MN Bio Industrial Processing Roadmap - FULL REPORT

Minnesota RoadMap:Recommendations for BioIndustrial ProcessingMaRch 2012

with contributions by

Table of ContentsTable of Contents

Executive Summary 1

I: Building the Next-Generation Biorefinery 8

II: Downstream Market Development – Biobased Chemicals 24

III: Downstream Market Development – Biofuels 36

IV: Agricultural-based Supply Chain Partnerships 51

V: Forest-based Supply Chain Partnerships 62

VI. Policy Development for Bioindustrial Processing 73

Appendices 88

Acknowledgements and Contact Information 96

The Minnesota Roadmap: Recommendations for BioIndustrial Processing 1

Executive Summary

intRoductionThe advanced biofuels and biobased chemicals industry is poised for rapid growth as the markets grow for alternatives to petroleum. Minnesota has an opportunity to be a global leader in bioindustrial processing and the emerging biobased products industry. The state can build from its current assets and channel its legacy in adding value to agriculture and forest resources.

For the last century, Minnesota has proven itself to be a global leader in the sustainable growth of the con-ventional biobased industry, includ-ing the manufacturing of food, feed, and fiber. In fact, sawmills and flour mills provided an initial basis for the economic growth of Minneapolis, St. Paul, and the rest of the state in the latter half of the 1800s. More recently, the state pioneered the development of the ethanol and biodiesel industry.

The capabilities and infrastructure of the conventional biobased industry provides a base to build upon for the growth of the emerging biobased industry. Minnesota companies will continue to see opportunities to se-cure investment for expansions into production of advanced biofuels and biobased chemicals.

Additionally, the state has already emerged as a leader in the growth of com-pany headquarters within the biobased chemicals industry.

BackgroundThe following roadmap is designed to provide a pathway to accelerate the in-dustry’s development. The report details factors influencing the development of the global advanced biofuels and biobased chemicals industry, identifies opportunity areas for Minnesota, and sets forth strategic recommendations.

The roadmap was developed under the guidance of The BioIndustrial Partnership of Minnesota, a group of businesses, government officials, and academics who are committed to realizing Minnesota’s potential as the center of development for the advanced biofuels and biochemicals industries.

Critical DefinitionsBioindustrial processing industry » The advanced biofuels and biobased chemicals industry, where industrial biotech-nology is used to process biobased resources into valuable fuels and chemicals.Conventional biobased industry » The industry manufac-turing traditional agriculture and forest products such as food, feed and fiber and the value chain associated with manufacturing these products. Also includes the manufac-turing of corn ethanol and soy biodiesel.Emerging biobased industry » The industry manufacturing advanced biofuels, biobased chemicals, bioenergy, bio-polymers, bioplastics and the value chain associated with manufacturing these products. Renewable materials » The chemicals, biofibers, polymers, and materials that can be derived from renewable, biologi-cal resources including agriculture, forestry and other biobased resources.Sustainable bioeconomy » Economy based on sustainable use of renewable resources to meet the growing food, material, and energy needs of the world.


These efforts will accelerate industry growth, job creation, and value-added manufacturing that build upon Minnesota’s agriculture and forest-based resources. These recommendations, if followed, can lead to the addition of 12,000 direct and indirect jobs in bioindustrial processing by 2025 across Minnesota, as detailed in Appendix E.1

GloBAl TRENDS

Factors influencing industry development Advanced biofuels and biochemi-cals combine forces in a drive to replace the whole barrel of oil – not just fuels. In today’s oil refinery industry, 3 percent of the volume of feedstock is used for a wide array of chemicals, while another 70 per-cent is used for fuels. However, the total revenues from each category are equal. For this reason, indus-try development for the emerging biobased industry must proactively include the production of biobased chemicals, as well as biofuels, in order to create maximum value.

However, years of research and development and commercial de-velopment will be required before a product in the emerging bio-based industry can be viable in the marketplace, creating significant high-technology jobs. Additionally, manufacturing of advanced biofuels and biobased chemicals is capital intensive, making it important to en-sure funding availability across the spectrum. The opportunity is large for successful companies, however.

