USDA Allots $50 Million For Advanced Biofuels, Enerkem To Go Public

Source: JOSEPH BAKER • Energy Boom  • Posted: Wednesday, February 8, 2012

On Friday, the United States Department of Agriculture rolled out two new funding programs which it hopes will both increase the production of advanced biofuels and also promote the use of renewable energy to create the biofuel.

On Friday, the United States Department of Agriculture rolled out two new funding programs which it hopes will both increase the production of advanced biofuels and also promote the use of renewable energy to create the biofuel.

Dubbed the “Repowering Assistance Program,” the fund will provide up to $25 million to biorefineries for the implementation of systems that employ biomass to produce heat or power. Biorefineries that have been in operation since 2008 or earlier can receive up to 50% of the cost to replace or retro-fit fossil fuel system.

The USDA also said that $25 million is now available to advanced biofuels producers who expect to produce eligible biofuels in Fiscal Year 2012. The funds will be made available to eligible producers (cellulose, sugar and starch, crop residue, vegetative waste material, animal waste, food and yard waste, vegetable oil, animal fat, and biogas) that enrolled in the program last fall.

This news marks the first biofuels funding support the USDA has announced in 2012. Compared to how the Agency supported biofuels in the beginning of 2011 when, in January, it announced $410 million in financing incentives for three large cellulosic ethanol projects and for small producers in 33 states, this latest round of funding may seem small. However, placing this announcement within a view of the last 12 months, and it is clear that the USDA is throwing its support behind advanced biofuel production in the U.S.

In May 2011, the Agency launched the first Biomass Crop Assistance Program project area in Kansas and Missouri. This program will provide incentives for farmers who establish grass and herbaceous plant crops dedicated to energy feedstocks. Two months later, in July, the USDA added four new areas which it allotted $45 million for producers that enrolled in the program.

Finally, in August, alongside its partners the Department of Navy (DON) and the Department of Energy (DOE), the USDA committed $170 million to be used over the next three years toward constructing or retrofitting drop-in biofuel plants and refiners to produce bio-based jet and diesel fuels.

Yes, 2012 is a different year than 2011. Certainly, the booming years of loan guarantees and government backed support for development of alternative and clean energy have changed. Public financing for alternative energy programs could be even tougher to locate in 2012, considering it is an election year — many eyes will be focused on how the Obama Administration is handling the public’s money.

Yet, even amongst the political banter and the fixation on the clean energy companies that have failed with government funds behind them, it may be important to look at the successes the Administration’s support has spawned.

Biofuel producer Enerkem Corporation offers a telling example. Enerkem’s patented technology transforms municipal solid waste into cellulosic ethanol. The company, which is based out of Montreal, Canada where it operates a commercial demonstration facility, is currently constructing its first full-scale commercial plant in Alberta.

In December 2009, the DOE awarded Enerkem $50 million in funding to support the development and construction of a biorefinery in Mississippi and a year later signed off on an $80 million loan guarantee for the project (which will be capable of producing 10 million gallons cellulosic ethanol per year).

On Friday of last week, Enerkem announced it plans to go public. The company expects its initial public offering (IPO) to raise estimated $125 million.

Although this news may not have the Obama Administration, or those who are favour financial support from the government for clean energy companies, jumping out of their seats with smiles, it does mark a big step forward for a budding technology business capable of helping to fill the energy security gap.