Why is Khosla Ventures not mentioned at all in this article? With this kind of tax money being thrown around, you'd think people would want to know that the same billionaire funded the now defunct Range Fuels as well as Lanza Tech. This connection is more than enough grounds to support an investigation for possible embezzlement.
Photograph courtesy LanzaTech
Published January 19, 2012
The sandy soils of central Georgia nurture growth of bunchy wiregrass and longleaf pine. Here between the blackwater Ohoopee and Oconee rivers, about 160 miles (260 kilometers) southeast of Atlanta, a fortune has been sunk in hope of converting the abundant local biomass into fuel.
One of the more spectacular failures in the renewable energy industry—the Range Fuels collapse—played out here. Less renowned than the bankruptcy of Solyndra last September, Range’s failure that same month similarly involved the loss of millions of dollars in U.S. government funds and private investment, all wagered on an innovation that promised to propel an old technology to an exciting new level.
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But where bankruptcy seems to have spelled the end for Solyndra and that California solar company’s technology, a new chapter is now being written in the effort to brew advanced biofuel in the “Million Pines City” of Soperton, Georgia.
Earlier this month, a New Zealand-based carbon-capture and energy startup called LanzaTech bought Range Fuels’ idle biorefinery in a foreclosure auction for just $5.1 million. That’s a bargain basement price, considering the money that Range Fuels had attracted from private investors and from both the Bush and Obama administrations for its cellulosic ethanol plant here: more than $160 million in venture capital, a $76 million grant from the U.S. Department of Energy in 2007, a $6.25 million grant from Georgia in 2008, and an $80 million loan guarantee from the U.S. Department of Agriculture in 2009.
LanzaTech says it has a business plan and technology that can coax success out of the Range Fuels plant. And one of the primary backers of LanzaTech’s efforts here is the same venture capitalist who helped bankroll and promote Range, technology investor Vinod Khosla. It’s now up to LanzaTech to see if it can turn the promise of Soperton into a real success for advanced biofuels and investors like Khosla.
High Hopes for Cellulosic
Producing ethanol from cellulosic plant sources has been seen as the Holy Grail of the renewable fuel industry. The U.S. corn belt may have perfected the art of fermenting its crop to produce fuel alcohol, but controversy abounds over the water use, the energy input for cultivating corn, and the limits and long-term viability of turning an edible product into fuel. That’s why President George Bush, in his 2006 State of the Union address, pledged to fund research to commercialize ethanol from non-edible plant material by 2012. Cellulosic ethanol companies also were in the first wave of alternative energy technologies backed by President Obama.
Although cellulosic ethanol can be produced in the laboratory and at pilot scale, the genetically engineered enzymes or heat needed to break down the plant material into sugars is expensive. Not a single company has succeeded in scaling up commercial cellulosic ethanol production in the United States six years after President Bush’s vow.
Oil companies in fact were fined $6.8 million in 2011 for failure to meet the U.S. Environmental Protection Agency’s requirement that 6.6 million gallons of cellulosic ethanol be blended into gasoline and diesel last year. Indeed, that target marked a dramatic scaling back of the goal Congress set in 2007. Lawmakers originally envisioned that 250 million gallons of cellulosic biofuel would be helping to fuel U.S. vehicles by 2011. Although that goal proved overly ambitious (in part because Range Fuels failed to meet production estimates), it would have displaced only a small fraction of oil dependence in a nation that burned 8.8 million barrels, or 370 million gallons, of motor gasoline per day in 2011, according to the U.S. Energy Information Administration.
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If things had gone as planned when Congress was setting cellulosic ethanol goals, a large volume of that advanced biofuel would have been produced in Soperton, the only incorporated town in Treutlen County, Georgia.
Range Fuels (formerly called Kergy, Inc.), of Broomfield, Colorado, set out to establish a biorefinery here that would produce 100 million gallons of cellulosic ethanol per year. There would be plenty of feedstock in the “Million Pines City," named after a local plantation where, in the late 1920s, a cotton farmer pioneered the cultivation of pine trees as a crop. Today, pine tree plantations dominate the landscape, and forestry makes up some 80 percent of all land use.
Range had a two-step process. First, it would use heat, pressure, and steam to produce synthetic gas from biomass. Step two would be converting the gas to ethanol using chemical catalysts.
Construction began in an industrial park here in November 2007, but by 2009 Range Fuels had fallen behind and dramatically reined in production goals. In August 2010, the company squeezed out its first batch of methanol, a wood alcohol fuel used in racing and some industrial applications. (Range Fuels said at the time that its methanol would be used to produce biodiesel.) But the facility ran into technical problems with the gasifiers and the system for feeding in biomass, and it never did produce any cellulosic ethanol that would substitute for the corn ethanol now used in cars and trucks.
Range Fuels closed the plant in January 2010, and filed for bankruptcy in September 2011. At the time of its failure, it had received only half of its expected federal grant and loan guarantee monies, amounting to a loss of more than $85 million in public funds. The USDA required the foreclosure sale this month to recoup some of its losses. “LanzaTech is just looking to capitalize on a bargain, really,” said Andrew Soare, an alternative fuels analyst with the research firm Lux Research.
