At Mascoma, Taxpayers Foot Much of the Biofuel Bill

7/1/08Follow @wroush

As part of a strategy to accelerate development of its biomass-to-ethanol technology, Cambridge, MA-based Mascoma appears to be sparking a little competition between state governments anxious to host the facilities that will bring the technology to market first.

On Friday, Michigan Governor Jennifer Granholm announced an agreement between Mascoma, the Michigan Economic Development Corporation, forestry and mining company JM Longyear, and two state universities that will bring a major Mascoma ethanol plant to Chippewa County in Michigan’s Upper Peninsula. Under “Center of Energy Excellence” legislation passed by the Michigan legislature last week, Mascoma will get a $15 million grant for the facility, as well as help finding a site from the state’s Department of Natural Resources.

The plant is expected to be the first commercial-scale facility using Mascoma’s technology, which is based on the fermenting of sugars from non-food biomass such as wood chips. But the company is already working with the University of Tennessee to build what it calls a “large-scale demonstration facility” in Monroe County, TN, using $26 million in grant money from the U.S. Department of Energy’s Oak Ridge National Laboratory, and with the state of New York to build a “pre-commercial scale” plant in Rome, NY, using $14.8 million in state funds and $1.25 million in tax breaks.

In each location, officials have boasted that their affiliation with Mascoma would help make their states into national leaders in cellullosic ethanol technology. Michigan is “in a race” to become the first state producing cellulosic ethanol from wood in high volume, Granholm told Detroit Free Press reporter Tom Walsh last week.

And wherever Mascoma goes, CEO Bruce Jamerson is quick to praise local leaders for their dedication to clean energy technologies. A few samples of Jamerson’s public statements:

•    “The leadership of the University of Tennessee and its trustees have demonstrated tremendous dedication and zeal towards the advancement of biofuel technology….We look forward to working with our new colleagues as we progress through the stages that will ultimately lead to the production and distribution of a commercial product in Tennessee.” — Tennessee Journalist, October 4, 2007

•    “Cellulosic ethanol will become a commercial reality and the work done at this new facility will dramatically expedite the process. We are excited about the support from New York, and commend New York’s leadership in advancing the cellulosic ethanol market.” — Mascoma press release published by Reuters, December 10, 2007

•    “Working with the state of Michigan, two of its leading universities, and JM Longyear on this significant project brings us closer to commercial scale production of biofuels that can promote energy independence, reduce greenhouse gas emissions, and stimulate regional economic development.” — news release from the office of Governor Jennifer Granholm, June 27, 2008

•    “Michigan, for us, is becoming one of the power alleys.”—Detroit Free Press, June 27, 2008

At a time when venture investment are harder to come by and fewer companies are making it to the IPO stage, it certainly pays to find creative ways to fund a technology company’s growth. Mascoma competitors SunEthanol and Range Fuels, for example, both receive money from the Department of Energy. But Mascoma executives seem particularly skilled at persuading government agencies to offer grants for biofuels facilities that promise to bring jobs and cheaper energy to their regions. Overall, state and federal government agencies have committed more than $115 million in grants to Mascoma—meaning that the company’s growth is being funded by taxpayers as much as by private investors, who have put approximately $100 million into the company.

It’s easy to see why Michigan, with the highest unemployment rate in the nation, would be eager to court growing companies like Mascoma. The $250 million Chippewa County plant, which will go into full operation by late 2010 or early 2011, is expected to create between 400 and 600 jobs in manufacturing, the timber industry, and transportation. And a wood-to-ethanol plant is a natural fit for a region like Michigan’s Upper Peninsula, which has huge amounts of low-quality scrub timber ripe for chipping. (JM Longyear, based in Marquette, MI, owns 65,000 acres of forest in the UP.)

“There are great synergies in Michigan for Mascoma, not only in the ready supply of wood fiber across northern Michigan, but also great research institutions with a long-time focus on this science and our 21st Century Jobs Fund that is tied to bringing job-creating alternative energy ventures to Michigan,” said James Epolito, president and CEO of the Michigan Economic Development Corporation, in a statement issued by Granholm’s office.

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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