Minnesota: the bioeconomy’s “Get it Done, Make it Happen State”

August 27, 2012 |

What is in the water up in Minnesota? Partnership seems to have become part of a new hybrid DNA, the Digest discovers in its special report on the state’s progress in biobased fuels, chemicals and materials.

There seems to be some confusion at the state level as to exactly what Minnesota’s nickname is – official publications refer to “the North Star State” while the US Mint put “Land of 10,000 Lakes” on the back of the Minnesota commemorative quarter. Since alternatives seem to be generally acceptable, we propose the “Get it Done State” for your consideration.

You see, other states can match Minnesota for its wealth of agricultural and forest resources (though ample they are), or its foundational base in agriculture and energy (via giants like Cargill, CHS and EcoLab) and for its highly-trained workforce (though more skilled they rarely come). But for per-acre yields of moxie and gumption, it would be hard to find a match.

Get it Done, Make it Happen

Leadership seems to be available as a low-cost residue up there, we’ve not yet exactly figured out how or why. Want to push through the transformative Farm Bill through the 2008 House Agriculture Committee? Minnesota’s Collin Peterson took the reins. Help push through the Algae Biomass Organization from great idea to great organization? Minnesota’s Mary Rosenthal, Tom Byrne, and Todd Taylor have been amongst the drivers. Innovative leaders in first-gen fuels like Brain Kletscher at Highwater Ethanol and Steve Christensen at Granite Falls Energy. Academic leaders such as Brendan Jordan, Director of Bioenergy at the Great Plains Institute, and legendary UMinn chemical engineer Lanny Schmidt; innovative venture capitalists like First Green’s Doug Cameron and Tom Erickson; perceptive analysts like Piper Jaffray’s Mike Cox and Mike Ritzenthaler; Luca Zullo, whose VerdeNero consultancy was on the of the first to focus on opportunities in green-black technologies. Just to name a small handful.

The state was the first to establish an ethanol and biodiesel mandate (mandating 10 percent ethanol content back in 1997, paving the way for the US Renewable Fuel Standard years later). The first plant to convert from ethanol to biobutanol? Gevo’s project in Luverne. One of the first biomass trading exchanges (MBioEx). One of the first bio-chemical clusters, which has spawned renewable chemical pure-plays like BioAmber and Segetis. Innovative biodiesel technologies like the Mcgyan process.

So, we think the “Get it Done, Make it Happen State” has a ring to it.

Despite a string of successful company formations and policy innovations, Minnesota appears to be far from done. The state’s leaders have developed a bioindustrial roadmap, with a primary goal of increasing in-state employment in bioindustrial processing from 2,000 in 2011 to 13,000 by 2025.

It’s worth taking a look at on two levels: first, for a set of innovative policy recommendations. Second, as an excellent look at the kind of innovation that can happen at the state level, as a debate over the role of national governments in fostering new industry takes place in the US this fall via the national election process.

The Roadmap addresses most of the critical issues that states and regional organizations like the Midwestern Govers Association might tackle over the next decade. R&D support, instruments to foster commercialization; university investments; marketing Minnesota for investment and partnerships; supporting product demand through state policies that mirror federal programs like USDA Biopreferred; plus regulatory reform to speed up permitting and eliminate the potential for bias.

You can download a copy of the Roadmap’s Executive Summary, here.

Let’s look at some of the key trends in the “Get it Done state” over the past year.

Renewable chemicals on the march

Earlier this month, Segetis announced that it has raised $25.5 million in its Series C financing. Saudi Basic Industries Corporation (SABIC) Ventures B.V. led the investment with full participation by current Segetis investors including Khosla Ventures, Malaysia Life Science Capital Fund (MLSCF), and Royal DSM, through its venturing subsidiary DSM Venturing. A new Malaysian-based investor, PNB Equity Resource Corporation Sdn Bhd, also joined in this round of financing.

Segentis is an early-stage developer of green chemical building blocks – specifically, biobased monomers derived from the combination of levulinic acid esters and biobased hydroxyl compounds. For example, its bio-based plasticizers, built on its Javelin platform of cellulosic-based levulinic ketals, which Segetis has branded as Javelin technology, are reported to enable faster processing speeds and elevated temperature performance.

Back in February, BioAmber raised $30 million in its Series C round of financing with $20 million invested in November by Naxos Capital, Sofinnova Partners, Mitsui & Co. Ltd. and the Cliffton Group, and a second tranche of $10 million closed with specialty chemicals company LANXESS. BioAmber and LANXESS are jointly developing phthalate-free plasticizers and expect to begin sampling succinic-based plasticizers in 2012.

