The United States' Environmental Protection Agency (EPA) recently acknowledged that, despite generous levels of taxpayer funding, cellulosic ethanol was not scaling up as quickly as they had hoped. So they reduced the 2010 cellulosic ethanol mandate from 100 million gallons to 6.5 million gallons. The basis for their decision was contained in a published update to the Renewable Fuel Standards Program.

In that update, from pages 175 and 178, they had the following comments on Range Fuels, a company that had been slated to meet a large proportion of the original target:

At the time of our assessment, we were also anticipating cellulosic biofuel production from Range Fuels' first commercial-scale plant in Soperton, GA. The company received a $76 million grant from DOE [the Department of Energy] to help build a 40 MGY [million gallon per year] wood-based ethanol plant and they broke ground in November 2007. In January 2009, Range was awarded an $80 million loan guarantee from USDA [the United States Department of Agriculture]. With the addition of this latest capital, the company seemed well on its way to completing construction of its first 10 MGY phase by the end of 2009 and beginning production in 2010. [...]

As for the Range Fuels plant, construction of phase one in Soperton, GA, is about 85% complete, with start-up planned for mid-2010. However, there have been some changes to the scope of the project that will limit the amount of cellulosic biofuel that can be produced in 2010. The initial capacity has been reduced from 10 to 4 million gallons per year. In addition, since they plan to start up the plant using a methanol catalyst they are not expected to produce qualifying renewable fuel in 2010. During phase two of their project, currently slated for mid- 2012, Range plans to expand production at the Soperton plant and transition from a methanol to a mixed alcohol catalyst. This will allow for a greater alcohol production potential as well as a greater cellulosic biofuel production potential. [emphasis added]

So taxpayers funded a 40 MGY (151 million litres per year) wood-based ethanol plant and they are instead getting a 4 MGY (15 million litres per year) wood-based methanol plant. The technology to produce methanol from synthesis gas (the output of Range's gasifier) was invented in 1923, and is widely used in the petrochemical industry today. So, it appears that the wheel has been reinvented at taxpayer expense.

This is a rather remarkable fall for Range Fuels, who burst onto the scene a few short years ago with grandiose claims of producing massive volumes of cellulosic ethanol at a lower price than corn ethanol. They put out a steady stream of press releases, made a number of big claims, and more importantly they took a lot of taxpayer money.

I delve much deeper into the history on my blog, but here is the condensed timeline of events for Range Fuels:

• October 2006 - In an interview with Wired Magazine called My Big Bet on Biofuels, Vinod Khosla described his investment in Kergy (which later became Range Fuels).
   
• February 2007 - Kergy became Range Fuels and announced that they would build their first "cellulosic ethanol" plant in Georgia. In a story at Green Car Congress, the capacity was announced at "more than 1 billion gallons (3.8 billion litres) of ethanol per year."
   
• March 2007 - Range Fuels announced a US$ 76 million grant from the Department of Energy.
   
• July 2007 - In a story in USA Today, the Phase 1 capacity was announced at 20 million gallons (75 million litres). Range CEO Mitch Mandich said the full scale would be 100 million gallons (380 million litres) at a cost of US$ 150 million.
   
• November 2007 - To much fanfare, Range Fuels announced the groundbreaking of their Georgia facility. They maintained that the first 20 million gallon phase would be completely finished in 2008.
   
• April 2008 - Range announced a US$ 6 million grant from the state of Georgia.
   
• October 2008 - In an ironic story, Discover Magazine published "Anything Into Ethanol" - ironic, because in 2003 Discover had written "Anything Into Oil", a gushing story about a company called Changing World Technologies (CWT) and their claim that they could make oil from biomass for US$ 8-12 a barrel. After burning through investor and taxpayer dollars, CWT declared bankruptcy when their actual costs were US$ 80 a barrel and they couldn't deliver on their claims. I did a post-mortem on CWT here.
   
• November 2008 - Range Fuels CEO Mitch Mandich was replaced by David Aldous, an oil industry veteran. The rate of press releases slowed dramatically.
   
• January 2009 - Range received another US$ 80 million, this time from the USDA, and announced receipt of US$ 158 million in venture capital funding for 2008.
   
• October 2009 - Range asked for more money. This time the DOE said "No."
   
• December 2009 - Biofuels Digest listed Range Fuels as #14 on their 50 Hottest Companies in Bioenergy.
   
• February 2010 - After investments that have been publicly announced at US$ 320 million, the EPA announced that Range would initially produce 4 million gallons, and it would be methanol. Further, no ethanol is expected before mid-2012.
   
• February 2010 - I write an article wondering why the mainstream media has completely missed this story.

In summary, when Range was looking for funding they said that it would take US$ 150 million to build 100 million gallons of cellulosic ethanol capacity. Now that they have their money, they need more, and for US$ 320 million they will have 4 million gallons of methanol capacity to show for it.

I don't think these are isolated cases. I think they are a symptom of things to come. We have gotten a lot of over-promises, because, let's face it, that strategy has worked to secure funding. But what this leads to are completely unrealistic expectations regarding energy policy, and numerous bad decisions on where to spend tax dollars. The decision to initially fund and then continue funding Range potentially drained investment away from others whose projects were perhaps more deserving on their technical merits, but less vocal.

We cannot afford to have our energy policy hijacked by those who make the boldest claims and the biggest hype: it will just lead to more of the same, and a completely distorted picture of the energy landscape. It is easy to conclude that we have no energy worries when so many start-ups are making unrealistic promises.

Finally, I want to make it clear that I am not criticizing failure. That is normal and expected. Failure is a part of what it takes to learn and move forward. But when you take taxpayer money to build your business, there needs to be a different level of accountability. Otherwise taxpayers will foot the bill and become cynical about biofuels as a result of too many broken promises, and, ultimately, funding will dry up for everyone in the sector.
 

Robert Rapier is an experienced professional in the energy industry, having worked on cellulosic ethanol, butanol production, oil refining, natural gas production and gas-to-liquids (GTL). He currently works as the Chief Technology Officer for bioenergy holding company Merica International. His blog, R-Squared Energy Blog, whose mission is to foster open discussions about energy and the environment, originally hosted a longer version of this article, which can be accessed here: http://i-r-squared.blogspot.com/
 

Editor's note: Just as the March issue of Subsidy Watch was being put to bed, the 4 March 2010 issue of Biomass Magazine reported that nearly 40 industry-relevant groups, including Range Fuels, had recently signed a letter addressed to U.S. Sen. Max Baucus, (D-Mont.), Charles Grassley (R-Iowa), Rep. Dave Camp (R-Mich.) and Rep. Charles Rangel (D-N.Y.) urging Congress to grant an investment tax credit to "advanced biofuel producers" in order to help spur the development of commercial-scale projects. Advanced biofuel producers are currently eligible for a federal production tax credit of 30 percent, but the incentive is currently not being used because there are no commercial-scale facilities yet operating in the United States.