USDA bets (again) on advanced biofuels

ZeaChem landed conditional approval for a $232.5 million loan guarantee, making this the USDA's second major biofuels investment this month.

The U.S. Department of Agriculture has kicked off 2012 with two investments in the advanced biofuels industry. Earlier this month, the federal agency approved a conditional commitment for a $25 million loan guarantee to build a biorefinery plant in Iowa that converts municipal waste into advanced biofuels. And just yesterday, the USDA made a conditional commitment for a $232.5 million loan guarantee to Colorado-based ZeaChem. The funds will be used to build ZeaChem's first commercial-scale biorefinery located next to its 250,000-gallon per year demonstration plant in Boardman, Oregon.

Both of these loan guarantees are via the Biorefinery Assistance Program, the same Farm Bill-funded program that backed failed cellulosic ethanol company Range Fuels. Despite failures like Range Fuels, the federal government hasn't backed away from the industry.

The advanced biofuels industry has so far failed to ramp up beyond pilot and demonstration projects. Financing has been a problem for startups trying to build commercial-scale facilities. Companies also have struggled to reduce production and feedstock costs enough to make their product commercially viable. The federal government and fossil fuel-based companies like refiner Valero and UK oil giant BP have provided significant financial support to the advanced biofuel industry. But so far, efforts to produce qualifying cellulosic ethanol has fallen flat.

Cellulosic ethanol production was supposed to hit 500 million gallons in 2012. Instead, the Environmental Protection Agency has said it will be 8.65 million gallons — or 0.006 percent -- far short of production volume mandated by Congress. It’s likely that even the 8.65 million production target won’t be met this year.  As of October, not a single gallon of qualifying cellulosic ethanol was produced, according to the EPA. Not a single commercially viable biorefinery exists for converting cellulosic biomass to fuel, according to the National Resource Council.

ZeaChem's tech and biorefinery plans

ZeaChem uses biomass that have high levels of cellulose -- the rigid structural compound found in plants -- as its feedstock. A combination of biochemical and thermochemical processing is used to make cellulosic ethanol and other biofuels.

The Oregon biorefinery's feedstock will consist of about 30 percent agricultural residue, such as wheat straw and corn stover, and 70 percent woody biomass from a local hybrid poplar farm. Once complete, the 25-million-gallon per year biorefinery will produce an estimated 51 percent of advanced biofuel. The remainder will be bio-based chemicals, such as acetic acid and ethyl acetate. The total  cost of the biorefinery project is estimated to be $390.5 million.

Photo: Flcikr user zzzack, CC 2.0


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