve woodland health and human safety, decrease reliance on foreign-sourced crude oil, and increase energy security.

Finally, recycling and collection strategies have been optimized over time but the rapid accumulation of MSW continues to stress landfi lls. Costly and hazardous incineration, landfi ll and burying methods can no longer be ignored. This fourth panel, Attacking a Growing Municipal Solid Waste Problem via Biorefi ning, will highlight the importance of turning this liability into a value-added feedstock by discussing conversion processes, such as gasifi cation, to produce a suite of products that are needed for economic stimulation and environmental stewardship.

EVENTS CALENDAR |

Southeast Biomass Conference & Trade ShowNovember 2-4, 2010 Hyatt Regency AtlantaAtlanta, GeorgiaThe Southeast Biomass Conference & Trade Show is one of three distinct regional offshoots of Biorefi ning and Biomass Power & Thermal’s International Biomass Conference & Expo. The program will include more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefi ning; and biomass project development and fi nance.(701) 746-8385www.biomassconference.com/southeast

International Algae Congress 2010 December 1-2, 2010 Congress Centre, The PlanetariumAmsterdam, Netherlands This fourth event is expected to attract 200 people from more than 40 countries. Focus will be on development, technologies and political issues in the world’s growing algae industry. The event is organized by DLG Benelux, subsidiary of Germany-based DLG e.V. +31 (0)348 484002www.algaecongress.com

International Biomass Conference & ExpoMay 2-5, 2011 America’s CenterSt. Louis, MissouriThe International Biomass Conference & Expo is the biomass industry’s largest, fastest-growing event. Plan to join more than 2,500 attendees, 120 speakers and 400-plus exhibitors for the premier international biomass event of the year.(701) 746-8385www.biomassconference.com

International Fuel Ethanol Workshop & ExpoJune 27-30, 2011 Indiana Convention CenterIndianapolis, IndianaThe FEW is the largest, longest-running ethanol conference in the world. Focused on commercial production of grain and cellulosic ethanol, op-erational effi ciencies, plant management, energy use and near-term research and development, the FEW will attract 2,500 attendees. (701) 746-8385www.fuelethanolworkshop.com

1/10


| TALKING POINT

Water is the most critical limiting re-source throughout the world. Sustain-able supplies of

good-quality water are needed for energy production, growing and processing high-value crops, industrial manufacturing and expanding populations. Water has been a key issue in biofuels production since the ethanol boom. Water issues relate to lo-cating production plants where adequate supplies of water exist, high consumptive uses of water during ethanol production, and the large volume of water needed to grow the crops used to produce the biofuels. I have sorted through data and information from readily available water/biofuels studies, many of which pres-ent confl icting information and tend to show certain biases, depending on the author or organization, and have made some calculations of the amount of water that it takes to drive a new fl ex-fuel vehicle down the highways and byways of America.

Just for instance, let me rework the calculations here to avoid the common biases that can sneak into them.

Let’s assume that regular 87 oc-tane gasoline has an energy content of 115,000 Btu/gallon compared to that

of 84,600 Btu/gallon for ethanol. E10 gas and E85 then contain approximately 112,000 and 89,000 Btu/gallon, respec-tively. If we assume that our fl ex-fuel vehicle gets 20 miles per gallon (mpg) burning regular gasoline, then, based on the energy content of the fuel, we can expect 19.5 mpg with E10 and 15.5 mpg with E85.

It takes around 1.5 gallons of water to refi ne a gallon of gasoline from crude oil and around 3 gallons of water to process corn to make 1 gallon of ethanol. Oil exploration and production also con-sume water—around 2 gallons per gallon in Petroleum Administration for Defense District 2 (Midwest).

Published values for the amount of water to produce a gallon of ethanol vary widely depending on where you grow corn, but where I live, USDA Region 7 (North Dakota, South Dakota, Nebraska and Kansas), the amount of water, less precipitation, to grow the corn is around 324 gallons/gallon of ethanol. It follows, then, that there is the equivalent of 3.5, 36, and 278 gallons of water used in the production of a gallon of gasoline, E10, and E85, respectively. Driving the same fl ex-fuel vehicle uses the equivalent of 0.18 gallons (23 ounces) of water for each mile driven on gasoline compared

to the equivalent of 1.8 gallons of water for E10 and 18 gallons of water per mile for E85. That’s 216,000 gallons of water a year using E85, assuming you drive 12,000 miles a year, and the equivalent of two years of typical household water use for an average family of four.

So when we consider domestic bio-fuel production—especially next-genera-tion biofuels—to reduce our dependence on foreign oil, we also need to consider its impact on our water resources. With-out fuel, life is inconvenienced. Without water, life ceases to exist.

Let me assure you that I recog-nize these numbers vary according to where you live and drive. The take-home message is that we, as a society, tend to overlook the value of water until we have either too much (fl ooding) or too little (drought), which has led us to the current water crisis.

Crisis, however, brings new oppor-tunity, but we need to be ever cognizant of the inextricable link between water re-sources and energy production, including fi rst- and second-generation biofuels.

Author: Dan StepanSenior Research Manager, EERC

(701) 777-5247 [email protected]

Ethanol Water Usage: How Much? Why water consumption in advanced biofuel production must improve BY DAN STEPAN

WWbiiBBY


LEGAL PERSPECTIVE |

In recent months, the U.S. Supreme Court, a U.S. District Court from the Northern District of California and the European Commission have had their say

about how genetically modifi ed organisms (GMOs) should be regulated. Additionally, several U.S. and even some local jurisdic-tions have chimed in. As more govern-ments weigh in, one thing is clear: without effective mandates from the federal government and consistency between the U.S. and EC, the composition, structure and jurisdiction of this particular regulatory framework will become more and more uncertain as time passes.

This uncertainty and the patchwork of regulations discussed below does not bode well for the rapid deployment of an advanced biofuels industry that does, and will continue to, rely heavily on innovative biotechnology and GMO products to de-velop alternatives to petroleum-based fuels.

The jurisdiction question—who regu-lates what—is an essential element to this discussion. In the U.S., three federal agen-cies have some jurisdiction over GMOs: the USDA, the U.S. EPA and the Food and Drug Administration. Each agency regulates a different aspect of GMOs, as pesticides, seeds and plants and food, respectively. However, federal regulation of GMOs is not comprehensive, which has left the door open for state and local regulation on the same issues.

Minnesota, for example, requires permits be issued prior to any release of certain genetically engineered organisms; Mississippi requires aquiculture facilities to have a cultivation and marketing permit for any aquatic plants or animals that have

been genetically modifi ed; and the Texas Department of Agriculture has a regula-tory division to oversee biotechnology programs—but it has only a vague mission to “promote the safe development and use of genetically engineered plants,” which allows the department to evaluate risks by “reviewing applications and requiring adequate safeguards before allowing con-trolled experiments to be conducted within the state.” Further, at least three counties in California and the town of Montville, Maine, have enacted outright bans on the production and cultivation of any GMOs. Although an argument could be made that some or all of these regulations are pre-empted by the federal regulatory scheme, that argument will be challenged until there is a more comprehensive federal scheme.

This relative cornucopia of regula-tions is only the domestic side of the story. Earlier this summer, the EC recommended a proposal that would grant individual Eu-ropean Union member states the right to determine if GMO crops can be cultivated in their country. While this proposal could be of great benefi t for crop imports into the EU, it sets the stage for fi erce debate between the regulated community and en-vironmentalists, as well as between member states’ governing bodies. As it stands, the EU is divided over this issue, with many countries issuing blanket prohibitions on GMO cultivation, and others appear-ing more open to the concept. If the EC proposal is approved, it could mark the beginning of even more regulatory chaos within production agriculture, and most importantly, within the framework aimed at regulating advanced biofuels feedstock production.

Admittedly, the legal frameworks discussed above relate largely to GMOs as seeds and crops. However, innovators hoping to develop commercial-scale plant-based advanced biofuel production facilities face an uncertain future. As noted above, the Texas Department of Agriculture Reg-ulatory Division’s charge to “review appli-cations” and require “adequate safeguards” is extremely vague and, in all likelihood, will be applied broadly to ensure there is some form of regulation, however undefi ned, on siting advanced biofuel production facilities that rely on or generate GMOs. Earlier this month, a report published in the journal BioScience indicated that scientists working to develop cellulosic biofuels, among other things, are feeling the pressure of the regu-latory uncertainty. Authors of the report called for regulatory reforms to make scien-tifi c developments less risky and uncertain, without which this industry may come to a bumpy, if not screeching, halt. Work is underway at several land-grant research institutions to provide accurate scientifi c in-formation to inform the debate on GMO use in advanced biofuel production. At this point, it is up to the federal government to take a position on GMO production and use in the context of advanced biofuel development, not only to help the industry survive, but to facilitate the government’s stated goals of reducing or eliminating this country’s reliance on imported fossil fuels.

Author: Anna J. Wildeman Attorney, Michael Best & Friedrich


al frameworks

More Uncertainty as GMO Issues Heat Up

Why the U.S. government should take a stand on GMOs for advanced biofuel applications BY ANNA J. WILDEMAN


Chinese industrial investment conglomer-ate Henan Investment Group and biore-fi ning technology company Chempolis Ltd. signed an agreement to conduct a feasibility study on developing a biorefi n-ery pulp mill project together. Depend-ing on the outcome of the study, a more formal agreement may follow. Henan Investment Group is a state-run company with existing nonwood pulp produc-tion and expanding paper production in Henan province, China. “In Henan, large amount of pulp mills are to be closed due to environmental pollution,” says Esa Rousu, president and CEO of Chempo-lis. The business delegation was lead by Henan province Vice-Governor Zhang Dawei. Henan, with a population of 100 million, is a strong agricultural province and currently the biggest producer of wheat in China.

Avantium has begun construction of a pilot plant at its Chemelot site in Geleen, Netherlands, to produce biobased mo-lecular building blocks as basis for green materials and fuels. Avantium has devel-oped a novel and proprietary catalytic process to convert carbohydrates into furanic building blocks under the brand

name YXY. The pilot plant is expected to become operational in the fi rst quarter of 2011. The facility will produce several tons of YXY building blocks a year to support product development. Avantium is collaborating with industrial partners such as NatureWorks, a subsidiary of Car-gill, and Teijin Aramid to develop novel materials on basis of its YXY building blocks. Avantium collaborates with DAF Trucks, a Paccar company, on the devel-opment of YXY fuels. The company ex-pects to use YXY building blocks for the production of green and recyclable mate-rials such as water and soft drink bottles, carpets, textiles, high-performance fi bers, coatings and plasticizers.