Partnerships are critical factors to consider in the growth of companies in the emerging biobased economy. Categories of partnership will include

• Downstream buyers of products, to ensure that a market exists for bio-based chemicals, and

• The conventional biobased industry, to minimize capital requirements and ensure biomass supply.

Figure 0.2Composite of Petroleum Product Prices, Reference Case, High Oil Case, and Low Oil Price

Case. (2011) US Department of Energy: Energy Information Administration. Annual Energy Outlook. Imported Low Sulfur Light-Crude Oil. Retrieved February 10, 2012 from http://

www.eia.gov/oiaf/aeo/tablebrowser/

Historical data from Spot prices from crude oil and petroleum products. (2012). Retrieved February 14, 2012, available from: http://www.eia.gov/dnav/pet/pet_pri_spt_s1_a.htm

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Figure 0.1, Oil Barrel Breakdown into Products


Downstream market development: Biobased chemicalsBiobased chemicals are being used in an increasing array of products, includ-ing everyday items such as plastics and cleaning agents.

The global market value of biobased chemicals is projected to reach $483 to $614 billion across a broad range of chemicals by 2025, as detailed by the USDA.2 This represents more than a 20 percent market share of the global chemicals industry.3 A variety of factors are driving growth in market demand.

First, petroleum prices are on a long-term upward trajectory, in part due to the increasing difficulty of extraction and transportation of crude oil. Between 2000 and 2010, the average cost of bringing a new oil well to pro-duction doubled.4 For chemicals dependent on petroleum-based feedstocks, supplies have been squeezed, and as a result, prices have increased. These market dynamics are creating an opportunity for biobased chemicals to pro-vide a cost-effective alternative.5

Additionally, consumer demand is growing for safer, more environmentally friendly products. Chemical regulation is becoming more stringent, and renewable materials that perform well in final products are helping fill the market’s demand for safer materials. These products provide clear value to their customers in terms of functionality and sustainability.

Downstream market development: BiofuelsGlobal demand for biofuels is projected to increase from $82.7 billion in 2011 to $185.3 billion by 2021.6 Policies requiring consumption of advanced bio-fuels across the globe continue to be implemented, and over time, these will likely continue to result in increased requirements for environmental per-formance. Additionally, development of the technology and required supply chains for cellulosic biofuels are expected to advance quickly.

Agriculture supply chain development The conventional biobased industry stands to benefit significantly from addi-tional markets, revenue, and profit that bioindustrial processing can provide.

Agriculture is well-positioned to meet increasing demand for food, feed, fiber, and fuels. Growth in yields for existing crops can enable the growth of new markets to utilize agricultural feedstocks, even while meeting existing de-mand. Additionally, the harvesting of agricultural residues will lead to added value from the land. In some cases, new crops will be developed for industrial purposes, such as diversified prairie grasses and energy beets. Bioindustrial processing could have profound impacts on agriculture production.

Forestry supply chain developmentThe forest products industry has been battered by economic turmoil in the past five years. Declining forest products output, and the resulting decline in timber production in Minnesota, has resulted in a systematic underuti-lization, an inability to manage some areas of the forest, and lost economic


activity. Advanced biofuels and biobased chemicals provide an opportunity for growth that leverages existing infrastructure, established supply chains, and Minnesota’s rich forest resource.

MINNESoTA’S STRENGTHSThe state’s bioindustrial processing industry is strong and growing, and Minnesota’s economy has an opportunity to benefit from its development.

Minnesota is well on its way to being a global leader in bioindustrial processing. Within the state, companies are supported by research and education from world-class universities, a supportive public sector, and a strong history for industry cre-ation in the development of the first generation ethanol and biodiesel industries. Additionally, there are four general categories of strengths listed below.

1. Emerging cluster of bioindustrial processing company headquartersThe state has a critical mass of companies on the cutting edge of the development and imple-mentation of new bioprocessing technologies. The state continues to drive toward the develop-ment of a sustainable industry cluster. Nearly 2,000 direct and indirect jobs have already been created through this economic activity.

The availability of talent is among the primary reasons for the growth of this new cluster, along with local biomass resources. Minnesota has

• Experienced executives in an array of biobased industries,

• Scientists and engineers with superior expertise in the production and conver-sion of biobased feedstocks, as well as the design and manufacturing of final products, and

• Accomplished service providers, such as lawyers, engineers, and accountants.

