The Good Side of Government

For all the gripes, some government-backed programs are working
| September 20, 2011

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

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

Because of BCAP   

One of the programs Thyfault believes has worked is the Biomass Crop Assistance Program. “The program has had some success in payments to producers,” she says, “but the goal of that program has been to incentivize cellulosic ethanol production. It’s not been successful in incentivizing advanced biofuels because the plants haven’t been built yet.” But according to Scott Coye-Huhn, director of business development for Aloterra Energy, an Ohio-based energy crop developer, that doesn’t matter. “Aloterra Energy,” he says, “was formed because of BCAP.”

Coye-Huhn and his partners at Aloterra come from the oil and gas industry, and before BCAP’s inception in 2008, he says his team already had their eyes on energy crop production. “When we saw BCAP pass,” he says, “we knew that was a game changer.” For the Aloterra Energy team, that meant buying and designing crop handling and planting equipment, buying miscanthus gigantus seed and even a farm to plant and test different varieties.

In June, everything changed for Aloterra. USDA’s Agriculture Secretary Tom Vilsack announced four BCAP project areas, one of which included 5,344 acres spread throughout Ohio and Pennsylvania. As the sponsor for that region, Aloterra Energy in one day became an energy crop company, and changed from a BCAP supporter to a BCAP beneficiary. And the biomass conversion facility in Ashtabula, Ohio, that the company developed became a soon-to-be bioenergy hotspot and, as Coye-Huhn can attest, a job creator. “We are already creating jobs in Missouri, Arkansas and Ohio,” he says, “and we have some very large manufacturing contracts that we are about to announce. There are a lot of really exciting things in the works because BCAP has kind of set the table for all of these companies that have just been waiting for somebody to come out with energy crops.”

For Coye-Huhn, people are starting to see the positives and believe in the story of companies like his. “This is about more than just going green,” he says. “This is about America’s next economy.” Alex Johnson, CEO of Synterra Energy, would agree with Coye-Huhn and his beliefs on the impacts of bioenergy and the possibilities brought forth from government involvement. After working on a hydrolysis and syngas approach to produce renewable diesel and other biobased products for nearly five years, Johnson spoke with Biorefining Magazine about plans the company has already made to build a biorefinery in Ohio, possibly followed by a facility in California. All of those plans, Johnson says, happened because of a $25 million DOE biorefinery grant that made the necessary research and development build-out steps possible.

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

One of those with hopes for a profitable future is HCL CleanTech, a company that has an interesting past. The North Carolina-based company has developed a hydrochloric acid hydrolysis process to convert biomass into fermentable sugars, an idea that stems from World War II. According to the company, during the war, Germany developed a hydrochloric process to create fermentable sugars and, after the war, the U.S., Russian and British armies all sent teams of engineers to study the way the process was used by Germany. After gaining access and reviewing the government documents on the process, HCL CleanTech was formed to prove that a modern version of the process would be more efficient and economical. In June, the company was awarded $9 million to further develop the hydrochloric acid hydrolysis conversion method. 

“Being selected by the DOE is very important to us,” says Philippe Lavielle, president and CEO of HCL CleanTech (also formerly with Genencor). “The selection process in itself is a way to obtain an outsider’s view on your technology and your process, and is like a seal of respectability.” Now, Lavielle says the company can become the company he and others believe it can be. “The DOE-funded program will help us optimize the process and the specification of our sugars for their use in renewable fuels,” he said. “It will finance part of our pilot plant operations that are scheduled to create 15 to 20 skilled jobs in the very short-term.”

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

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

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

Thyfault points to the plans by the DOE, Navy and USDA to join in a financial funding agreement, providing up to $510 million of matching dollars to renewable jet-fuel producing companies looking to build a facility, expand a demonstration plant or perform any other task that would allow those government entities to make good on their promise to utilize any renewable jet fuel that they can. According to Thyfault, the U.S. airline industry uses 16 billion gallons of jet fuel a year and it wants to buy 8 billion gallons of renewable jet fuel right now. But, for roughly $100 million, a plant could only produce 10 to 20 MMgy of renewable JP-8. Although, as she says, the push by the Navy, USDA and DOE is not going to make much of an impact, “what they are hoping to do is get the first plants built and then multiply that, but there is still a tremendous need.”

Coye-Huhn’s dealings with Washington might, however, show what many companies in the biorefining industry can expect when seeking out government-based funding (or what many most certainly already know). The process was grueling, he explains, but it was that way for both sides. According to Coye-Huhn, the people in Washington spent many weekends and long nights trying to work out the details to make the BCAP program in his area all work, and to him, this shows that both sides are hoping for the same result.

There is no doubt that the process takes time, and Thyfault indicates that the bridge from where the biorefining industry is now to where it wants to be might be too small for the huge demands and promise of the industry. But, as each company finds a way to get that next round of funding or tweak that microbe in just the right way, those companies need to realize that, as Coye-Huhn says about his own financial future, “this is much bigger than energy crops.” In his estimations, the bioenergy developments of today are similar to an economic paradise of the past—the tech boom of the 1990s.

Author: Luke Geiver
Associate Editor, Biorefining Magazine
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