Algenol Biofuels Inc. celebrated the opening of its new biofuels and green chemistry lab and R&D facility in Fort Myers, Fla. The 40,000-square-foot facil-ity houses an advanced algae biology, engineering, carbon dioxide and green chemistry laboratory, as part of the larger Lee Integrated Biorefi nery. Algenol re-ceived a $10 million incentive grant from the Lee County Board of Commissioners to build the lab. The facility will house Algenol’s advanced biology and engi-neering laboratories and operations. An adjoining 4-acre outdoor R&D area and 36-acre outdoor commercialization area will hold the company’s proprietary pho-tobioreactors, the containers that generate ethanol from algae, saltwater and CO2 using Algenol’s patented Direct to Etha-nol technology. The company has begun work on related projects such as using its ethanol and other green chemicals as a replacement for petroleum in plastic and chemical building blocks.

Genomatica recently announced that Wil-liam H. Baum has joined the company full time as executive chairman and chief business develop-ment offi cer. Baum will lead Genomati-ca’s strategic partner-ships with leading chemical producers, users, feedstock sup-pliers, brands and retailers. He brings more than 40 years of

global experience in the chemical space. Most recently, Baum was executive vice president, business development, at Ve-renium, and was part of the biofuels deal team working with the Galaxy BP/Vere-nium joint venture, which concluded BP’s recent acquisition of Verenium’s cellulosic biofuels business. Previously, Baum was vice president of global sales and market-ing with International Specialty Prod-ucts, one of the leading producers in the world of 1,4-butanediol (BDO), where he led the sales and marketing of BDO and other higher value BDO derivatives. Bill has led or had a key role in generat-ing $500 million in strategic partnerships over the past 10 years, including two joint ventures and research collaborations with BASF, Bunge, BP, DuPont, Dow, Synge-nta, Cargill, Bayer and DSM.

The Canadian Green Chemistry and Engineering Network has acknowledged the environmental stewardship of The Woodbridge Group by presenting it with the inaugural Ontario Green Chemistry and Engineering Award, presented to organizations based in Ontario that have made signifi cant contributions to the fi eld of green chemistry and engineer-

Proven Leadership Genomatica’s new executive chairman and chief business development offi cer Bill Baum played key roles in joint ventures with the likes of BASF, Dow, DuPont, Bayer and Cargill.

BUSINESS BRIEFSPeople, Partnerships & Deals

Let it Flow Avantium scientists use a Nanofl ow unit for catalysis research to develop biobased YXY building blocks.

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BUSINESS BRIEFS |

ing, including the technical, economic, human health and environmental benefi ts. The Woodbridge Group accepted this award from the Chemical Institute of Canada and the Ontario Ministry of the Environment, during the International Union of Pure and Applied Chemistry 2010 Conference on Green Chemistry. Robert B. Magee, Chairman and CEO of The Woodbridge Group, said in his speech, “On behalf of our scientists, our engineers and our dedicated workforce, it is my pleasure and distinct honor to represent them and accept the fi rst Green Chemistry and Engineering Award ever offered.”

Lignol Energy Corp., the cellulosic ethanol and biorefi ning tech company, announced that its subsidiary, Lignol Innovations Ltd., has developed process innovations that represent a breakthrough in organosolv pretreatment performance resulting in improved effi ciencies and enhanced economics of Lignol’s biorefi n-ery technology platform. Since acquiring the original Alcell pretreatment pro-cess, the company has been working on enhancements to improve effi ciency and economics. This work has culminated in the development of a signifi cant process modifi cation, which has recently under-gone operating campaigns in Lignol’s pilot plant in Burnaby, British Columbia. The patent-pending process, AlcellPlus, builds on the proven attributes of Lignol’s core process designs while providing the po-tential for lower capital cost, and reduced operating costs.

Petrobras and Novozymes have entered an agreement to develop a new route to produce second-generation biofuel from sugarcane bagasse. The agreement covers the development of enzymes and production processes to make second-gen lignocellulosic ethanol from bagasse in an enzymatic process. It is estimated that bagasse-to-ethanol technology can increase the country’s ethanol produc-tion by some 40 percent without having to increase the crop area. Novozymes is already carrying out research on enzymes to convert bagasse to cellulosic ethanol in order to make the process commer-cially viable. Since 2006, Petrobras has been carrying out research on integrated biochemical processes for converting sugarcane bagasse to ethanol.

INEOS Bio’s fi rst commercial project in the U.S. has secured key permits to build its waste to bioenergy facility in Indian River County, Florida. The INEOS Bio joint venture has obtained its fi nal air permit and environmental resource permit from the state of Florida, its wetlands permit from the U.S. Army Corps of Engineers, and a fi nal environ-mental assessment fi nding no signifi cant impact from the U.S. DOE. The BioEn-ergy Center will be developed entirely within the existing footprint of a former agricultural processing facility. The center will generate 8 MMgy of third-generation bioethanol from biomass including yard, wood, agricultural and vegetative wastes. The center will also generate 6 megawatts of renewable electricity. At the heart of

the INEOS Bio technology is a patented anaerobic fermentation step, through which naturally occurring bacteria convert gases derived directly from biomass into bioethanol. The Indian River facility is scheduled to begin construction in fourth quarter of 2010 and begin production in 2012.

Chemrec AB, a provider of gasifi cation technology used in pulp and paper mills to produce renewable low-carbon fuels, announced it has been chosen by Always-On as one of the GoingGreen Silicon Valley Top 100 winners. Chemrec was selected by AlwaysOn industry experts spanning the globe based on a set of fi ve criteria: innovation, market potential, commercialization, stakeholder value and media buzz. Inclusion in the Going-Green Silicon Valley Top 100 signifi es leadership amongst its peers and game-changing approaches and technologies that are likely to disrupt existing markets and entrenched players. Winners were selected from thousands of domestic and international green technology companies nominated by investors, bankers, journal-ists, and greentech industry insiders. The AlwaysOn editorial team conducted a rigorous three-month selection process to fi nalize the 2010 list. “Our gasifi cation technology can transform the pulp and paper industry to biorefi neries, providing the world with sustainable motor fuels reducing greenhouse gas emissions by 95 percent,” says Max Jonsson, CEO of Chemrec.

SHARE YOUR INDUSTRY BRIEFS To be included in Business Briefs, send information (including photos and logos if available) to: Industry Briefs, Biorefi n-ing, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also fax information to (701) 746-8385, or e-mail it to [email protected]. Please include your name and telephone number in all correspondence.


The pursuit for the perfect mix of enzymes and microorgan-isms is far from over. Steen Riisgard, head of the Danish superpower Novozymes Inc., the enzyme producer that has made several corn and cellulosic ethanol producers’ dreams come true, recently told European policymakers that technology (Novozymes’ in particular) is past the research stage and ready for deployment. But that isn’t stop-ping the U.K.-based Biotechnology and Biological Sciences Research Council from continuing the search for the next best enzyme cocktail or method to access C5 and C6 sugars.

A team from Cambridge University, also a member of the BB-SRC, has found a way to make a simpler version of the molecule xy-

lan, one of the main components of lignocelluloses. “The aim of our research was to understand both how the plant makes this molecule and then to see if we could produce a plant with a simplifi ed version of it,” says Jenny Mortimer, one of the members of the research team. “The idea is that if this molecule is simpler, it will be easier to break down to make sugars, to make biofuels.” To fi nd a simpler version of the molecule, the team turned to Arabidopsis, a plant commonly used within labs and which Mortimer says is generally un-derstood and, more importantly, that lacks two enzymes responsible for making xylan complex in some plants. “We managed to identify the gene responsible for making the xylan so complicated,” she says.

STARTUP Biorefi ning News & Trends

Take a look at Neste Oil’s list of ac-complishments, and you’ll see what it takes to succeed in the renewable energy industry. Develop a biobased diesel fuel from vegeta-ble oil and waste food chemically similar to existing diesel—done. Build a demonstration facility that includes drying of biomass, gas-ifi cation, gas cleaning and Fischer-Tropsch catalysts testing, and do it successfully—did it. Start construction of the world’s largest renewable diesel facility near Singapore—did that too. But it’s the latest addition to that list that makes the Finnish fi rm one of the lead-ers in renewable diesel development.

After the success of its joint-venture demo facility in Varkaus, Finland, Neste Oil and partner Stora Enso have embarked on the construction path again. “We are now in the phase where we verify our technology,” says Lars Peter Lindfors, head of technol-ogy and strategy for Neste Oil. “At the same time we are making profi tability calculations, developing business models and looking into fi nancing of a production-scale unit.” The plan is to build a commercial biorefi nery to produce renewable diesel at one of two locations, Porvoo or Imatra, Finland. To do

so, the JV has begun the year-long process to assess environmental impacts.

The assessment will include input from residents, associations and organizations inter-ested and close to the project sites. The sites were chosen based on raw material availabil-ity and the possibility of each city to utilize the heat-energy gener-ated at the biorefi niries. The facility, which would cost roughly $700 million according to Matti Lievonen, CEO of Neste, would implement the same technology used at the Varkaus plant. “In the demo plant,” Lindfors says, “we have been able to produce high quality hydrocarbon wax and condensate in a once-through process, starting with drying the biomass (forestry waste) and carrying it through gasifi cation, reforming, washing steps and Fischer-Tropsch.”

While Lindfors doubts there will be any “obstacles” along the way with the envi-ronmental impact assessment, he also says Neste has not decided on a site, and will not, for roughly a year. Still, even to consider adding another commercial facility is an ac-complishment in itself. Add this one to the list: Assess the feasibility of another location for another renewable diesel plant instead of worrying if the process will work or be economical—check.

The Amazing ChecklistNeste Oil has already done a lot, but the Finnish company has only just begun BY LUKE GEIVER

Out in Front Neste Oil is a global leader in the renewable diesel sector.

