Cuts Could Jeopardize Poet Project

Officials at Sioux Falls-based ethanol producer Poet are concerned that cuts to a federal loan guarantee program could hamper the company’s plans to build an advanced biofuels plant in Iowa.

During testimony Wednesday at a Senate hearing about gas prices, Poet CEO Jeff Broin said financing a cellulosic project without a federal loan guarantee is “impossible.”

“Cellulosic ethanol can build on the accomplishments of grain ethanol, hold gas prices down and make us less dependent on foreign energy,” he said, according to a transcript of the hearing. “All we need is stable government policy.”

At issue is the spending bill that passed the House in February, which would carve $25 billion out of the Department of Energy’s loan guarantee program for nonnuclear renewable energy projects.

Poet, the largest ethanol producer in the world, is in negotiations with the DOE to secure a loan guarantee for a commercial-scale cellulosic ethanol plant in Emmetsburg, Iowa, called Project Liberty.

Broin’s Capitol Hill testimony came a day after he and 33 other CEOs of clean energy companies sent a letter urging congressional leaders to keep funding the program.

“As part of our (loan) applications, our companies have already spent tens of millions of dollars to meet the government’s stringent requirements for a loan guarantee,” the letter says. “Our companies have hired engineers, acquired land, complied with environmental reviews and negotiated power purchase or other off-take agreements. Eliminating funding at this late stage would literally pull out the rug from under our projects, just when we are about to break ground.”

Company President Jeff Lautt said cutting the loan program would send a message that the U.S. isn’t serious about developing cellulosic technology.

“Any new technology such as this needs some security to get a reasonable financing package,” he said in a statement in response to questions. “We’ve said in the past that we can’t move forward until the loan guarantee comes through. Without that, we’re back to square one on financing. At the very least, this delays Project Liberty by years.”

Cellulosic ethanol is derived from cellulose, so the feedstock can be plant waste or nonfood crops such as switchgrass. It’s more difficult to ferment, however, and thus more difficult to commercialize. Poet says it has spent more than $40 million researching cellulosic ethanol during the past decade.

In contrast to the House budget, the White House budget for fiscal year 2011 actually would bump the DOE loan program’s credit subsidy by $500 million to support new loan guarantees.

President Obama, speaking about energy at Georgetown University, said Wednesday that his administration’s goal is to cut oil imports by one-third by 2025. A good step in that direction, he said, is to support the “tremendous promise” of renewable biofuels – specifically, to “help entrepreneurs break ground for four next-generation biorefineries” in the next two years.

Through a spokesman, Rep. Kristi Noem, R-S.D., who voted for the spending bill, declined to comment.

Previously, Noem had said she voted for the spending bill because it was important to follow through on a campaign pledge to shrink the size of government.

Noem also voted against amendments in the bill that would have banned federal money being spent to build blender pumps and halted plans to increase ethanol blends from 10 percent to 15 percent.

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