The fact that Range Fuels and LanzaTech share a lead investor—Vinod Khosla’s Khosla Ventures—has raised eyebrows because LanzaTech bought the Soperton site for a fraction of the amount spent developing the facility. And both companies have talked about big dreams for the site. “Right now the equipment is sized on the order of 4 million gallons,” LanzaTech CEO Jennifer Holmgren said in an interview. “But, you know, some day I’d like to build bigger units there. It’s a lot of land. It’s a lot of wood residue. That site’s really not meant for a little facility. I can imagine making 100 million gallons of fuel there,” perhaps within five years.
A New Approach
However, the companies differ when it comes down to the process for transforming the biomass of Treutlen County, bordered by the Ohoopee and Oconee rivers, two tributaries of the mighty Altamaha. LanzaTech, which has named the old Range Fuels site Freedom Pines Biorefinery, plans to use a gasifier to produce synthetic gas from biomass. That much is the same. But while Range Fuels planned to use chemical catalysts for the next step, LanzaTech’s technology uses microbes (specialized through genetic modification and arrested evolution) to ferment the syngas.
At Freedom Pines, LanzaTech intends to initially produce chemicals such as butanol and propanol, rather than ethanol, which sells in high volume but is a product that results in a relatively low profit margin, Soare said. This is new ground for LanzaTech. Since its founding in 2005, LanzaTech has concentrated its efforts mainly on capturing carbon monoxide from industrial flues, and using its proprietary microbes to convert the gas into ethanol fuel.
“Our organism gets carbon and energy from a carbon monoxide molecule,” Holmgren said. “One of the best places to find carbon monoxide is in steel mills,” where the gas would normally be flared and released into the atmosphere as carbon dioxide. And one of the best places to find steel mills, she added, is China, which produces about half the world’s steel.
In Shanghai, LanzaTech recently started up a 100,000-gallon-per-year demo with Bao Steel. Speaking in a phone call from New Zealand, where 50 of LanzaTech’s 85 employees are based, Holmgren said LanzaTech’s first commercial facility would most likely be in China, with construction beginning as early as next year. LanzaTech also has industrial partners in India, where it’s using municipal solid waste as a feedstock. And in partnership with Virgin Atlantic, Swedish Biofuels, Boeing, and others, LanzaTech has also begun developing a renewable jet fuel using its microbe-based carbon-capture system.
LanzaTech’s acquisition of the Soperton facility will give the company a new measure of independence, according to Holmgren. “Imagine our situation,” she said. “We’re very excited about our work in the chemicals area, but the demos and commercial facilities are controlled by partners. And so we would have to ask them for permission. We would have to come to an agreement,” to begin proving LanzaTech's technology for biochemical production at any significant scale. “Why would somebody operating this big ethanol plant care about us showing our technology or doing all the process that’s required to deliver a chemicals play, right? We feel that as a company, we need to have the ability to control the larger asset.”
It’s a Gas
At the Freedom Pines Biorefinery, LanzaTech will be tackling a whole new process: the gasification step, which was such a headache for Range Fuels. Through its steel mill partners, Soare said, LanzaTech has “access to free feedstock. So it’s surprising to see them go after this. But in the context of how cheap it was, it did make sense.”
LanzaTech plans to try fixing the Range Fuels gasifier. If that fails, Holmgren said, LanzaTech will bring in a new gasifier from a partner. As Soare put it, “They’re not a gasification company. If they can’t get the gasifier to work, they’ll move on.” Soare expects that LanzaTech will spend no more than a few million dollars working on the old gasifier.
Either way, moving into chemicals production strikes Soare as a shrewd strategy that could position LanzaTech for some lucrative deals down the road. “Syngas to ethanol is a very challenging step,” he said. About a dozen companies are working on syngas to ethanol globally, and a few dozen are working on cellulosic ethanol generally. “If gasification companies are unsuccessful, like Range, and if LanzaTech shows its organism works, there could be licensing or acquisition opportunities. Competitors will likely look to LanzaTech to help them switch to chemical production if LanzaTech can demonstrate its technology works at the Soperton plant.”
As for the U.S. government’s hopes for cellulosic ethanol to enter the fuel market this year, the EPA’s analysis is that there are six U.S. companies—each with a differing technology—that could produce the advanced biofuel in 2012. Therefore, the EPA set a goal of blending 8.65 million gallons of cellulosic ethanol into motor fuel this year, over objections from the oil industry that technology wasn’t available for producing that volume. The EPA said the goal was important to ensure a viable market for cellulosic ethanol, and the growth of the industry as Congress intended.
At this point, not a drop is expected to come from Range Fuels’ former biorefinery, which the EPA had projected would contribute 1 million gallons of cellulosic fuel to the U.S. energy mix in 2011. The agency is counting on no fuel production at Soperton in 2012.
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