Assuming Minnesota’s industry can grow at a rate similar to global market growth, direct and indirect employment in bioindustrial processing company headquarters is projected to total 7,000 by 2025.7

2. Feedstocks Another advantage for Minnesota is that the state has sufficient agricultural and forest resources available to provide a diverse set of feedstocks for manu-facturing advanced biofuels and biobased chemicals. Key assets include:

Figure 0.3, BioIndustrial Processing Companies with headquarters or major operations in Minnesota

The map is intended as a list, not an indication of location.


• Strong agriculture production. The state ranks fourth in the nation for production of corn, and third in the nation for soybeans, and is the top producer of sugar beets.

• At least 3.2 million green tons of surplus wood available in northern Minnesota.8

3. Existing infrastructureA third advantage for Minnesota is the state’s strong conventional bio-based industry, which provides nec-essary infrastructure for integrated biorefinery development. Facilities in the ethanol, biodiesel, and forest products industry have the poten-tial to develop additional revenue streams. In partnership with the emerging biobased industry, exist-ing biorefinery infrastructure can be repurposed for the advanced biofu-els or biobased chemicals markets, which is the case for three shuttered oriented strand board (OSB) facili-ties in northern Minnesota.

The manufacturing of advanced bio-fuels and biochemicals could result in the employment of over 6,000 people by 2025 in a combination of partnerships with existing biorefin-eries as well as new construction. The impact for rural communities in Greater Minnesota could be consid-erable, just as it was in the recent emergence of the conventional biofu-els industry.

4. Established base of large companies in related industriesFinally, Minnesota is home to 20 Fortune 500 companies.9 Several of these large companies could be drivers in the value chain for renewable materials, including Cargill, 3M, Ecolab, H.B. Fuller, Target, and CHS.

Within these companies exist established capabilities that could be lever-aged to provide logistics systems for commodity supply chains, formulation and manufacturing of products using biobased chemicals and biobased in-termediates, and distribution and sales of goods to end users. Mutually ben-eficial relationships along this value chain can solidify the favorable market position of downstream partners, while enabling growth in the advanced biofuels and biobased chemicals industry.

200 km100 mi

SearchBiorefinery Infrastructure Map

Figure 0.4, Minnesota’s ethanol, biodiesel, pulp and paper mills, large sawmills, and engineered wood products facilities


A STRATEGY FoR MINNESoTAGiven Minnesota’s advantages in resources, knowledge, and infrastructure, industry development is expected to occur across all stages of company growth, from early-stage development through manufacturing scale-up and global market growth.

The following strategies provide a roadmap to allow Minnesota to realize its potential as a world leader in bioindustrial processing.

1. Ensure availability of funding options for bioindustrial processing Financing will be of critical importance to the industry. A full spectrum of investment is needed, from seed and angel funding to venture capital and long-term debt capital. Tactics include:

• Educating investors and financial institutions about the unique oppor-tunity to develop the bioindustrial processing industry in this region, and

• Ensuring awareness, availability, and access to federal and state financial support to accelerate research and development through full-scale manufacturing

2. Communicate Minnesota’s competitive advantages to the global industry Minnesota’s unique combination of assets provides opportunities to actively position the region and individual biorefineries as strong places to develop business opportunities. Other geographies are aggres-sively competing in this space, including other U.S. states, Brazil, and Southeast Asia. Outcomes would include the attraction of companies, business leadership, and investment.

A second tactic would be to provide support to individual facilities that have the desire and financial interest in partnering with advanced bio-fuels and biochemicals companies. Identification of viable partners and navigation of federal policy programs are two major areas of need.

3. Enable production and development of end markets for bioin-dustrial processingContinued improvement of the regulatory environment in Minnesota is critical for the development of manufacturing in the state. Adjustments in policies must be designed to include considerations to accelerate speed of time to market and minimizing costs for companies. Additional details are provided in the policy section of this document.

Furthermore, policies must be developed in a fashion that ensures inclusivity for all types of biofuels. This can ensure the overall biofuels market continues to grow for various applications.

For renewable materials, education will play a role in ensuring that parties across the value chain understand the factors behind demand. For example, a manufacturer who understands how to take advantage


of market growth from green-conscious consumers, perhaps through the use of biobased materials, can stand to benefit significantly from new market opportunities.

