By Dan Mika
The DowDuPont cellulosic ethanol plant sits mostly empty today after the chemical giant suspended operations and laid off most of its 90 employees earlier this month. A skeleton crew is maintaining it while the company looks for a buyer for the $225 million plant, which was expected to produce 30 million gallons of cellulosic ethanol annually.
But the question remains: did DowDuPont build the plant on a biofuel struggling to reach commercialization?
The Nevada plant was built to produce cellulosic ethanol, made by refining plant byproducts corn cobs and soybean shells into biofuel. The idea behind it is simple: if a facility can break down the plant walls of that byproduct and refine the material into ethanol, the edible parts of the plants can be diverted into the food supply.
State and local officials pledged a total of nearly $15 million to the project in 2010, according to project reports from the Iowa Economic Development Authority. The department granted DowDuPont a $5 million forgivable loan and $586,000 in job training funds back when Dow and DuPont hadn’t begun merger discussions.
Under the IEDA package, DowDuPont was also eligible for up to $4.6 million in various state tax credits. The city of Nevada offered $8.6 million in tax abatements over 10 years.
IEDA spokeswoman Kanan Kappelman said the department is in discussions with the company about the future of the loan.
“White elephant investment”
The plant had its share of critics long before it closed its doors. In 2014, Nelson Peltz, an activist investor and New York hedge fund manager, said the company’s $500 million investment into cellulosic ethanol production was one of many “speculative and expensive corporate science projects” DowDuPont was pursuing at the time.
It’s unclear exactly how much ethanol, if any, the plant produced. In an emailed statement, DowDuPont spokeswoman Wendy Rosen said the plant remains in its startup phase and produced biomass through the conversion process “up to and including fermentation.”
At an industry scale, the cost of building and running that type of plant doesn’t make economic sense at the moment, said Craig Irwin, a biofuels industry analyst at Roth Capital Partners.
He said cellulosic ethanol production will struggle in a market in which landfill gas, produced by capturing gases deep within landfills, is growing because it counts under the Renewable Fuel Standard’s quota for cellulosic energy at a fraction of the cost of an ethanol plant.
Because of that, Irwin said he believes DowDuPont closed the plant to cut its losses and shift its focus elsewhere.
“The ethanol-based facilities are costing their owners way too much money to run after being horrible white elephant investments, and they’re outcompeted,” Irwin said.
Irwin said some firms may be interested in buying specific machinery out of the factory. But in terms of finding a buyer for the whole plant, Irwin said DowDuPont might be able to sell it for just pennies on the dollar.
“The only people who thought that it was going to do 30 million gallons were engineers with limited real-world practical understanding,” he said. “The rest of the industry essentially thought three, five, seven maybe, but definitely not 30.”
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