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A Good Enzyme Getting BetterNew research is keeping hope alive for the next best enzyme BY LUKE GEIVER


Upgrading, even replacing, its fi rst-gen biodiesel plant with advanced processing is on the minds of executives at Dexter, Mo.-based Global Fuels LLC, a 3 MMgy continu-ous fl ow biodiesel refi nery. The company is conducting a feasibility study to evaluate producing synthetic drop-in or green fuels. Global Fuels Plant Manager Jason Harris says they are also looking at biochemicals and green energy production. The study is being supported by a $48,833 grant awarded by the Missouri Department of Natural Resources in August.

The existing biodiesel plant is currently operating, but not at full capacity, says Har-ris, mostly due to the expired biodiesel tax credit and a drop in demand. The feasibility study will compare the various second-gen technologies currently available for imple-mentation. “What we hope to accomplish is to fi nd a technology out there that is sustain-able without subsidy,” Harris says. “Given our current industry, where we are at with the $1 subsidy being lapsed, and the market being overproduced, it’s just something for us to look at for long-term stability.”

Global Fuels is looking at a wide range

of technologies. “We’ve looked at several different companies that are on the mark and either ready to commercialize or are still in pilot facilities,” Harris says. “We are look-ing at gasifi cation, pyrolysis, fermentation—we hope to get it narrowed down by the end of the study.”

The company is also investigating lo-cally available biomass sources. “We hope to end up with a technology to utilize some of the biomass that is produced within Mis-souri,” Harris says. “We’re trying to keep an open mind and unbiased opinion starting out. We don’t want to concentrate on one feedstock because that really narrows your study. We want to keep it open and broad, that way we get a chance to look at every-thing. We’re a highly agricultural area, a lot of agricultural residues and forest residues.” Other possible feedstock are municipal solid waste, construction waste, and manure. “We are looking at the whole spectrum,” Harris says.

The offi cial timeline for the study required by the grant is one year. However, Harris notes that Global Fuels is working under an accelerated timeframe and expects

to fi nish the study within six months. While Global Fuels intends to oper-

ate its existing biodiesel plant during the feasibility study and construction of a new facility, the plant’s long-term fate is unclear. According to Harris, a retrofi t of the exist-ing facility isn’t very likely. “Depending on what technology we go with, the second- and third-generation fuels—the synthetics or the greens—the processes by which you produce those are so much different than the transesterifi cation process that there wouldn’t be a whole lot of the existing line utilized,” he says. “Just mainly the company’s building and the tank farm structure.” A fi nal determination on whether the biodiesel plant will continue to operate will be made later. “After everything is up and running, we’ll make that determination.”

Searching for Economic Sustainability Missouri biodiesel producer uses grant to explore feasibility of second-gen process BY ERIN VOEGELE

STARTUP |

New Approach Global Fuels has plans to replace its existing biodiesel plant with a second-generation biorefi nery.

The team ran tests on the Arabidopsis plant to test stem strength to see how a less complex xylan-based plant would com-pare to a typical energy crop. They did it in a peculiar way. Mortimer says the team knew the engineering department had the capability to test the strength of items such as steel beams, and after a little tweaking, the engineering department was able to test the strength of the plant stems using the same system, and the results showed that the plants with simpler xylan molecules were nearly as strong as plants like miscanthus or willow.

Now the team is working with other groups to see if breeding plants with these traits is possible, and Paul Dupree, lead researcher on the team, says this work could make cellulosic ethanol produc-tion more possible now that we know more about what makes plant deconstruction so diffi cult.

The work of the Cambridge team, while important, isn’t enough for the BBSRC though. The center has also joined an EU-

funded project along with several other groups called DISCO, aimed at developing more effi cient and economical enzymes to produce cellulosic ethanol. The project is tapping into a library of more than 4,000 microorganisms that produce a number of different enzymes. Already, the DISCO project has pinpointed a number of promising organisms, most of which have come from the library housed at the Budapest University of Technology and Economics, with positive enzyme activity. Along with the BUTE library, Kristiina Kruus, director for the project, says that the “answer could literally be lying in the soil, in an undiscovered and uncharacterized microorganism.” For the tests, the project is using spruce chips from paper-making, wheat straw from farming and waste bran from milling as poten-tial feedstock to test the enzymes on. Research progress made by DISCO and the xylan-testing team from Cambridge demonstrates that in the enzyme world, a good thing can always get better.


| STARTUP

Conversion of biomass to biofuels and biobased chemicals often requires using strong acids or other harsh and expensive com-pounds, but a team of Iowa State University researchers discovered a simple yet effective technique to produce high-value saleable biobased chemicals that can have many applications.

Supported by grants from the Iowa Energy Center, the research aims to produce sugar derivatives from cellulose such as wood chips while studying reactions in alcohols at high tempera-tures and pressures, according to Walter Trahanovsky, ISU chemis-try professor and lead researcher on the project. After early experi-ments produced the expected sugar derivatives, he says, the team focused on breaking down glucose—the monomer of cellulose—using a supercritical fl uid conversion process, in which the fl uids are heated under pressure until their liquid and gas phases merge. When analyzed using nuclear magnetic resonance spectroscopy, signifi cant yields of ethylene glycol and propylene glycol were found with low molecular weights.

“NMR allows us to see things that other people maybe didn’t see if they were using gas chromatography,” Trahanovsky says. “It was a surprise to us.”

Depending on conditions and amount of cellulosic biomass used, according to Trahanovsky, the conversion process approxi-mately yielded a 2:1 ratio of ethylene glycol to propylene glycol. The patent-pending process also produces alkyl glucosides and levoglu-cosan, which can be converted into glucose for ethanol production and other applications. “We’ve done mostly batch reactions on a lab scale, but we’re trying to develop a continuous process, which should be appealing to scale-up and use on an industrial level,” Trahanovsky says.

An advantage to using the supercritical fl uid pathway is that the

process doesn’t use expensive reagents such as acids, enzymes, cata-lysts or hydrogen. It is also insensitive to impurities in the biomass, Trahanovsky says. “That’s really one of the differences between what we’re doing and a lot of the biological work that’s going on with enzymes, because the enzymes are pretty sensitive to impuri-ties whereas this technique, by and large, is not,” he says. Uses for ethylene glycol include automobile antifreeze, polyester fabrics and plastic bottles. Propylene glycol has many applications, including food additives, solvents in pharmaceuticals, moisturizers in cosmet-ics and as a coolant in liquid cooling systems.

Though demonstrated under batch reactions on a lab scale, progress is underway to develop a continuous process to make it amenable for industrial-scale applications, says Trahanovsky. “There’s a signifi cant amount of work to be done before it can be commercialized.”

Unintended DiscoveryHow ISU researchers produced useful biochemicals from cellulosic material BY BRYAN SIMS

What does a recently passed U.S. House of Representatives bill mean for algae? Parity, for one thing—or at least the allusion of it. The bill, the Algae-based Renewable Fuel Promotion Act cospon-sored by Rep. Harry Teague from the algae friendly state of New Mexico, and Rep. Brian Bilbray of California, will alter the tax code for cellulosic biofuels and, in do-ing so, make algae eligible for a cellulosic biofuels tax credit. Mary Rosenthal, execu-tive director of the Algal Biomass Orga-nization, says the bipartisan support in the House shows an unmistakable message “to the hundreds of companies, scientists,

entrepreneurs and government agencies working to accelerate the development of algae-based fuels.” The bill will now enter debate in the Senate, and for anyone who’s had an eye on Congress’ ability to pass a biofuel-based bill in the past year, the fact that one regarding algae made it through the House may only be a good sign in theory. But, if you’re an algae supporter or developer, time and effort spent on posi-tive policy shows real support is there for algae, even if it’s only alluded to.

—Luke Geiver

Algae Policy TeaserCombine policy support and algae for a positive result

Creating Value ISU’s Ronald Holtan, left, and Walter Trahanovsky use high-pressure vessels to make high-value chemicals from biomass.

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STARTUP |

Terms like “guarantees,” “perfor-mance” and “return on investment” are just a few watchwords the investment commu-nity adheres to when it comes to fi nancing biorefi nery projects. As far as cellulosic ethanol project development goes, BlueFire Renewables Inc. holds fi rm to these same principles. The Irvine, Calif.-based com-pany announced three milestones necessary for bringing online its 19 MMgy facility in Fulton, Miss., by securing an off-take agreement with Tenaska BioFuels LLC for the purchase and sale of its ethanol. It later signed a 15-year contract with Cooper Marine & Timberlands to lock up its agri-cultural residue feedstock supply and, then, in early October, the company selected Wanzek Construction, a wholly-owned subsidiary of MasTec Inc., to build the $296 million facility, which includes a $100 mil-lion biomass power plant.

Selecting the right EPC can make or break a cellulosic ethanol project, according to BlueFire CEO Arnold Klann. “Without having a lump sum turnkey contract from an EPC contractor that basically guarantees

the price, schedule, performance under the contract and provides liquidated damages to back-stop those guarantees, you’re not go-ing to be able to get fi nancing,” he says. The same can be said about securing long-term feedstock and off-take agreements for etha-nol, although these contracts can sometimes be the most challenging to fi nalize even without DOE-backed funds, Klann notes.

“For feedstock agreements, especially for ag residue contracts, you don’t have a credit-worthy or deep-pocket supplier that’s going to gather material and guarantee supply during the life of a loan,” he says. “Conversely, you have to have someone buying the product and guaranteeing some kind of price matrix that matches feedstock costs because of conversion effi ciency.”

Securing feedstock, ethanol and EPC arrangements like these before breaking ground on a cellulosic ethanol project aren’t new priorities but, according Klann, they were pegged especially high for his compa-ny because BlueFire is the recipient of loan guarantee funds through the U.S. DOE. If the company hadn’t secured the arrange-

ments, funding may have been delayed or, worse, stripped. By not securing feedstock, off-take and EPC agreements prior to building a plant, the odds of obtaining any type of funding are slim to none, regardless of having a DOE loan guarantee or not.

“Right now, if you’re not in queue to get a loan guarantee then you have to create a contractual model that is much more rig-orous to get any type of funding from the outside,” he says, adding that the company also applied for a USDA loan guarantee as a fallback measure. “Commercial banks and equity players want to see security of the cost estimates that you have for building the facility. They want to see the security that you actually have revenue streams coming in to pay off the debt.”