4. Organize industry-led efforts to develop a voice for the industrySuccessful implementation of the strategy described above will rely on the development of a stable voice for the industry. The focus of the organiza-tion would be industry growth.

Harnessing collective efforts to develop and communicate clear and con-cise messages can raise the profile of bioindustrial processing, providing multiple benefits in terms of developing supportive policies and driving investment and business partnerships to the industry.

CoNCluSIoNThe advanced biofuels and biobased chemicals industry is set for strong growth, and Minnesota has the assets to sustain a global leadership posi-tion. Implementation of the prior recommendations will serve to acceler-ate this growth.

endnotes1. BBAM analysis. Includes direct and indirect employment. Please see Appendix E for detailed

explanation.

2. A majority of this value is derived from specialty and fine chemicals. U.S. biobased products market potential and projections through 2025. (2008) Washington DC: U.S. Department of Agriculture, Office of the Chief Economist. OCE-2008-1. February 2008. Retrieved on March 12, 2011 from www.usda.gov/oce/reports/energy/biobasedreport2008.pdf.

3. U.S. biobased products market potential and projections through 2025. (2008) Washington DC: U.S. Department of Agriculture, Office of the Chief Economist. OCE-2008-1. February 2008. Retrieved on March 12, 2011 from www.usda.gov/oce/reports/energy/biobasedre-port2008.pdf.

4. Dobbs, R. et. Al. (2011) Resource Revolution: Meeting the world’s energy, materials, food, and water needs. McKinsey Global Institute, McKinsey Sustainability & Resource Productivity Practice. Pg 45. November 2011. Retrieved on November 23, 2011 from http://www.mckinsey.com/en/Features/Resource_revolution.aspx.

5. Additional details in Downstream Market Development-Biobased Chemicals. Production has shifted to a reliance on natural gas feedstocks, squeezing the market for certain petrochemicals.

6. Pike Research, Inc. ( 2011). Global biofuels market value to double to $185 billion by 2021. October 11, 2011. Retrieved on February 27, 2012, from http://www.pikeresearch.com/newsroom/global-biofuels-market-value-to-double-to-185-billion-by-2021.

7. BBAM analysis. Includes direct and indirect employment. Please see Appendix E for detailed explanation.

8. Deckard, Don. (2010) Economic Opportunities for Minnesota’s Wood. Unpublished Document. May 2010. The surplus assumes a small reserve capacity to remain in the forest for market stability.

9. Fortune 500 Ranking of America’s Largest Corporations (2011). CNN. Retrieved on October 1, 2011 from http://money.cnn.com/magazines/fortune/fortune500/2011/states/MN.html.


I: Building the Next-Generation Biorefinery

intRoductionMinnesota has been a national leader in the development and implementa-tion of conventional biorefineries to produce ethanol and biodiesel from regionally grown agricultural feedstocks, primarily corn and soybeans. These conventional biofuels have achieved broad acceptance and have created a significant economic impact in Greater Minnesota.

Attention is now turning to the scale-up and commercialization of advanced biofuels, such as cellulosic ethanol and isobutanol, and other biobased chemi-cals. Prospects for growth are strong. To fully capitalize on this growth, Minnesota’s next generation of biorefineries must become more versatile to

• produce a variety of drop-in and novel biofuels and biobased chemicals,• accept diverse biomass feedstocks,• partition and/or break down more biomass components (e.g.,

cellulose), and• ensure the quality of high-value co-products (e.g., distillers’ grains)

for food and feed.

Industry development efforts will require both a strong cluster of companies commercializing tech-nology for the production of fuels and chemicals, and manufacturing capacity for emerging products that leverage the conventional biobased industry’s infrastructure. We proj-ect that industry growth enabled by these recommendations would cre-ate 12,000 direct and indirect jobs across Minnesota by 2025, increas-ing from 2,000 jobs created by the industry today. Of the total, 7,000 jobs would be created by the estab-lishment of company headquarters of advanced biofuels and biochemi-cals companies, with another 6,500 jobs added through development of partnerships with existing biorefin-eries and construction of next gen-eration biorefineries.10 Additional details on job creation numbers can be found in Appendix E.

