Section 9003’s Success Helps Insure More Capital for Biorefineries

February 10, 2016 |

ericksonBy Brent Erickson, Executive Vice President, Biotechnology Industry Organization

USDA’s Section 9003 Program created by the comprehensive Farm Bill has successfully helped fund construction of biofuel biorefineries over the past six years and it is now expanding to launch renewable chemical facilities as well. Like other USDA programs, this loan guarantee enables manufacturers to access capital for large-scale projects in rural communities. The program has helped companies like INEOS Bio and Abengoa put steel in the ground for first-of-a-kind cellulosic biorefineries. It will now help companies such as Biosynthetic Technologies and several others to build commercial facilities for renewable chemicals. Early on in the process BIO helped Congress conceptualize this program and has been a strong and effective advocate for the program since it was first adopted in the 2008 Farm Bill. Renewable chemical production is important because it adds new product streams to biorefinery operations and this can   diversify revenue streams and reduce volatility.

Under the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program, USDA works with rural lenders to guarantee loans of up to $250 million for the development, construction or retrofitting of biorefineries for advanced biofuels or renewable chemicals. Without loan guarantee programs, rural communities might never be able to pool sufficient capital to lend to large capital projects like biorefineries – rural populations are not large enough. But biorefineries are proven job and economic growth drivers for rural communities. BIO worked with its members and advocated for the establishment of this program in the 2008 Farm Bill. And because the program originally served only biorefineries that primarily made biofuels, BIO advocated its expansion in the 2014 Farm Bill. The loan guarantee is now available for biorefineries that generate renewable chemicals as their primary product.

The 9003 Program’s success is indeed very tangible, measured by steel put in the ground, well-paying jobs created, and economic growth. Abengoa Bioenergy worked with USDA and a farm lender to build a commercial-scale cellulosic ethanol biorefinery in Hugoton, Kansas. The facility is the first of its kind to use a proprietary enzymatic hydrolysis process to turn cellulosic biomass into ethanol. The facility generates its own power as well as power for an adjacent conventional biorefinery. Abengoa invested hundreds of millions of dollars in the facility and during construction had nearly 1,000 workers on the site. The facility creates permanent jobs for more than 50 people in the area as well as new opportunities for farmers in the surrounding counties.

INEOS Bio is another example of the success of the 9003 program. The company’s Indian River BioEnergy Center located near Vero Beach, Florida, is designed to produce up to eight million gallons of advanced biofuels and six megawatts of renewable power annually from local yard and citrus grove green wastes that are diverted from landfills. It provides 50 full-time jobs for the area. INEOS Bio was the first company in the United States to bring cellulosic biofuels to commercial scale, proving technology first developed at the University of Florida.

With reauthorization and expansion of the 9003 Program in 2014, renewable chemical companies have improved access to capital and a level playing field. For instance, Biosynthetic Technologies, LLC, recently received approval from USDA for its loan guarantee application under the Section 9003 program. Biosynthetic Technologies is working with a rural lender to finance the construction of a full-scale commercial manufacturing plant that will produce 20 million gallons a year of its high-performance motor oils, industrial lubricant products, and cosmetics. These biobased oils have higher viscosity, thermal stability and flash point than traditional petroleum motor oils as well as existing synthetics. This new project will create manufacturing jobs in the U.S, strengthen the agricultural sector, and help create environmentally friendlier products that perform better in cars.

 

USDA’s Section 9003 program has already unlocked hundreds of millions of dollars of private lending for rural communities that otherwise would not have access to capital. BIO has been a consistent advocate for the adoption, mandatory funding and expansion of this program to serve a range of companies that generate biobased products.  Section 9003 is one more policy step that has helped our industry create a biobased economy with more jobs, a stronger manufacturing sector, and help us meet the demand for cleaner, greener high performance products. The next step is to get renewable chemical tax credits passed by Congress.

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