First Things FirstWhy securing EPCs, locking up long-term feedstock and off-take agreements are critical for cellulosic ethanol projects BY BRYAN SIMS

A group of major airline companies, airports and Rolls Royce have joined Sustainable Use of Renewable Fuels, a consortium that says it intends to develop a microalgae-to-fuel process and have a commercial production facility up and running in only three years. SURF is a project between U.K.-based Cranfi eld University, Airbus, British Airways, Rolls Royce, Finnair, and Gatwick Airport. The plan is to continue work being done on the campus of Cranfi eld to grow and process algae, and eventually, move that work to the sea. In fact, the consortium joined with Cranfi eld for that specifi c reason. The university’s Sea Green Project is aimed at rapidly grow-ing algae in the ocean, and, according to Naomi Stanford-Jones, Cranfi eld’s executive of corporate communications, British Airways, Rolls Royce and the others will all provide help in business and technological decisions for the project. Maybe the Sea Green Proj-ect will make algae a reality. Either way, we’ll know in three years.

—Luke Geiver

The 3-year Algae Timeline Big players with huge things to say about tiny algae

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Go Team SURF team members will provide industry knowledge and general business practices.

Big Investment Compared to fi rst-gen ethanol plants, BlueFire’s 19 MMgy cellulosic ethanol biorefi nery—indeed, most advanced biorefi nery projects—will cost big bucks.

TOTAL PROJECT COST

$296 million

BIOMASS POWER PLANT COST

$100 million


| STARTUP

During a milestone announcement, U.S. EPA Assistant Ad-ministrator for Air and Radiation Gina McCarthy stressed that the agency is not requiring the use of E15, rather it is opening up the possibility for fuel retailers to begin offering the fuel. “This decision is about allowing the use of gasoline blended with E15 ethanol by the appropriate vehicles to use where and when E15 becomes avail-able,” she says.

Most stakeholders seem to agree that the situation is less than ideal. In fact, the National Association of Convenience Stores has spoken out urging its members to exercise extreme caution when deciding whether to offer the fuel. This attitude has nothing to do with E15 itself, rather the NACS notes that EPA approval of the fuel does not negate the many federal laws and restrictions that are in place regarding the sale of fuels. According to the NACS, retailers may make themselves vulnerable to many liability issues and legal repercussions if they supply E15 before other laws and regulations are updated to safeguard the sale of E15.

While the current situation may be less than ideal, the EPA’s actions do refl ect an important fi rst step in opening the market to allow for greater use of ethanol-blended fuels. In the short term, the fuel waiver approval is expected to help spur investment in com-mercial-scale cellulosic ethanol plants. “It provides confi dence to investors that the U.S. government is going to continue to increase our use of renewable fuels,” says Wes Bolsen, Coskata Inc.’s chief marketing offi cer and vice president of government affairs. “Right now, Coskata is looking to start building our fi rst commercial plant, so of course it helps in the sense that it gives investors additional confi dence.” That extra confi dence should be created later this year when EPA approves the second portion of the wavier for 2001 though 2006 cars and light-duty trucks, he says.

Glenn Nedwin, executive vice president of technical enzymes at Genencor, a Division of Danisco, agrees. “Once the second deci-sion comes, then it is going to get much more attractive for investors because we now see there is growth potential in the industry,” he says. “With an open market now, we will defi nitely see more invest-ment coming.” However, the E15 approval is only one step in the right direction towards increasing the use of ethanol. “This is a fi rst step,” Bolsen says. “We see this E15 waiver as a fi rst step in a bigger plan to get to very high volumes of cellulosic ethanol.” The big question now is what the second step might be. “What is our plan?” says Bolsen. “Do we have the enduring policy to start putting in the infrastructure, meaning blender pumps and [fl ex-fuel] vehicles? What is the strategy? Is it E15, then E20, then E25, or are we talking about a much bigger plan?”

According to Bolsen, it will be important for all relevant ethanol industry stakeholders to form a coherent plan in order to actually get higher volumes of fuels in the market. “[We need to] put together an entire industry stakeholder plan, and by that I mean not just producers, but everyone from station owners to the national pe-troleum refi ners,” he says. “How do we all work together on a transi-tion plan to meeting our mandate and reducing our dependence on foreign oil?”

Cracking the Blend Wall U.S. EPA approves conditional E15 fuel waiver BY ERIN VOEGELE

With $1 million from the New Zealand Ministry’s Waste Minimisation Fund, Crown Research Institute Scion plans to build a pilot plant to demonstrate its biosolids conversion technology. Company spokes-woman Christl McMillan says the technol-ogy combines the benefi ts of biochemical and thermochemical processes into a single hybrid system using a thermal deconstruc-tion process to cook and break down the biosolids. The technology can produce nutrients, such as nitrogen and phosphorus; biobased fuels and chemicals, such as acetic

acid, organic acids, ethanol or bioplastics; and methane for electricity production.

“The plant is currently being prefabri-cated offsite with installation and commis-sioning expected to take place in January,” McMillan says. “The pilot plant will be portable, allowing its application at multiple sites into the future.” Scion is partnering with the Rotorua District Council on the project, and will use about 5 percent of the city’s waste biosolids. The fi nal objec-tive of the two-year project is to develop a design for a commercial-scale facility, which

McMillan says could be under construction by 2013.

—Erin Voegele

Transforming Waste into ValueNew Zealand project aims to turn solid organic wastes into biochemicals, energy

Blending up Potential Blender pumps could offer a simple solution to overcoming E15 concerns by making E10, E15 and E85 available at a single pump.

Put to Use Biosolids, such as those produced at the Rotorua District Wastewater Treatment Plant, are byproducts of sewage treatment.

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STARTUP |

Despite billions of dollars in fi nanc-ing, countless government incentives and a graveyard of failed startups, increased volumes of biobased fuels and biomateri-als are expected to fl ood the marketplace in the next fi ve years, according to a report published by Lux Research titled “Biobased Fuels and Materials Through 2015: Growing Capacity Past a Drop in the Bucket.” The report forecasts that by 2015 global biofuel capacity will grow 7.8 percent annually to 53 billion gallons, while biomaterials are on pace to grow at a 17.7 percent per year clip to reach 8.1 million tons.

Technological advances focused on algae oil and biobutanol development are expected to fuel global growth in biofu-els to 78 billion gallons of total capacity while, on the biomaterials side, capacity is anticipated to climb to 10.5 billion tons, with much of the volume expected to come from succinic acid and ammonia producers. Deeper corporate involve-ment in either industry could fuel massive growth, particularly for biomaterials where it could bring total capacity up to 12.4 mil-lion tons by 2015. Biofuel capacity would also benefi t from increased corporate investment, and could expand to 65 billion

gallons in the next fi ve years, the report states. It also notes that global ethanol capacity will rely heavily on government regulation. A U.S. increase in the national blend limit to 15 percent should open up more demand for the fuel additive by bringing the forecasted capacity to 43 bil-lion gallons by 2015.

Moving on Up Report: Advanced biofuels and biomaterials production poised to explode into global market within next fi ve years BY BRYAN SIMS

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Ready for Growth Of the four major global regions, North America possesses the largest biofuel production capacity while Asia has the most biomaterial capacity today.

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| STARTUP

Imagine standing on a rocky shoreline, high cliffs littered with pine trees jut toward the sky, waves are crashing in, seagulls fl y overhead and at your feet you fi nd a piece of algae, a microorgan-ism that come to fi nd out is 60 percent more effi cient for biofuel production than most other strains. What would you do? The scene may sound far-fetched but for Ocean Nutrition Canada, a giant supplier of Omega-3 fatty acids, a similar situation hap-pened. During a research screening process aimed at fi nding appli-cable microorganisms that may aid in Omega-3 fatty acid supple-ments, ONC found a strain of algae that is not only 60 percent more effi cient, but is also heterotrophic (able to grow without sunlight). They found it in, of all places, the Bay of Fundy, a large body of water located between New Brunswick and Nova Scotia. What ONC did next might make that algae strain, which they’ve named ONCT18B, something we hear more about in the near future.

The Sustainable Development Technology Canada organiza-tion is the Canadian version of the U.S. DOE, and ONC chose to partner with SDTC to further develop the strain. At nine years old, SDTC has worked on roughly 195 projects, helping clean tech companies across the valley of death, says Rick Whittaker, chief technology offi cer and vice president of investments for SDTC. The organization currently has $478 million invested in its projects, not to mention the private capital the organization helps participating projects fi nd. “We’ve got just over a billion dollars,” Whittaker says, “and that is leveraged up by two- to three-times

by the private sector.” Whittaker also says SDTC has a program called “follow on funding,” which helps companies identify ad-ditional investors.

Fortunately for the Halifax-based Omega-3 fatty acid sup-plier, Whittaker’s organization doesn’t just supply funding. The SDTC he says “takes good ideas and proven designs through the pre-commercialization stages of development to scale-up, so that when they get done with us, they land in the market.” The organization is housed within a government body but staffed with private sector people, “to make it industry friendly, speak industry language, have solid business plans,” he says, adding, “a solid busi-ness plan will drive market uptake.” And if all that isn’t enough, SDTC doesn’t require repayments of the fi nancial contributions it provides to funded projects through the SD Tech Fund, a $550 million fund that supports late-stage development and pre-com-mercial demonstration of clean technology.

ONC has virtually everything required to make an algae project a success, Whittaker says, including the right algae strain, a production process already existing at their Omega-3 plants, and a business model that can bring the product to market (look to their partners on the project—UOP LLC and Lockheed Martin, among others). So if you fi nd a new strain of algae or have a novel tech-nology, what should you do next? For starters, pretend you’re on a rocky shoreline somewhere, maybe even a large body of water between two Canadian provinces.

Algae from Where?A Canadian company discovers new algae strain, fi nds perfect partner BY LUKE GEIVER

Notable Portfolio SDTC-supported projects contribute technology solutions to major economic sectors in Canada, reducing costs while increasing productivity and competitiveness.

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$92M (19%)

$97M (20%)

$86M (18%)

$36M (8%)

$14M (3%)

$42M (9%)

SDTC’s current investment into 195 projects is $478M


STARTUP |

Former hippy counterculture haven Berkeley, Calif., is home to Bio Architecture Lab Inc., a company working to convert weed—seaweed, that is—into second-generation biofuels and chemicals. The one-step process, known as consolidated bioprocessing, uses a microbe to break down sugars in seaweed to convert them into common metabolites, which can then be converted into a wide range of biobased products, such as ethanol and isobutanol.

