WisBusiness.com: Flambeau River Biorefinery still on track despite missing federal grant

Bill Johnson was disappointed this spring when the proposed Flambeau River Biorefinery did not make the cut for an $80 million grant from the federal Department of Energy.  (The DOE gave out $385 million for six cellulosic ethanol plants, covering about 40 percent of the investment costs.)

But that doesn’t mean Johnson, whose family is a major player in the northern Wisconsin timber business, has given up on the idea of producing ethanol from cellulose, a byproduct of the paper-making process. His father is “Butch” Johnson, a long-time friend of former Gov. Tommy Thompson and a prominent businessman.

“It just means we’ll have to raise the additional money from private investors,” said Bill Johnson, 31, who is leading the effort to create the $213 million biorefinery.

WisBusiness editor Brian Clark recently spoke with Johnson about his company’s plans for the Park Falls plant.


Brian Clark:  What is the status of the biorefinery at this point?

Bill Johnson: We are still moving forward, out talking to potential investors every day and continuing to do trials and due diligence to make sure the process will be commercially sound and successful outside of the pilot and lab studies that have been done.

The work so far shows that this plant will be commercially viable, so we are continuing to go out and put together the financial package that we need to get this constructed and operating.

Clark: When do you hope to have it up and going?

Johnson:  I would hope that we can break ground in a year to 18 months from now.

Clark: Can you talk a little about the federal grant that you’d hope to get?

Johnson: We applied for a section 932 DOE solicitation for a commercial cellulose ethanol plant. There were 44 applications submitted and six were awarded. We found out later that we were ninth on the list, so we came up just a little short for the $80 million we were hoping to get.

Clark: How much of a setback was that for your plans?

Johnson:  It hurt a bit, obviously. The total construction costs we had in that application were $213 million and we had letters of intent for all those dollars minus the $80 million grant. There is great interest in this project. The financial community — at least those that we talked to — found it very viable.  They were excited about it and I think that is going to continue.

In his State of the Union address in January, President Bush said he wanted the United States to produce 35 billion gallons of ethanol by 2017.  But studies say the maximum production of ethanol from corn starch is about 15 billion gallons per year. So that means a lot — 20 billion gallons — needs to come from cellulosic ethanol. His plan called for $2 billion in funding for cellulosic ethanol plants and another $1.6 billion was announced later by the USDA.

Losing out on the DOE grant this time around was a bit of a hit, but we’ve talked to a lot of the companies that got the grants and they’d been working on their projects for 18 months. Of course, we did not buy Flambeau River Papers until July of last year and the solicitation application was due on Aug. 10. We first met with Atlanta-based American Process Inc., which has patents on this technology, on June 28 of 2006.

We met them in the governor’s conference room at the Capitol. They made a presentation and in six weeks, we were able to throw together a 150-page DOE solicitation that in our minds, with the amount of time that we had, we did pretty well.

Clark: Is most of the financial support for the biorefinery coming from northern Wisconsin?

Johnson:  No, it’s coming from all across the country.

Clark: Is this process producing power anywhere else at this time?

Johnson: American Process’s technology is not — and I can’t talk too much about that because they have patents pending on some of it. But I can say that the forest products industry has been producing for many, many decades. There is a Georgia-Pacific plant out in Bellingham, Wa., that is producing seven to eight million gallons a year.

I’m flying to Europe soon to look at a plant in northern Sweden that has been producing ethanol from cellulose for 40 to 50 years.  I’m going with a group from the mill, the Forest Products Lab and American Process Inc. to see what they are doing.

A couple of months ago, Lt. Gov. Barbara Lawton was up at Flambeau Rivers Paper with a gentleman from Sweden and we talked about how we can partner together to look at how we move cellulosic ethanol and the paper industry forward.  

Clark: How many gallons of ethanol do you hope to produce from your plant?

Johnson: We hope to produce 20 million gallons a year using C5 and C6 sugars, while at the same time producing 500 tons a day of specialty softwood pulp that would be used for paper.

