US-Backed Cellulosic Ethanol Plant In Trouble

Just a few weeks after announcing it had begun operations and was looking to “ramp up to full capacity,” the federally backed ZeaChem cellulosic ethanol demonstration plant in Boardman, Ore., appears to be teetering.

ZeaChem, which has been supported in various ways by the Obama administration, told industry watcher Biofuels Digest that money trouble had forced it to “minimize” operations at the plant, which makes ethanol from wood that it sources from a nearby poplar tree farm as well as from locally sourced agricultural residues.

cellulosic ethanol zeachem

Poplar intended for use at the ZeaChem plant in Oregon (image via Greenwood Resources)

In a statement to Biofuels Digest, ZeaChem’s spokeswoman Carrie Atiyeh said:

“ZeaChem recently had to scale back plant operations in Boardman and let go a number of our valued employees because we were not able to secure a bridge-loan intended to carry ZeaChem into its next funding round.  As a result of this unforeseen delay, we could not avoid scaling back our operations, which we intend to be a short-term event.  We are having very productive conversations with investors and are quickly making progress in the right direction.

“After recent successful production of cellulosic ethanol – an achievement for which our great employees are to thank – there is no question as to ZeaChem’s value as a refiner and an investment.  To that end, our main concern and top priority is to expedite additional capital investment in order to get our employees back to work, and continue to make progress toward commercialization and profitability.

“Operations have been temporarily minimized at the Boardman plant – it is not being sold. We have recently proven our technology end-to-end with our first cellulosic ethanol production and are confident about quickly raising additional funds and re-starting production.”

ZeaChem announced last October that the plant was completed, but in earlier statements the company had said it anticipated a startup by the end of 2011. And in October it said it expected to begin production before the end of the year.

Finally, on March 12 this year, the company said the plant was operating – but here we are, two weeks later, and the situation is cloudy at best. This is bad news for ZeaChem and potentially bad news for the Obama administration and U.S. taxpayers.

In 2009, the U.S. Department of Energy gave it a $25 million grant to do the Boardman demo. Then, in October 2011, ZeaChem was one of the industrial partners in a $40 million Department of Agriculture (USDA) grant to the University of Washington for the development of cellulosic ethanol – and another partner was GreenWood Resources, which is growing the poplar trees in the Boardman area for use in the ZeaChem plant.

Ultimately, ZeaChem aims to have a 25 million gallon biorefinery up and running at the Oregon site. To support that, the Obama administration last year used the USDA’s Biorefinery Assistance Program that was part of the 2008 Farm Bill to conditionally extend a $232.5 million loan guarantee to the Colorado-based company. Not all of the ZeaChem’s backing has come from the government, however; last October the company said it closed series C financing totaling $25 million in new equity.

Pete Danko is a writer and editor based in Portland, Oregon. His work has appeared in Breaking Energy, National Geographic's Energy Blog, The New York Times, San Francisco Chronicle and elsewhere.

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