One major benefi t of the seaweed used by BAL is that it contains no lignin, says CEO Daniel Trunfi o. Breaking down lignin is a very complete and expensive process, he says. By working with a lignin-free feedstock, the company has managed to sidestep one of the more signifi cant impediments faced by second- and third-generation biorefi ning processes.

Trunfi o says BAL’s technology is

fl exible, allowing for production of a wide range of fuels and chemicals from seaweed. “Ultimately, I would like to see our company be seaweed agnostic,” he says. “You bring a seaweed to me, tell me what products you want us to make, and we will.”

BAL recently formed a strategic partnership with Norwegian energy gi-ant Statoil, under which Statoil will fund research, development and demonstra-tion projects for conversion of seaweed to ethanol. If successful, Statoil will also fund commercialization activities in Norway and Europe. BAL has also formed an isobutanol research part-nership with the Advanced Research Program Agency-Energy and an ethanol research partnership with the Chilean government.

—Erin Voegele

Sidestepping Lignin’s ChallengesTargeting lignin-free macroalgae for advanced ethanol production

SOURCE: BAL CEO DAN TRUNFIO

Fastest growing plant on earth

Known cultivation methods

No fertilizers

No lignin

Approximately 50 percent sugar content

Sustainable biomass source

Environmentally beneficial

Low greenhouse gas footprint

Seaweed Facts

Consumer product manufacturers are discovering that the time is right to capital-ize on existing manufacturing technologies while using available supplies of biomass like soybeans and corn to replace current petroleum-based products, or to reduce demand on resources such as wood. These strategies fi t in with overall sustainability targets for emerging companies like Corn Board Manufacturing Inc., which entered into a licensing agreement to utilize a corn-based structural composite technology developed by researchers at the University of Illinois Urbana-Champaign. CBMI’s primary product, trademarked CornBoard, is a version of wood composite board that uses corn stover. The composite is prepared by mixing the fi brous corn component with a polymer matrix, lami-nating the mixture and applying heat and pressure, according to CBMI CEO Lane Segerstrom.

“We chose corn-based materials be-cause it’s a readily available biomass we can take and do something with right now,” he says. “That’s what makes it so attrac-tive.” Due to its fl exibility, CornBoard isn’t limited to being a wood composite board replacement. But it’s also being developed into a variety of products, including its line of Zea Home Outdoor Furniture Collec-tion, kitchen cabinets, door cores and a full line of longboard skateboards called “StalkIt Longboard.”

Meanwhile, Cargill intends to use Momentive’s Niax silicone L-670 sur-factant in conjunction with its soybean oil-based BiOH polyols to reduce the use of petroleum-based polyols from which polyurethane foam is traditionally made. Replacing standard silicone surfactant with Niax L-670 surfactant in formulations using Cargill’s natural oil-based polyols increases foam’s biobased content by up

to 30 percent over current levels, which can result in enhanced foam properties and processing methods. Cargill, which has been using its soybean oil-based BiOH polyols in foam manufacturing since 2005, sees in coming years a steady climb in more products incorporating the biobased material in various consumer products, ac-cording to Yusuf Wazirzada, business unit leader for Cargill Biobased Polyurethanes.

“We are actively promoting the vi-ability of soy-based foams because of the environmental benefi ts they offer, without sacrifi cing quality,” he says. “The market presence has grown signifi cantly in the past few years and we see potential for even more growth in the future.”

—Bryan Sims

Coming to a Home Near You Why biobased materials continue fi nding their way into consumer goods


| INDUSTRY

Market Penetration NatureWorks' biobased polylactide production facility, located in Blair, Neb., can generate approximately 300 million pounds per year of its Ingeo brand biopolymer resins for a variety of plastic and fi ber applications. PHOTO: NATUREWORKS LLC


How marketing a branding strategy may give companies a leg up on the competition BY BRYAN SIMS

When people think of biofuels, the first thing that usually comes to mind is ethanol and, perhaps with it, a roll of the eyes. Mention a chemical like biobased levulinic acid and one may expect a reaction of puzzlement with raised eyebrows. Such a chemical is not likely to ever become a household name compared to, say, corn-based ethanol. Nevertheless, some biorefi ning compa-nies are recognizing that to heighten visibility of their products, they should consider, or perhaps reconsider, implementing a clear branding strat-egy within their marketing campaigns. By lever-aging a branding strategy in a marketing cam-paign, particularly with diverse media at their fi ngertips, advanced biofuel and biobased chem-ical companies also have a chance to educate consumers and potential or existing customers

on the benefi ts of their products and services—a feat fi rst-gen biofuel producers weren’t really able to successfully capitalize on in the prime of their growth period.

“It’s a defi nite change in mindset now, not in just the general public, but also in govern-ment,” says Al Novak, alternative energy man-ager for Emerson, a global automated process control supplier to a variety of industries, in-cluding biobased fuels and chemicals. “Govern-ment is looking at how to adjust subsidies, tax credits or funding to take into account the new dynamic of the market, where it isn’t just about corn-based ethanol anymore.”

Colorado-based cellulosic ethanol develop-er Range Fuels selected Emerson as its primary automation and process control contractor for its 100 MMgy cellulosic ethanol and methanol

INDUSTRY |

Marketing

Marketthe


plant under construction near Soperton, Ga., where it will use wood waste as feed-stock. Emerson also teamed with Dynamic Fuels to help bring the 75 MMgy renewable diesel plant in Geismar, La., online.

In a move intended to showcase its innovation and engineering expertise with

Range Fuels, Emerson rolled out a 30-minute television commercial under the “It’s Never Been Done Before” marketing campaign. Created by Chica-go-based marketing agency DDB, Emer-son fi rst launched its “Consider It Solved!” marketing campaign in 2002. Emerson later extended the campaign for another seven

years in March, subsequently renaming the campaign under the new designation, “It’s Never Been Done Before.”

Regarding the ad with Range Fuels, Novak says, “It was a mutual marketing campaign. Companies like Range Fuels have enough to worry about with the un-derlying process technology. They may not have a lot of expertise in large-scale project execution or process control, and those are obviously things we can help them with and remove some of the risk when they get to execute a project or build a plant.”

According to Novak, the advanced biofuels market is one that the company has been keeping a close eye on for three to four years to potentially offer its services to. “We’ve recognized advanced biofuel as an emerging sector that we defi nitely want to be engaged in,” Novak says, adding that Emerson is the only nonproducing, or tech-nology developer, member in the Advanced Biofuels Association. Novak says the com-pany also has engaged between eight and 12 advanced biofuel developers in the ABFA as potential candidates for partnerships similar with Range Fuels. “We’re keenly in-terested in its success,” he says.

Though an aggressive marketing cam-paign seems to work for Emerson and Range Fuels, the time may not be right for

all companies with similar strategies. They place varying degrees of importance on fi nding, or refi ning, particular company names, process technologies and products to increase recognition of the products they intend to offer.

What’s in a Name?Irvine, Calif.-based advanced

biofuel developer BlueFire Re-newables rebranded its company name in August to better refl ect the all-encompassing products and services it will market. For-merly BlueFire Ethanol Inc., the company works to deploy tech-nology for manufacturing a suite of biobased chemicals and fuels, including cellulosic ethanol, biod-iesel, synthetic fuels and biojet fuel utilizing a concentrated acid hydrolysis technology originally developed by Arkenol Fuels LLC. A primary impetus behind the company’s rebranding and name change, according to CEO Arnold Klann, was to move beyond advanced biofuels exclusively, such as cel-lulosic ethanol, in order to attract equity investment.

“A lot of companies realized they couldn’t get fi nanced in the concept of just being a pure ethanol play because of the

bad press,” he says. “By rebrand-ing, the primary reason was to open the mindset of the invest-ment community as they’re now recognizing there’s a much broad-er market out there.”

The company initially went with its previous company name during corn-based ethanol’s growth period when investor in-terest peaked. “We ended up call-ing our company BlueFire Etha-nol mainly because ethanol in the name attracted attention,” Klann says. “It’s like giving kids primary colors as opposed to muted col-ors—you have to be in their face,

so to speak.”Another reason why BlueFire Renew-

ables chose to rebrand its company name, Klann says, was to create exposure into in-ternational markets under the umbrella of a true biorefi ning company. “If you think about Thailand or Europe, their primary focus on fuels is diesel,” he says. “It’s not necessarily gasoline as their infrastructure

| INDUSTRY

Providing Exposure Partnering with companies like Emerson can heighten visibility of an advanced biofuel and/or biobased chemical producer, says alternative energy manager Al Novak.

Refocus BlueFire Renewables Inc. CEO Arnold Klann says renaming a company to better refl ect the overall scope of business is critical to reaching domestic and international customers.

Downstream Machine INGEO biopolymer resin pellets shoot into a bag at NatureWorks' production facility in Blair, Neb.

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line of biobased poly-lactide (PLA) under the brand Ingeo, used as a biopolymer material in variety of plastics and fi ber applications. The company manufactures PLA from dextrose in plant material through fermentation. Nature-Works’ primary cus-tomer is ultimately the product manufacturers that opt to use Ingeo biopolymers, which are then offered to con-

sumers in the retail sector through various products. But in order to reach its consumer base, the intended results of an aggressive marketing campaign, if pursued, can some-times get lost in the fast-paced business-to-business (B2B) market.

“When branding is done in the B2B space, it’s more of a trademarking strategy

that never survives beyond the fi rst step,” according to Steve Davies, director of pub-lic affairs and marketing for NatureWorks. “For us, it was critical to get the environ-mental credentials across what we’re selling, and that’s what’s critical to the brand-owner for making the consumer sale.”

When marketing a biobased product such as Ingeo, NatureWorks puts a tremen-dous amount of attention into developing and improving upon the environmental cre-dentials, or “ecoprofi le,” in order to better communicate to retailers and its customer base the renewable advantages Ingeo car-ries. Davies says, “That’s why it is critical to us, even though we’re in a B2B space, to brand our product so that it can be tracked downstream to the fi nal user, so they know the pedigree of what they’re buying.”

