USDA, DOE announce $646M in advanced biofuels loan guarantees

| January 21, 2011

US Secretary of Agriculture Tom Vilsack

In Washington, the USDA and DOE announced four loan guarantees worth $645 million to Coskata, Ineos BIO, Enerkem cellulosic ethanol projects, and a Valero-Darling renewable diesel project in Louisiana.

Agriculture Secretary Tom Vilsack announced three projects totaling $405 million in guarantee loans. The winners: a 55 million gallon Coskata cellulosic ethanol project in Greene County, Alabama, which received a $250 million guarantee; a 10 million gallon Enerkem cellulosic ethanol project in Pontotoc, Mississippi, which received an $80 million guarantee; and the 8 million gallon (and 6 MW) INEOS New Planet cellulosic ethanol project in Vero Beach, Florida, which received a previously leaked $75 million guarantee.

The full announcement from USDA.

DOE announced the offer of a conditional commitment to Diamond Green Diesel, LLC, the proposed joint venture between Valero Energy Corporation and Darling International Inc., for a $241 million loan guarantee.  The loan guarantee will support the construction of a 137-million gallon per year renewable diesel facility in Norco, Louisiana, about 20 miles west of New Orleans.

Valero Energy Corporation plans to direct the design, construction and operation of the project and market all of its output, while Darling International Inc. will supply feedstock to the project. The project will be the first application of its kind in the U.S. to use an innovative hydrotreating/isomerization process from Universal Oil Products (UOP), known as EcofiningTM, and a pretreatment process from Desmet Ballestra Group, which converts processed feedstock into high-quality diesel.

The full announcement from DOE

The Digest’s Take

1. Where is BlueFire?

First of all, fears that the USDA would only be able to issue three loan guarantees, instead of their hopes for four, or even six as indicated last fall, were realized. The unlucky project that missed out at this time: BlueFire Renewables.

BlueFire’s CEO, Arnold Klann, commented: “BF is behind due to bureaucratic inertia but not out of the money. According to communications from USDA with members of our team, just this week, the Agency suggests it plans on issuing a LG to the BlueFire Mississippi Project upon the project receiving its credit scoring from OMB. Coskata was ahead of the BF project by one year having submitted their application under the 2009 solicitation and BF under the 2010 RFP. They were able to pioneer the scoring procedure with the OMB and now BF is in the process with OMB. Both the Enerkem and Ineos projects, as smaller projects, did not have to go to OMB.  We are also still in the running with DOE for a LG and will be in DC the beginning of February for an IBR review with them.”

2. Where is Coskata?

It appears that Coskata has landed the largest biofuels loan guarantee ever issued, at $250 million. And, we finally have more information on the location – to date, Coskata had only divulged that the project was in the Southeast US, but today the USDA confirmed that the project is in western Alabama. The Alabama Development Office said today that the plant in the Crossroads of America Industrial Park in Greene County is the project site, and that the Coskata project would bring 300 construction jobs and 700 direct and indirect jobs to Greene County.

3. Where are the advanced drop-in biofuels?

We note that each of the USDA loans were for cellulosic ethanol, and only DOE loan was for a drop-in renewable diesel, in this case the Valero-Darling project. Digest sources indicated that this is reflective of the applications received – in USDA’s case, the only four projects that passed through the technical, financial and environmental review were all cellulosic ethanol projects.

4. Where are POET, Abengoa, Fulcrum?

Our understanding is that each of these three have received term sheets from DOE, but have not yet passed through the full review process which is required for the conditional loan offer.

5. Is this it?

Our understanding is that the USDA intends to make another loan guarantee solicitation this year, and may well find funding under existing FOAs or other Department sources to make additional loan guarantee conditional offers prior to an additional solicitation round.

