U Tennessee scales back proposed cellulosic ethanol project, Mascoma withdraws

In Massachusetts, Mascoma announced that it was withdrawing from a joint venture with the University of Tennessee to build a cellulosic ethanol plant. The company said that, in light of the University’s decision to scale back the proposed project from demonstration-scale to pilot-scale, that it would focus its efforts on completion of its previously announced pilot-scale plant in Rome, NY.

Mascoma background

Mascoma was finalizing negotiations with the state government to locate its first commercial-scale plant in Chippewa county. The state has pledged $15 million towards the project, which will cost more than $250 million. The company also announced that J.M. Longyear will become a joint venture partner in the project. Longyear is a major forest landowner in the Upper Peninsula. The company expects to have its plant operational by early 2011.

Mascoma received another $10 million in financing with an equity investment by Marathon Oil. The company said that it had received a total of $61 million in its latest funding drive, putting the total of equity investment and research grants for Mascoma at more than $200 million. Mascoma’s “single-step” production system for cellulosic ethanol has attracted attention for its potential to eliminate cost and risk in scale-up towards commercial scale cellulosic ethanol.

“Marathon is one of the premium players in the space, with as good a knowledge of ethanol distribution as you can have,” said Mascoma President Colin South in a Biofuels Digest Newsmaker interview.

Last week, General Motors and Mascoma announced a strategic relationship to develop cellulosic ethanol, which included an undisclosed equity investment in Mascoma by GM. Mascoma’s single-step biochemical process has received support from a host of high-profile investors and partners including the Department of Energy, Khosla Ventures and Kleiner, Perkins.

The investment by GM is the second in cellulosic ethanol, following its partnership with Coskata earlier this year. “Taken together, these technologies represent what we see as the best in the cellulosic ethanol future and cover the spectrum in science and commercialization,” GM President Fritz Henderson said. “Demonstrating the viability of sustainable non-grain based ethanol is critical to developing the infrastructure to support the flex-fuel vehicle market.”

Mascoma last month raised an additional $30 million in equity and $20 million in debt from Khosla Ventures, Atlas Venture, Flagship Ventures, Kleiner Perkins, Pinnacle Ventures, and VantagePoint Venture Partners. A Dartmouth College spin-off, Mascoma has commenced construction of its demonstration-scale plants, and is raising money to complete construction and fund future commercial-scale plants.

The company previously raised $40 million in venture funding and has received grants from three states related to its research. Dartmouth professors Lee Lynd and Charles Wyman founded Mascoma in 2005.

Mascoma decided late last year to move the location of its proposed cellulosic ethanol plant from Greece to Rome (NY), citing the need to be closer to biomass sources and the suitability of the former Griffiss Air Force Base as a facility. The switch had been mooted for some time and in September Mascoma appeared before the Oneida County Board in support of its plans to open in Rome.

The proposed demonstration plant would produce 500,000 gallons per year of cellulosic ethanol, and will commence production by March. The plant has received $14.8 million in assistance from New York state.

Last November, Mascoma acquired Celsys BioFuels, a cellulosic ethanol production technology company founded by a Purdue University team last year. The founder of Celsys has become the CTO of Mascoma.

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