Author: Bryan SimsAssociate Editor, Biorefi ning

(701) 738-4974 [email protected]

and their cars aren’t designed to run on ethanol. The rebrand should open up that market for us as a result.”

Bio'D'efi ning Process Technology

Depending on where an advanced biofuel or biobased chemical company sits in its development cycle and fi nan-cial position, some companies may prefer to focus their capital resources on refi n-ing their process technologies to scale rather than marketing a branded technol-ogy. However, some companies, such as Biofi ne Technology LLC, say having a brand or trademarked name attached to a process technology is what helps es-tablish potential licensing ventures once commercial deployment nears.

“You have to defi ne the technol-ogy you’re selling,” says CEO Stephen Fitzpatrick. “You sort of sell the whole concept along with the core technology.” The company’s core conversion pathway, called the Biofi ne process, is derived from a contracted version of the word “biore-fi nery.” Fitzpatrick says the process can convert virtually any biomass feedstock that contains cellulose into four main intermediate products: levulinic acid, for-mic acid, furfural and ligneous char. The company is targeting production of ethyl levulinate as the “basis for advanced bio-fuel,” he says.

If a biobased chemical developer wishes to enter the commercial market-place, equal effort would have to be put into fi ling for patents to build an intel-lectual property wall around the branded technology. In other words, patent pro-tection backs the name a technology de-veloper puts on its processes, which can be an attractive selling point.

“A branded technology encapsulates what a technology is selling, what it’s all about,” Fitzpatrick says. “It’s extremely important to have a brand name and have it relate, certainly in this business, to a certain technology or set of IP.”

Downstream MarketingSince 2003, NatureWorks LLC, a Car-

gill joint venture, has been marketing its

INDUSTRY |

Consumer Appeal Marketing a bioproduct downstream to retailers and to consumers is imperative for biobased product manufacturers like NatureWorks LLC, according to Steve Davies, director of public affairs and marketing.


| POLICY


What one organization proposes to spark greater biobased chemicals production BY ERIN VOEGELE

Tax credit programs have long supported the biofuels industry. The massive build-out of fi rst generation ethanol and biodiesel plants in the past 20 years can be large-ly attributed to tax incentives that helped these industries stand toe-to-toe with their petroleum counterparts. As the biofuels industry moves to second- and third-generation development, tax credits will continue to play a signifi cant role. An initiative being led by the Biotechnology In-dustry Organization aims to build similar sup-port mechanisms into the tax code for biobased chemicals and materials producers.

“We’ve seen a pretty good body of federal policy developed to help commercialize biofuels and next-generation biofuels,” says Matt Carr, BIO’s managing director of policy. “I think there is a pretty wide appreciation for the benefi ts of biofuels, and I think members of Congress un-derstand why we should invest in biofuels.” Carr notes, however, that biobased chemicals and products have not historically received the same level of appreciation. As a result, policy support for these sectors is lacking. “One particular area where this is true is in the tax codes, where we have a number of biofuels tax incentives—but really nothing in the renewable chemicals and biobased products space,” Carr says.

Generally speaking, biobased products and chemicals are competing with well-established petrochemicals. “In order for new alternatives to really break into the market, federal policy

plays a key role,” Carr says. “That is why BIO has chosen to pursue a tax credit for renewable chemicals and biobased products.”

The ProposalThe proposal developed by BIO, along

with the input from several industry partners, would create a 30-cents-per-pound tax credit for biobased products made via the chemical or bio-logical transformation of feedstocks. The credit would increase to 36 cents for qualifying prod-ucts made by small producers that manufacture less than 5 million pounds a year. The proposal also offers a higher tax credit for qualifying cel-lulosic or algae products. A partial tax credit would be made available to biobased products that meet the requirements of the USDA’s Bio-Preferred program, but are not chemically or biologically transformed, as well as biobased products manufactured from byproducts of a fuel process that have been further transformed chemically or biologically. The production tax credit would not apply to food, feed or fuel ma-terials.

“I think we have a pretty well developed proposal,” Carr says. “We’ve taken pains to work with the industry to make sure it will work for a wide variety of business models and have also consulted with government offi ces and agencies, experts and academics. “I think what we put to-gether is a very well-crafted proposal, but it’s really just a starting point for conversation,” he

Incentive

POLICY |

Legislating an


continues. “I think we have to make sure the credit works for a wide range of busi-ness models. The key concept here is that biobased products are a tremendous driver of green jobs. We want to incentivize ad-ditional production at existing commercial facilities, and the construction of new fa-cilities. To do that, the credit needs to apply to all qualifying advanced products, and also work for companies that might not have a lot of profi t against which to apply a tax credit. We’ve requested that the incentive be refundable or available to companies that might not have a tax liability in the early years.” That mechanism, he says, is similar to those that have been developed to sup-port startups in other renewable energy sectors, such as wind and solar. “It would be a refundable investment tax credit, as an option to the production tax credit,” Carr says.

According to Karl Sanford, vice presi-dent of technology development at Genen-cor, there are four key elements his company thinks should be included in a fi nal tax bill. Due to the large capital investments that are required in the biorefi ning sector, Sanford says that scope of the tax credit needs to be proportional. He also says that the time-frame for which the tax credits are avail-able needs to be long enough to allow the new sector to establish itself. In addition, Sanford notes that the tax credit should be limited to new and developing bioproducts, and also be feedstock agnostic, he says—not limited to lignocellulosics. “I believe that a well-planned tax credit is imperative for our sector,” Sanford says. “Without fed-eral assistance, I think the hurdles for get-

ting the advances of indus-trial biotechnology into the chemical industry could be paralyzing. What is at stake for the U.S. is leadership in the industrial biochemicals business, and along with that goes new jobs and eco-nomic impacts.”

Brian Tockman, direc-tor of strategic sourcing at Segetis Inc., also points out that it is important for the tax proposal to clarify what constitutes a qualifi ed prod-uct in terms of biobased

content. This is necessary to ensure that the treatment of intermediates is consistent with the treatment of other biobased chem-icals and materials, he says. “We see this pro-posal as a bridge, not a permanent aspect of the industry,” Tockman says. “We see it as a booster shot—a temporary booster shot—until the industry has the scale to compete with petroleum-based incumbents.”

According to Metabolix CEO Rich-ard Eno, the tax credit proposal needs to include a refundable tax credit since many biorefi nery startups will require time to be-come profi table. “The refundability aspect of the proposal will allow the businesses to realize benefi t of the tax credit immedi-ately,” he says.

The Political EnvironmentThe current political climate does pose

a challenge to getting the proposal in front of Congress, Carr says. “I think it’s going to be tough to get anything done for the remainder of this year,” he says. “We’ll continue to work, and I think there is still a strong interest, a bipartisan interest, in do-ing something further for green jobs and renewable energy. We’ll continue to talk to members of the Ways and Means Commit-tee and the Finance Committee, looking for opportunities. If we don’t see something before the election, there’ll be a new cohort of folks that we may have to educate and bring up to speed. I’m confi dent that as we educate lawmakers, we are developing new champions. It may take time, but we’ll get there.”

Carr says it’s not just the policy envi-ronment posing challenges right now, but

the fi scal climate is too. It’s particularly dif-fi cult to fi nd a way to fund new expenses. “It’s really about how do you pay for some-thing?” Carr says, adding that, realistically, the proposal may have to wait for the next Congress to be addressed. “There will be a primary focus on cutting the defi cit and spending. It will be a tough environment in which to propose additional spending, but we’ll continue to educate lawmakers to un-derstand and appreciate the long-term ben-efi ts of investment in this sector and the job growth potential. We’ll leave it to Congress to make the decision where money is best spent, but we feel like there are few better investments than those in renewable chemi-cals.”

The main obstacle to the proposal is political in nature, not philosophical, Carr says. “Hopefully, we’ll see the economy turn around and a desire in Congress to re-invest in the future economies and revitalize U.S. chemical manufacturing jobs,” he says. “When we get to the point when Congress is ready to do that, I think the opportunity will be there.”

Building SupportBIO has been working aggressively to

educate lawmakers on the benefi ts of the proposal, says Rina Singh, BIO’s director of policy, who noted that the education com-ponent of the initiative is extremely impor-tant. “The process of educating Congress members about renewable chemicals and biobased products has been very benefi -cial,” she says. BIO’s educational messaging has focused primarily on the benefi ts of job creation, retaining manufacturing facilities, increasing economic growth and maintain-ing U.S. leadership in the biotech sector.

The energy security implications of the tax credit are also important to note, Singh says. Increased biochemical production will reduce reliance on petroleum feedstocks, thereby reducing dependence on foreign countries. Biochemicals are also likely to lead to more price stability, she says, adding that recent volatility in oil prices has trans-lated into volatile prices in the chemical sec-tor. “Renewable chemicals can give compa-nies a more reliable, predictable and stable supply chain,” she says.

“The history for developing this tax credit is very much focused on the U.S.

Policy ProfessionalMatt Carr, BIO's managing director of policy, is helping spearhead development of a production tax credit for biobased products and chemicals.

Outreach Leader BIO Director of Policy Rina Singh has been aggressively working to educate lawmakers on the benefi ts of aproduction tax credit for the biorefi ning industry.

Technology Titan Karl Sanford, Genencor’s vice president of technology development, says a production tax credit for biorefi ners would allow his company to bring products to market sooner.

| POLICY


and impacts to the U.S. bottom line,” Singh says. Outreach efforts to date have focused on bringing representatives of industry to Washington to build support for the pro-posal. Bringing high-ranking CEOs from the biorefi ning sector to speak to lawmak-ers about the tax credit is not only a great networking opportunity, Singh says, it’s also going to pay dividends.

Taking ActionCarr says those who want to help sup-

port BIO’s tax credit initiative can start by reading the organization’s white paper on

the value of renewable chemicals. They can also contact their congressional representa-tives and encourage them to invest in alter-natives to petroleum. The same thing can also be done on the state level by working with state development agencies, and Carr notes that the biorefi ning sector should encourage those agencies to look for op-portunities to attract investment and new development into their states. Economic development agencies should also be en-couraged to advocate on behalf of the tax credit and its economic development pos-sibilities. “The key is really to work at the

grassroots level, and eventually I think the message will resonate here in Washington,” Carr says.