Basically, you have three parts that make up the tree. You have cellulose, which is the main part of the tree that goes into paper and gives paper its characteristics. Then you have hemicellulose, which is your sugars. And then you have lignin.

What we are going to do is take that cellulose and send that to the paper mill and the open market. Then we will take the C5 and C6 sugars from the hemicellulose and ferment it to get 20 million gallons of cellulosic ethanol. And with the lignin, because the technology is not quite there, we will send that into a boiler and use that to produce the steam and electricity we need to run the plant.

This plant will be about 140,000 tons per year carbon positive and run solely on biomass. We won’t be emitting any carbon into the atmosphere. Everyone is talking about carbon credits now and we will have 140,000 tons of carbon credit to sell on the Chicago Climate Exchange if we decide to join the exchange.

So we could be helping Al Gore (chuckle).  According to a study from Argonne Labs at the University of Chicago, one of the big benefits of cellulosic ethanol is that it cuts greenhouse gas emissions by 85 percent over reformulated gasoline. Starch ethanol, which comes from corn, usually uses natural gas to fuel the process and reduces greenhouse gas emissions by only around 20 percent to 30 percent over the production of gasoline.

Clark: How many people with the biorefinery employ?

Johnson: We hope it will be about 75 full-time employees and it should benefit about 300 independent loggers. The construction and engineering should take three to three-and-one-half years by the time it is all done and should employ throughout the course of building it around 300 to 400 people.

Clark:  Is your father the president of the biorefinery?

Johnson: No. The president is Ben Thorpe, from Richmond, Virginia. My father is the CEO. Ben Thorpe is the foremost expert in the country on biomass power.  

Clark: Where will the biorefinery be located?

Johnson: It will be right on site with Flambeau River Papers.  We bought the former Smart Papers mill and reopened it last July and had the first paper come off the paper presses on Aug. 9 at 7:21 p.m. (The deal was aided by a $4 million loan package from the state.) There are now 296 people working directly for Flambeau River Papers, another 15 in the chip mill and wood yard.

Johnson Timber owns the chip mill and a private contractor has the wood-loading operation. Innovative Converting, which is a minority owned company out of Canada,  has 22 employees in the converting section. Flambeau produces 20-ton rolls of paper, and they take those rolls and produce the 8.5 by 11 sheets or legal sheets or whatever is called for. They cut the rolls into the individual sheets. …

Clark: Has biorefining of cellulose from trees not been done more because the technology wasn’t there or is it because the cost of other energy was low enough that making ethanol from wood was not profitable?

Johnson: In the past, people were comfortable with the price of fuel. But now it has gotten to the point that everyone is looking towards other solutions. The thing that we are excited about is that we can produce a gallon of cellulosic ethanol for a price that is very, very competitive with what the corn ethanol guys are doing.

Depending on what the price of corn is now, they are producing a gallon of ethanol for $1.50 to $1.75 a gallon with high use of natural gas and water. With our process through the paper mill, we hope to produce a gallon of ethanol with no natural gas because we will be burning the lignin. And we already have the water on site, so we won’t require that much more, and we have the waste water treatment facility to replenish it. We should be able to produce that gallon of cellulosic ethanol for $1.23 a gallon.

Clark: Do you think making ethanol is in the future for many paper plants in Wisconsin and elsewhere in the country?

Johnson: I think it gives Wisconsin a great opportunity to lead the nation again, just like we did in the 90s with welfare reform and school choice and everything else. Right now, I think we have fallen behind a bit. We look at neighboring states in terms of corn ethanol production and we are lagging behind.  We have a great opportunity once again to lead the country and distinguish ourselves from our neighboring states.

Clark: Do you think 10 years down the road most paper plants will have biorefineries connected to them?

Johnson: I would like to think so. Papermaking here is a struggling industry right now in terms of the global economy.  We are competing with China, Brazil and other countries that have quick turnaround and low labor costs.  Their resource grows at a substantially faster rate than ours so the paper industry has to find a way to make ourselves more competitive. I can’t think of a better way to find a new stream of revenue that helps with national security and helps our country get off of foreign oil.