Critical DefinitionsBioindustrial processing industry » The advanced biofuels and biobased chemicals industry, where industrial biotech-nology is used to process biobased resources into valuable fuels and chemicals.Conventional biobased industry » The industry manufac-turing traditional agriculture and forest products such as food, feed and fiber and the value chain associated with manufacturing these products. Also includes the manufac-turing of corn ethanol and soy biodiesel.Emerging biobased industry » The industry manufacturing advanced biofuels, biobased chemicals, bioenergy, bio-polymers, bioplastics and the value chain associated with manufacturing these products. Renewable materials » The chemicals, biofibers, polymers, and materials that can be derived from renewable, biologi-cal resources including agriculture, forestry and other biobased resources.Sustainable bioeconomy » Economy based on sustainable use of renewable resources to meet the growing food, material, and energy needs of the world.


Industry Background and DefinitionBiomass is created through the conversion of air, water, sunlight, and soil into the simple and complex carbohydrates, proteins, oils, and lignin that make up our food and animal feed, as well as materials for clothing, craft, construc-tion, and fuels. Humans have applied bioprocessing organisms such as yeasts, molds, and bacteria to biomass feedstocks for millennia to produce beer, bread, wine, cheese, and yogurt, among other foods. The majority of these products are relatively non-toxic and biodegrade in a short amount of time to air, water, and soil.

Fossil fuels, including petroleum and natural gas, are essentially ancient pre-bioprocessed biomass. A crowning achievement of 20th century science and technology breakthroughs has been the conversion of fossil fuels to create fuels, fibers, plastics, building materials, and useful chemicals that make up consum-er products used in modern life. However, economic and geopolitical concerns and long-term damage to environmental and human health make the resulting dependence on petroleum a major challenge.

Biorefining to manu-facture biofuels and biobased chemicals is the marriage of biopro-cessing organisms with chemical and industrial engineering to convert contemporary biomass into building blocks that can replace those derived from petroleum.

Figure 1.1 shows a typical manufacturing cycle for manufactured biobased products, from the har-vesting of raw materials through sale to end users. A more detailed represen-tation of the value chain is included in Appendix A.

This report details the factors influencing the development of the advanced biofuels and biobased chemicals industry across the globe, explains op-portunity areas for Minnesota, and sets forth strategic recommendations. Implementation of these recommendations can accelerate industry growth, job creation, and value-added manufacturing that leverage Minnesota’s agri-culture and forestry resource.

Figure 1.1, Renewable Materials Value Chain


industRy tRends

Advanced biofuels and biobased chemicals markets poised for rapid growthAdvanced biofuels and biobased chemicals have gained traction in the broader fu-els and materials industry over the past decade, leading to the availability of fund-ing flowing to the industry. Market drivers pushing the industry forward include:

• demand for safer materials that are regulatory compliant,

• unfavorable petroleum price dynamics,

• materials shortages resulting from shifts in the chemical manufacturing industry,

• increasing consumer demand for green products, and

• policies requiring consumption of advanced biofuels.

For more detail, see the following chapters: II: Downstream Market Development – Biobased Chemicals, and III: Downstream Market Development – Biofuels.

Advanced biofuelsThe global market for biofuels is projected to increase from $82.7 billion in 2011 to $185.3 billion by 2021.11 The U.S. market is expected grow in step with global market demand, buoyed by the drive to implement the Renewable Fuels Standard 2 (RFS2), which mandates a total of 36 billion gallons of biofuel consumption by 2022.12 In 2011, biorefineries across the U.S. produced over 13 billion gallons of ethanol,13 and over 1 billion gallons of biodiesel.14

Moving forward, satisfying existing mandates for advanced biofuels will require an aggressive build-up of capacity. According to an analysis from the U.S. Department of Agriculture, this could require 528 commercial-scale cel-lulosic ethanol refineries located across the United States, with capital require-ments totaling $168 billion. 15, 16

However, commercial-scale production of cellulosic biofuels has developed more slowly than expected, and uncertainty about the technology continues today. For production to continue developing, production incentives and strong mandates will remain critical.