Representatives of both Genencor and Segetis have traveled to Washington with BIO to advocate on behalf of the tax credit. “I was pleased to visit with many members of the California Congressional delegation and their staff where we received some overwhelming support for the biobased tax incentive,” Sanford says. “They emphasized the need for scoring any proposals under the ‘pay for’ rules, which in this Congress is a prerequisite for getting a champion to step forward and move the legislation.”

Lawmakers’ engagement and enthusi-asm for what biobased chemicals can do, both in terms of bringing chemical manu-facturing back to U.S. soil and environmen-tal benefi ts, is directly tied to education, Tockman says. “My feeling is that giving Congress a more clear understanding of those macrobenefi ts would give them addi-tional reason to support the specifi c issues of the tax credit, because they would under-stand that propelling this industry forward achieves so many important goals for the U.S.”

While speaking with federal lawmak-ers is important, Tockman says that some of Segetis’ most productive relationships have been with the local offi ces and staff of these senators and congressmen. Local staff in these offi ces then need to be very engaged in these initiatives because they can feel the direct benefi t of these policies in their local communities, he says. “You have to engage the Hill, but you also have to en-gage local offi ces and staff,” Tockman says.

“BIO members are working hard with this Congress to underscore the importance of enacting a tax credit that will help our industry grow—providing new jobs, eco-nomic opportunities and an alternative to petroleum-based products,” Sanford says. “Genencor remains committed to working with the 112th Congress as well to ensure that U.S. policy and tax code keeps up with the pace of innovation.”

Author: Erin VoegeleAssociate Editor, Biorefi ning


POLICY |

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PLASTIC JOBS IN THE U.S. (in thousands)

CHEMICAL JOBS IN THE U.S. (in thousands)

Turning It Around A production tax credit for biobased products and chemicals would help spur employment in the U.S. chemicals sector. SOURCE: BIO

1989

1991

1993

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1997

1999

2001

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2005

2007

10

20

30

40

50

60

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Dol

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ions

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Bring It Back Home The production tax credit would not only benefi t the U.S. biorefi ning sector, it would also reduce foreign imports, bringing economic growth back to the U.S. SOURCE: BIO


| ALGAE

Counting the Clicks Sapphire Energy’s sophisticated algae strain counting system makes a “clicking” sound every time the system detects that a strain has evolved.


Here is what we know about al-gae: it’s often green and always load-ed with potential. Its growth rate of 30 to 100 times that of terrestrial plants is alarming. And the whispers that once told us microalgae, an organism much smaller than the size of a pinhead, could change the way we think about fi lling our tanks and fueling our planes get loud-er—much louder. Apparently the city of San Diego was listening from the start, and now the idea of growing, harvesting and tweaking algae, or anything that has to do with it, represents a topic the city is not shy about touting. “It seems simple to me,” says Jason Anderson, vice presi-dent and executive director for CleanTech San Diego. “But that may be because it is something that San Diego does so well.”

And that may be an understatement. In the city and surrounding area alone, there is a mix of more than 30 algae-based research centers, labo-ratories, startup companies and well-established players. For all the touting and talk by the city on algae development, for all the time spent in the university labs or the high-tech facilities work-

ing to fi nd the perfect strain or the best growing method, there is one thing, of all the things that we don’t know, that we especially want to know: When? For all the talk of a “green bullet” that can ignite our energy independent future and squash any debate over food, land or air, that question of when might our algae dreams come true is what everyone wants to know. After all, if we can fi nd out what some celebrity in Asia is doing at this exact minute by reading a tweet, or if our latest technological device can be outdated the day after we buy it, why can’t we get a solid guess as to algae’s arrival? The answer is complicated, as Tim Zenk, vice president of corporate affairs for Sapphire Energy, says. “This isn’t software—this is changing the world type stuff.”

Although one guess as to a scaled-up, eco-nomical path to algae utilization—two months, two years, 20 years, never—might be as good as the next, the scene in San Diego is unveiling the one thing we really need to know about that slimy green sludge with all the potential, and it has nothing to do with time.

To begin, look at the University of Cali-

How researchers in San Diego, a city boasting one of the world’s largest algae development clusters, are creating tomorrow today STORY AND PHOTOS BY LUKE GEIVER

ALGAE |

SeeingScene WorthAn Algae


fornia-San Diego’s Scripps Institution of Oceanography. Greg Mitchell, research bi-ologist and senior lecturer, along with his team, work with algae every day. The team represents a small part of the scene in San Diego, a group of well-groomed, intelligent speaking individuals who have answers for just about every algae question one might have. “We are working on breakthroughs that will take us to large-scale production,” Elizabeth Trentacoste, a graduate student working with Mitchell, says on a portion of the university research. Another mem-ber working with Trentacoste, R. Cameron Coates, says that one of the unique traits the lab possesses “is the ability to analyze samples with a high degree of accuracy using tools that are standard to organic chemistry.” When it comes down to bio-fuel components, Coates says, “It’s analyz-ing those compounds and fi guring out the genes and the enzymes that are required to make those.” Although some of the work at UCSD may sound familiar—a good idea relating to algae and a university that spends money to explore that idea—be assured it is different.

Mitchell’s team has already worked with General Atomics in a phase one de-velopment project, and Mitchell’s work sets the UCSD facility apart. Mitchell focuses on how many photons are used in photo-synthesis and the quantity of biomass that is actually produced. “While people are running really fast inside the labs to make strains that are elite, sooner or later they are going to come to the physiology lab (UC-SD’s) to see how they perform,” Mitchell says. “The industrials are going to need to know performance of their organisms and they’re going to need to have models that predict performance. They aren’t going to go out there willy-nilly with a strain and say ‘Hey, I hope it works.’”

The ‘Best’ ApplicationWhile Mitchell and the others at Scripps

may meet the smart-speaking, serious and passionate researcher standards we expect from such a highly touted lab, the San Di-ego Center for Algae Biotechnology just up the street from Scripps (literally) is a bit of the same—but different. Led by Stephen Mayfi eld, director of the SD-CAB, the team

also works with algae 24/7 but is headed in a different direction. Mayfi eld’s crew, also a mix of researchers and grad students, is working to understand algae genes. “For many, many things that we are going to do, whether it’s lipid composition or growth rate or salt tolerance, all of those we can get without ever understanding what the gene is,” Mayfi eld says. “Just by selection, we can take 10 million of these guys and put them through selection and some volunteer will step forward and say, ‘I’ll survive in salt.’” If that gene can be understood, however, Mayfi eld says, “You can get there much quicker.”

The place where SD-CAB’s genetic work might go isn’t just about biofuels ei-ther. Along with the incredible research fa-cilities, the multitude of options or “places” that algae may end up is just another part of the scene San Diego is revealing. Already, a large pharmaceutical company has ap-proached Mayfi eld on the possibility of an

algae-based pill used for vaccinations. The idea, he says, is that “if you make these (the pills) with algae, then instead of 100 bucks a dose, we might be at one buck a dose.”

An algae company, Kent Bioenergy, just down the street from General Atom-ics (also literally), is in tune with the idea of other algae uses that don't involve bio-fuels. After starting in the fi sh business and now operating as a large algae harvester, Kent Bioenergy is looking into wastewa-ter treatment. “Although the attraction of biofuels is really compelling as a business,” says Barry Toyonaga, chief business offi cer for Kent, “we actually think cleaning water might be the fi rst order of business because, in the process of learning how to deal with vast amounts of water on different types of sites, we’ll learn a lot about what it takes to do larger scale installations for fuel produc-tions.”

For Toyonaga and his team, treat-

Showing the Way Stephen Mayfi eld, a founder of Sapphire Energy, has started SD-CAB, the San Diego Center for Algae Biotechnology, and with it, a new research effort on algae genes.

| ALGAE


ing wastewater via algae purifi cation and extraction offers a prospect that they’ve already tested at a landfi ll site with signifi -cant results. Following work that turned a dark brown sludge from the landfi ll into an almost clear, almost drinkable solution, Toyonaga says they have already been ap-proached by China and India. The success of the wastewater treatment process how-ever is making the future for Kent diffi cult. “We are at the multifork in the road,” Toyo-naga says. “The company can’t go down 10 paths at once.”

If Kent Bioenergy is undecided on which path to take the algae ride, there are others in San Diego who have no doubt where they will end up. Sapphire Energy knows exactly what it wants to do. “You solve the most diffi cult things fi rst and move to the easy stuff later,” says Tim Zenk, vice president of public affairs. Fuel, whether renewable diesel or jet fuel, is Sap-phire’s main focus. “If you can crack this

market,” he says, “all the others will fall in place.” And Sapphire isn’t thinking small scale. One of the founders of the company, Mike Mendez, vice president of technology, says that in the beginning they approached the company’s future with a certain perspec-tive. “If you couldn’t see our footprint from space,” Mendez says of that early company motto, “then why even bother.” Mendez says now Sapphire has taken algae from a kind of black magic or folklore species to something that is a daily routine.

New-Age Approach

The scene in San Diego, where the laboratories are fi lled with beakers of green algae (most of the time), the university hall-ways are sprinkled with algae experts, and companies in the business proliferate, might be best summarized by the setting in the lob-by at Sapphire’s headquarters. A surfboard imprinted with the company’s logo leans against a wall, and security guards in dark

blue uniforms stand watch. The view from one boardroom window shows brushes of the San Diego landscape’s sprawling valleys; and from the other, a small section of a lab unit scattered with miniature algae ponds and beakers, and more beakers. But beyond the surfboard, the guards and the labs lies the equipment that demonstrates to anyone with questions about algae everything they need to know.

In the middle of the facility is a large room, fully equipped with stainless steel refrigerators, countertops, large-screen tele-visions, Wii consoles, fancy couches, every-thing, it may seem, that has nothing to do with algae. Overhead a mix of current music pumps through the speakers and in the lab it’s no different, there’s music and a lot of bodies concentrating on algae strains. Zenk says the large room in the middle of the fa-cility is for those long nights when the work-ers need a break before heading back into the lab. And that’s it, that’s what San Diego is showing us about algae. Like everything else, everybody might have a different take on “when” algae might fulfi ll its promises. But, if you think not knowing when is rea-son enough to dismiss that “green bullet,” then look at that large room in the Sapphire headquarters. Its whole purpose is based on the presumption that a worker will want to spend all day researching algae and, after a break, will want to return to that work.