6. The elephant in the room: will Congressional funding be cut for Loan Guarantees?

The continuing budget resolution carries the nbation through the first week of March, and Congress ultimately is expected to pass a budget, and there’s appetite for deep cuts in “non-working programs,” and for sure the loan guarantee programs have had their critics, particularly the DOE program. Will these announcements be enough to convince Congress that bioenergy loan guarantees are good for job creation, energy security and emissions. Time will tell, but it certainly is progress on the DOE front, and the USDA moved at light speed on their 2010 loan guarantee solicitations to demonstrtae not only a working progra,, but an efficient one.

7. Where is Range Fuels in all this, which received a loan guarantee from the USDA but has been reportedly in various kinds of distress.

Secretary Vilsack yesterday said that “we are hopeful that Range will work through its technology problem which are at the heart of the concerns”. The problems appear to center, to an extent, on the company’s gasifier technology. According to one Digest source, “before it was ever built, it was known by many that it would have performance issues given the past failures of the technology in small scale with low hydrocarbon loaded fuels.”

Vinod Khosla, a lead investor in Range, commented: “Technologies like Range that started with chemical catalysis will need to switch over to newer fermentation technologies.”

Enerkem, Coskata and INEOS are all deploying variations on gasification technologies. So that’s something to watch. The good news – there are a lot of alternatives in the gasification area, with Coskata among other companies looking at the ClearFuels technology, for example.

8. INEOS and Coskata both received loan guarantees, but are suing each other – is there any added risk in that?

Yes, INEOS has sued Coskata over patent infringement, which Coskata denies – stemming from the switch of a key technologist from INEOS to Coskata. The issue is still in the courts, but speaks more to financial liability than the viability of the technology – in fact, INEOS and Coskata fighting over the IP shows that both think it is robust, and key to unlocking value in this space.

9. A $241 million loan guarantee for a bioenergy project from…gulp, the Department of Energy. Does this mean the DOE really, really loves bio more than, say, solar?

Sorry, pilgrims. The DOE also yesterday announced a condition commitment for a $967 million loan guarantee to the 290MW Agua Caliente Solar photovoltaic project in Yuma County, Arizona. By the way, a Digest shout-out to ACS, which when completed is scheduled to be the biggest solar energy project in the world.

More on the feedstocks

Coskata: Woody biomass.
Enerkem: Dried and post-sorted municipal solid waste.
INEOS New Planet BioEnergy: Vegetative waste (citrus and agricultural wastes), yard wastes, wood waste, and municipal solid waste.
Diamond Green Diesel: Animal fats, used cooking oil and other waste grease streams.

Industry Reaction

Wes Bolsen, CMO, Coskata: “Coskata’s $250 million loan guarantee announced today by the USDA is the largest biofuel guarantee that has ever been issued by a federal agency. The USDA’s announcement further validates that Coskata’s platform technology is ready for commercial scale deployment. This loan guarantee will allow us to move forward with raising capital to finance the construction of our 55-million gallon cellulosic ethanol facility, the largest planned in the country.”

Brent Erickson, EVP, BIO’s Industrial & Environmental Section : “The USDA’s Biorefinery Assistance Program is being deployed to demonstrate the viability of commercial-scale biorefineries in diverse areas of the country, utilizing local biomass resources. Growing biomass for biorefineries can produce hundreds of thousands of jobs and billions of dollars in economic activity, primarily in rural areas where economic development is greatly needed. This announcement can help the United States maintain its leadership in developing a biobased economy, using renewable resources for energy, fuels, chemicals and materials.”

Tom Buis, CEO, Growth Energy: “Secretary Vilsack and the Administration are showing tremendous foresight by investing in programs that will advance America’s renewable energy goals. This funding will help wean our nation off our dependence on foreign oil, create jobs here in the U.S. and improve our environment by promoting  the rapid commercialization of cellulosic ethanol and other advanced biofuels,” said Growth Energy CEO Tom Buis. “Our country’s next energy policy goal should be to open the transportation fuels market, as we outline in our Fueling Freedom plan, which would encourage demand for cellulosic ethanol and spur even more investment from the private sector.”



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