Biobased ChemicalsThe 2010 market value for biobased chemicals was estimated to be between $130 billion and $180 billion, and is projected to grow up to 9 percent annu-ally.17 The global market value of all types of biobased chemicals is projected to reach $483 to $614 billion across a broad range of chemicals by 2025 as detailed by the USDA.18 This represents more than a 20 percent market share of the global chemicals industry. 19, 20 Employment in this sector across the United States totaled 5,700 in 2007.21


For companies developing platform chemicals and plastics, rapid growth is necessary because the petrochemicals being displaced by biobased chemicals are typically produced and sold in high volumes; bioindustrial processing companies will be expected to “go big or go home” to be credible players. Rapid ascension to gain economies of scale will be necessary to be competitive.

Emerging manufacturers of biobased chemicals are projecting annual produc-tion of 5 billion pounds by 2015, a 25-fold increase from 200 million pounds manufactured in 2011.22 Such rapid development will continue to rely on equity events, traditional bank financing, and diffusion of risk through some level of government support.

Capital investment fueling growthIncreasing demand is giving rise to encouraging signs of momentum for capital investment into bioindustrial processing. From 2004 to 2009, $1.48 billion was invested into the industrial biotechnology sector, which largely encompasses bioindustrial processing.23

Capital funding for clean technology companies, used as an indicator of venture investors’ interest in green and clean products, has increased significantly over the last decade. Since 2006, $16.3 billion in venture investments have gone into clean technology, compared to $1.6 billion dollars between 2001 and 2005.24

More recently, a series of initial pub-lic offering (IPOs) have brought in-vestment into the advanced biofuels and biobased chemicals industries. Since December 2009, 13 industrial biotechnology companies have filed for an IPO.25 Of these, six have been listed on public stock exchanges, and these equity events have yielded a total of $727 million of investment.26 When combined with venture capital investments, public financial markets are pro-pelling businesses toward commercial-scale manufacturing capability.

Risk diffusion critical for industry developmentWhile private capital support is available, the industry remains an especially capital-intensive endeavor. In general, private sources of investment and lenders cannot handle the required risk to bring biobased fuels and chemicals to the marketplace. Significant research and development must occur for a product in the advanced biofuels and biobased chemicals space to reach the market, with the time from concept to commercialization extended over many years of research with teams of highly skilled experts.27

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investments by year Q1 1995- Q2 2011. Retrieved October 3, 2011, from http://www.nvca.org/index.php?option=com_docman&task=doc_download&gid=773&Itemid=93


Additionally, hundreds of millions of dollars are required to build commercial-scale processing facilities. Therefore, opportunities to minimize the capital required for scale-up are aggressively pursued. Viable strategies to diffuse risk in the pursuit of commercial-scale production include developing partnerships with the conventional biobased industry and leveraging of government support.

Partnerships with the conventional biobased industryExisting biorefineries include facilities operated by companies in the conven-tional biobased industry, such as biofuels facilities, agriculture processors, paper mills, and other bioprocessing facilities. These companies have already made investments into infrastructure critical to manufacturing biofuels and biobased chemicals, such as wastewater treatment, feedstock storage, and truck and rail access. An array of mutually beneficial partnerships can be developed to acceler-ate commercialization, including acquisitions, joint ventures, and licensing deals.

For the local biorefinery, these strategic partnerships provide an opportunity to enter new markets and maximize value created locally from agricultural and forest resources. In many cases, these deals will include some form of lo-cal ownership or joint ventures. This ensures benefits to the local community and may provide pathways to raise capital from local investors.

Government Support to Diffuse RiskGovernment support has proven to be a major contributor to successful advanced biofuels and biobased chemicals projects across the globe. Policies to provide financial assistance through grants and loan guarantees have been designed at the national, state, and local levels to diffuse risk for pri-vate investors and incent job growth. The petroleum industry has had 100