Meanwhile, last month Evonik Industries and BioAmber agreed on a collaboration to develop and manufacture catalysts for making 1,4- butanediol, tetrahydrofurane, and gamma – butyrolactone from bio-based succinic acid.

Additionally, NatureWorks and BioAmber announced in February that they would create an AmberWorks joint venture to bring new performance bio-based polymer compositions to market.

With the formation of the JV, NatureWorks plans to commercialize a new family of compounded Ingeo resin grades, and is immediately offering samples of developmental grades aimed at thermoforming and injection-molding processes.

Advances in commercializing biobutanol

Gevo recently began the start up of its first commercial-scale isobutanol plant in Luverne, with plans for another startup in 2013 at its Redfield, SD joint venture.

In June, Gevo announced that, in collaboration with first-gen ethanol leader BioFuel Energy, designed to explore high-volume production of isobutanol, including a potential plant conversion at BIOF’s 110 million gallon production facility in Fairmont. The two companies will also explore the potential for seeking Advanced Biofuel status for isobutanol, which would allow domestic corn-based biofuels to compete more directly with biodiesel and imported ethanol produced from sugarcane.

First-gen profit weakness as corn, ethanol crush spread narrows

In June, we reported that five of the six (reporting) ethanol companies in the state didn’t turn a profit during the last quarter, partly because of more efficient vehicles and partly because people are driving less in the weak economy. The industry has also been hit by the expiry of the VEETC at the end of last year.

Extension of ethanol, biodiesel mandates

In May, Gov. Mark Dayton signed into law the 2012 Omnibus Agriculture Policy bill, with broad bipartisan support.  The bill modernizes statutes covering food safety enforcement, grain trade and renewable fuels.  A section of the bill fine-tunes the course of biofuels in Minnesota by extending Minnesota’s E20 mandate for two years and directing agencies to develop recommendations for incorporating biofuels other than ethanol into the mandate.
The bill also extends exemptions on the state’s 10 percent biodiesel requirement for three more years, while directing MDA to develop proposals for evaluating the exemptions with an eye toward ending them.

Advances in biofuel-powered locomotive technology

In May, we reported that a biofuel powered, carbon-neutral locomotive engine may become a reality, as the Coalition for Sustainable Rail has unveiled their plans for the development of such technology. The coalition, comprised of the University of Minnestora’s Institute on the Environment and Sustainable Rail International, plans on using torrefied biomass (bifocal) to create an engine which may reach speeds of 130 mph.

Advances in R&D

Back in March, the state’s Dept. of Agriculture granted $2.4 million to several projects to stimulate biofuels development.

Especially notable were a proposed West Central Renewable biomass-to-ammonia project near Willmar; a small scale Mcgyan process biodiesel project from SarTec; next-gen production of diesel and jet fuels as an expanded Al-Corn ethanol plant in Claremont; and a Prairie Skies Biomass Co-op project to develop a 300 ton per day biomass conversion facility in Madelia, producing advanced biofuels.

Innovations in financing

Last December, Warburg Pincus announced that it will invest up to $355 million in First Green Partners, a newly formed early-stage venture capital company. First Green will, in turn, invest in early-stage companies that focus on developing methods of converting renewable carbon, such as non-food biomass and carbon dioxide to fuels and chemicals, and applications of clean or green technologies in the conventional energy or industrial process, otherwise known as green-black technologies.

First Green will make initial investments of $500,000 to $10 million in each emerging technology and up to $100 million in a single business as it commercializes. Cameron commented, “We plan to do 10 early-stage/seed deals over then next 3-5 years.

The Bottom Line

Minnesota ranks poorly in one category: self-promotion – there’s much that states (and national governments around the world) might usefully glean from a look at how Minnesota organizes itself, but it is hard to imagine Minnesotans sending out the invitations. In speaking with industry leaders during this tour, and in visits past, we’ve come to recognize that its just difficult to hand out the laurel wreaths in Minneapolis – they’d probably just try and process them into specialty chemicals, anyway.

A key to their success – you see it time and again in this report, or any survey of the state’s activities. Coalition, collaboration, joint venture, partnership. At a time when federal-level dollars for R&D or commercialization are harder than ever to come by – it’s a model for aggregation of resources that any jurisdiction might benefit from emulating.

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