Cellulosic producer says it’s finally on solid ground
Source: Amanda Peterka, E&E reporter • Posted: Monday, November 11, 2013
KiOR, which operates one of the nation’s first cellulosic biofuel facilities in Mississippi, said it had its best quarter ever in terms of production, generating 324,000 gallons of fuel from woody biomass that is identical to petroleum-based gasoline and diesel. As of yesterday, the plant has been running for 57 consecutive days without issue, KiOR CEO and President Fred Cannon said on the company’s third-quarter earnings call.
“In contrast to our earlier efforts, which were reactive and focused on just keeping the plant running, our operations now are much more proactive, and the plant generally goes down only on a planned basis as opposed to unplanned basis before,” Cannon said.
KiOR will have completed construction on the plant a year ago tomorrow and began its first shipments of fuel this March. The company feeds Southern yellow pine into a proprietary catalyst system based off one used in oil refineries; the resulting gasoline and diesel is identical to petroleum-based fuel.
At full capacity, the plant is capable of producing 13 million gallons of cellulosic biofuel a year, according to the company.
KiOR’s production in the third quarter of this year represents a nearly 150 percent increase from production in the previous quarter. Of the fuel it produced, the company shipped 245,000 gallons to customers in the oil industry.
“We are obviously not at our nameplate capacity,” Cannon said. But “we believe that uncertainty and up-and-down operations that mark the startup period are now largely behind us.”
Assuming stable production, KiOR believes it will top 1 million gallons of production for the year — a record level of cellulosic biofuel production for the nation but below the 6 million ethanol-equivalent target set by U.S. EPA in its renewable fuel mandate for this year.
Only one other company, INEOS Bio, is currently producing cellulosic biofuel at a large scale in the United States.
Although it had a record production quarter, KiOR posted a net loss of $43.1 million, compared with $38.5 million in the second quarter. Its revenues totaled $720,000.
Critics of the industry in the oil refining sector have faulted companies for scaling up technology more slowly than the timeline anticipated in the 2007 Energy Independence and Security Act, which created the most recent federal biofuel mandate. They’ve challenged EPA’s targets in court; a legal victory for oil companies early this year forced the agency to scale back its targets even more.
Oil groups have again challenged EPA’s target this year. In a conference call this morning, American Fuel & Petrochemical Manufacturers President Charles Drevna said he doubted whether the industry would reach the agency’s projections.
“Even after being slapped down by the courts and after everybody agreeing cellulosic isn’t out there, EPA still comes up with these unrealistic cellulosic numbers,” Drevna said.
KiOR itself has also faced criticism. In August, the company was slapped with a class-action lawsuit for consistently coming up short of its stated goals. The lawsuit in U.S. District Court for the Southern District of Texas accused the company and its executives of deceiving investors by reporting optimistic production targets and deadlines, spurring stock purchases at prices that were artificially high (E&ENews PM, Aug. 21).
While not naming the lawsuit in particular, Cannon addressed the criticism of the industry in the earnings call. There’s an “expectation gap” between the feasible amount of time it takes to build a new industry and what critics believe should be the timeline, he said.
“This is not an industry that can come online in an instantaneous fashion, as many seem to have expected,” he said. “Innovation, technology development, process design, construction and scale take time to achieve.”
The cellulosic sector went from “mere ideas” to producing fuel that can be used in vehicles in just five years, he said. Compared with last year, the volumes produced by the industry have increased 60 percent, according to the latest production information from September.
“I know the numbers of gallons are not huge yet, but they’ll come,” Cannon said.
Cannon also sought to quell investor worries over a draft EPA proposal for next year’s renewable fuel standard targets that would significantly cut into both advanced biofuels and conventional corn ethanol. He said the proposal from EPA to set the cellulosic biofuel target at 23 million gallons next year would give the company more than enough room to grow.
KiOR is planning to build a second cellulosic plant adjacent to its first facility in Columbus, Miss. Last month, it announced that it had received a significant funding boost from Bill Gates and venture capitalist Vinod Khosla for the project (Greenwire, Oct. 23).