They’ve made an algae facility a home away from home, and it’s working to turn that folkloric species into a reality, even during those long nights. Kent Bioenergy doesn’t know what the future holds either, but they know they want to get there with algae. And if a city’s effort isn’t enough, if algae activity and commitment isn’t equal to achievement, then look at Mayfi eld, one of the founders of Sapphire, that promising facility working around the clock with algae. For Mayfi eld, who’s back in the lab work-ing again on algae at SD-CAB, “There is a lot of room for a lot of Sapphires.” When, who knows, but if one had to guess, San Diego or other cities like it might be good places to continue watching for answers.

Author: Luke GeiverAssociate Editor, Biorefi ning


To Be Continued The San Diego laboratory remains the prime research engine driving Sapphire’s algae development, even with four other research locations up and running.

ALGAE |


You may begin to notice large oil companies like Exxon Mobil and Shell advertising alternative sources of energy such as algae. Make no mistake, these pub-lic relations expenditures are serious com-mitments. Large global corporations are fully aware of their leadership role in the quest for energy. Looking ahead to integrating biofuels, they expect to work with their busi-ness peers. So let’s begin by addressing the gaps between the entrepreneurial producer and the corporate producer and prospective funders in advanced biofuel projects.

At this time, biofuels producers tend to be operating startups and expansions. They must constantly balance feedstock supplies, methanol and other processing ingredients, equipment costs, labor and technology costs. Some companies have intellectual property and proprietary or patented tech-nology. These often have attorney, legal fi ling and marketing costs. And, in some cases, just like the big energy companies, biofuel producers run PR campaigns to convince business partners, municipal and state regulators (and politicians), along with

the general public, that biofuel process-ing is a safe, positive community business. The costs of doing business are, of course, offset by contracts for purchase, ideally with strong profi ts margins.

Where it is feasible, small next-gen bio-fuel operations, or patented processes, may become scalable and may require signifi cant fi nancing. The bridge between the proces-sor’s entrepreneurial mindset and the cor-porate money mindset is the business plan. That plan must address the specifi cs and the character of the biofuel business.

While biofuel producers are passionate curious people, many are not fi nancially savvy―but this can be fi xed BY ROBERT BAILEY

Financial Advice for Project Developers

| FINANCE

CONTRIBUTION


The three most frequent holes in busi-ness plans that I have seen are in documen-tation, references and capital. Often the big-gest hurdle is getting the client to understand that funding is a process. Obtaining funding from a corporate entity, a private equity fund, a wealthy individual, a hedge fund or any other large-scale funder is not like going to the bank to sign for a loan.

The funding process works through unfamiliar investment and business questions toward a common objective between the investor and the bor-rower. And building a solid business plan is the fi rst step in the funding process.

Biofuel produc-ers are sometimes

frustrated when they are told that the hard work they poured into their plan is either insuffi cient or needs realignment. However, the business plan is a refl ection of one’s business model. It is also a refl ection of how the principle (and the management team) thinks. There are some situations producers seeking investment want to avoid at all costs. On more than a few occasions I have seen funders entertain themselves when they read an exit strategy that discusses only success. In the world of energy investment, a plan that says “we won’t fail” is not viewed as cute or clever, but as junk.

We might think of the funding process this way. If the business plan is the bridge to tens, possibly even hundreds, of millions of dollars, the capital broker is the guide. A good capital broker provides the client with a global perspective on biofuels and the details of securing fi nancing that help the producer’s business in several ways. For ex-ample, the broker can help the producer by

incorporating public policy drivers into the business, and keeping current on relevant policy changes during the funding discus-sions. Big investors are always looking for insights on supply-side incentives (producer) and demand-side incentives (buyer) for pro-duction and distribution of biofuels.

A number of producers look to Europe and see coherent, long-term economic and energy policies that are helping both producers and end-users of biofuel. This is no time for envy. The consensus among my colleagues is that despite the lack of a broad national policy in the U.S., recent federal and state measures demonstrate a keen under-standing of the economic value of sustain-able long-term policies for biofuels.

In 2010 Congress may have chosen not to renew the $1 per gallon federal tax credit for biodiesel production, as well as the re-newable diesel credit. But this seems to have sparked other actions. In addition, industry observers suggest that Congress will, in fact, reestablish the federal tax credit for produc-tion. On Oct. 13, the U.S. EPA increased the allowable ethanol content in fuel to 15 percent. The small sounding change is a 50 percent increase (upon unconditional ap-proval). And in the meantime, other efforts have been introduced that support biomass-based diesel production. To its credit, EPA has now addressed the economics of biomass-based diesel within RFS2 by creat-

ing rules for trading the renewable identifi ca-tion number (RIN) credits.

Traders like Steve Skrinar, a RIN trader at OceanConnect in White Plains, N.Y., are perhaps most keenly aware of the economic potential of biodiesel. One of Skrinar’s tasks is aggregating RINs owned by small produc-ers. This year, he says, the price for biomass-based diesel RINs has ranged from as low as 15 cents to a high of about 60 cents a gallon. Biomass-based diesel producers earn 1.5 RINs per gallon. Larger energy companies, including major oil companies, will buy and sell the credits to offset gains working with RIN brokers like Skrinar. Originally seen as an administrative tool, RINs are now a val-ue-adding benefi t that also pushes producers

to compete on an economic basis. “This is a relationship business, it

moves fast, and the RIN credits have a shelf life of about two years,” says Skrinar. “Any time the EPA alters a reg or approves a fuel type, it may open a new door for produc-ers,” he says.

Just as valuable in the marketplace are exemptions from state taxes. Rhode Island, for one, has a demand-side incentive that exempts producers from the state’s 32-cent-per-gallon fuel tax. This permits locally produced biomass-based diesel to compete with its petroleum-based cousin. On the demand side, some states and municipalities are mandating blends for biofuels. Min-

FINANCE |

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily refl ect the views of Biorefi ning or its advertisers. All questions pertaining to this article should be directed to the author(s).

Successful producers acknowledge that their company requires more than money. There are numerous nonmonetary resources that serious funders are able to supply with capital, such as ad-ditional feedstock sources, distribution sources, engineering improvements, management technology and other business and scientifi c support.

Trusted Advisor Financial advisor Robert Bailey says there’s more to project fi nance than sourcing capital.


| FINANCE

nesota, for example, requires a 5 percent biodiesel blend. In July, Mayor Michael Bloomberg signed legislation requiring 2 percent biodiesel in home heating oil by October 2012 in New York City.

Alan Weber of Marc IV, an advisor to the National Biodiesel Board, thinks biodiesel producers may borrow from sophisticated farmers who use commodity futures as a hedge against risks. Familiarity with commodity markets, suggests Weber, will especially benefi t operations selling into overseas markets. It may take some time for individual producers. But the commodities data for biofuels are ready.

Some longtime farm price observ-ers are identifying correlations between feedstocks, agricultural-based biofuels and petroleum fuels. The Jacobsen is a 100-plus year-old company that began by compiling a report on agricultural data from Midwest farmers. Ryan Standard is The Jacobsen’s associate editor. He says his group is track-ing the relationships between agricultural products and energy. The correlations be-tween feedstocks, biofuels and the broader energy markets, he says, are closer when biofuel production levels are high. In the foreseeable future monitoring commodity price relationships may become a best-practice for management.

All of this should signal the expanding awareness of biofuel as an industry. That prospect has spawned plenty of would-be lenders eager to get in on the game. Their claims, however, often exceed their capabilities.

Many candidates for funding expect 100 to 103 percent fi nancing. These levels of funding are intended to cover the capital request, as much as 18 months interest reserve, carrying costs such as fees and expenses of reviewing, writing and posi-tioning the project, and in some cases legal and transaction fees, like the brokers. Such demand is fed by a maze of opportunist

brokers, some who charge staggering up-front open-ended commitment fees ranging from $25,000 to $1 million or more.

In my experience, funding from large upfront fees tend not to fund. These are the fees that state Attorneys General warn against. These offer unspecifi c consid-eration. They may be demands for pay-ment prior to receiving documentation or references. More exotic systems promise access to useless or worse, fraudulent, instruments. There is a further weakness. Funding a successful biofuel project is not necessarily related to money alone.

Successful producers acknowledge that their company requires more than money. There are numerous nonmonetary resourc-es that serious funders are able to supply with capital, such as additional feedstock sources, distribution sources, engineering improvements, management technology and other business and scientifi c support. If the company aspires to supply the global markets, there are cultural and currency issues to be addressed.

The hint is: locate a broad-based fund-ing source. This can bring any company’s potential to reality and requires solid docu-mentation, references and capital.

The documentation required for fund-ing includes verifi able information on the project leader’s experience and credentials both in the energy fi eld and in general business management. It includes proof of ownership or lease rights of use, and access to feedstock and facilities. Moreover, fully committed contracts for offl oad of the bio-fuels product catch any investor’s attention. If you want to secure funding, a sound exit strategy demonstrates the team’s capacity to manage the unexpected.

References tend to include the profes-sional members and elements of the team, both on the business and energy sides, as well as vendors, subcontractors and licenses. One of the pieces most frequently

missing from even the better business plans is a “Plan B.” Too few producers have a backup plan. There is simply too much volatility not to address how the company would manage changes in supply and price of feedstock, chemical inputs, machinery, labor, distribution and land.

With regard to capital, there are costs for getting a project funded. Consider up-front fees. Lots of people have paid them, and have been burned. But, in the right place, they serve several specifi c purposes for the investor—mainly they show a com-mitment to the funding process.

There are also reasonable fees used to demonstrate the borrower’s willingness to commit to the funding process and to share genuine expenses. Sometimes these are staged fees ranging from as little as $500 to $7,500 for a review and critique your proj-ect. Ideally, this will lead directly to funding. Getting a professional review of your proj-ect is an investment that may be worth the price. Making such decisions is part of the job of the borrower. It is not easy.

In the next stage you are likely to meet face-to-face with someone close to the investor. If you feel positive about your mutual ability to achieve the funding needs, two things will happen. There will be expenses to be covered—by you. And you will be working harder than you ever imagined making your business into some-thing a larger entity or substantial investor will seriously consider for funding of tens of millions of dollars, or more. This time, however, you will be well prepared.

Author: Robert BaileyFinancial Advisor, Trusted Advisory


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