Partnerships for Growth: Minnesota’s Biobutanol ManufacturingMinnesota has emerged as a leader in the commercialization of biobased isobutanol. The state is projected to be the home for two of the first commercial-scale facilities in the country, both of which involved strategic partnerships that have enabled conversion of existing infrastructure to produce biobased isobutanol.First, in September 2010, Gevo, a Colorado-based renewable chemicals and advanced biofuels com-pany, purchased Agri-Energy LLC, an ethanol manufacturer in Luverne, Minnesota.1.1 More recently, in November 2011, Highwater Ethanol LLC in Lamberton, Minnesota, signed a letter of intent to produce isobutanol using technology developed by Butamax Advanced Technology LLC, which is a joint venture between BP, the global oil and gas company, and DuPont, one of the world’s largest chemical companies. In each case, the local partnership provided a small commercial-scale facility to prove the emerging technology and bring products to market, while enabling the biofuels facility to maintain production and grow through accessing advanced biofuels and biobased chemicals markets.1.2 1.1 Breaking new ground: Agri-Energy’s purchase by Gevo leads to innovation. (2011) The Daily Globe. Retrieved on

January 15, 2011 from http://www.dglobe.com/event/article/id/47248/.1.2 Butamax discusses biobutanol commercial activities including early adopter initiative. (2011) Butamax Advanced

Biofuels. Retrieved on December 3, 2011 from http:/www.highwaterethanol.com/documents/2011_butamax.pdf http://www.highwaterethanol.com/documents/2011_butamax.pdf.


years to reach economies of scale, and emerging biobased products are thus at a disadvantage for near term scale-up in the marketplace.28 Additionally, the potential for job creation throughout the value chain is significant.

Increasing interest in biobased chemicals across bioindustrial processing As companies in the emerging biobased industry develop, they are increasingly shifting their technol-ogy suite to include the production and sale of chemicals, in addition to biofuels. This shift is enabled by factors cited above that are increasing the demand for biobased chemicals, combined with the high volume and lower-value nature of fuels. Initial public offering (IPO) registration statements for companies primarily focused on biofuels have included significant attention to the production, or potential production, of valuable biobased chemical platforms using their proprietary technology.29

The high value of chemicals is demonstrated in the analogous petroleum-refining business. Total revenues for fuels and chemicals are identical, though only 3 percent of the volume from a barrel of oil is used for a broad range of petrochemicals, and 70 percent of the barrel is made into refined fuels. The remainder goes to products such as fuel oils, gases, and asphalts as detailed in Figure 1.3.30 Thus, relatively smaller scales are required to gain significant revenues in the production of biobased chemicals as compared to biofuels.

case study: BioAmberBioAmber, a Minnesota company commercializing biobased succinic acid and other platforms, pro-vides a clear example of a company aggressively pursuing partnerships to accelerate their capability to grow. This company has entered into multiple partnerships that illustrate the importance of such alliances, including the following examples: Natureworks LLC: Joint venture on commercialization of new biopolymers based on PLA and PBS, a derivative of succinic acid. BioAmber can leverage Natureworks’ established global market presence to accelerate commercialization, while allowing Natureworks to provide additional material solutions for their customers.Cargill: Joint development of yeast strains that can result in lower production costs and lower capital costs, while building toward an organism that processes cellulosic materials.Lanxess: The most recent deal in a suite of partnerships involves the development of commercial products. Lanxess, a specialty chemicals company, is a downstream partner on joint development and commercialization of biobased plasticizers to displace phthalates.Partnerships. (2011) BioAmber. Retrieved on February 27, 2012 from http://www.bio-amber.com/bioamber/en/

company/partnerships.

Figure 1.3, Oil Barrel Breakdown into Products


Emerging companies are leveraging the favorable price dynamics in the bio-based chemicals market to diversify production and accelerate returns on invest-ment. However, as with all aspects of bioindustrial processing, downstream strategic partners drive a company’s market, and fuels remain the largest vol-ume market for many downstream partners interested in biobased feedstocks. Additionally, the biobased chemicals market has a broader range of market seg-ments, limiting the addressable market for individual biobased chemicals manu-facturers. To summarize, the industry is moving toward inclusivity of biobased chemicals in most bioindustrial processing business plans to maximize value.

Commercialization pathways dependent on chemical outputsTwo major categories of products have emerged in the biobased chemicals industry that demonstrate likely commercialization pathways for biobased chemicals companies. First, manufacturing capability is being developed for advanced biofuels and biobased chemicals that are chemically identical to those derived from petroleum. Alternatively, novel proprietary chemicals from biobased sources are providing unique functionality.

“Drop-in” chemicals and fuelsSupply and demand changes in the petroleum industry are opening opportu-nities for cost-effective biobased “drop-in” chemicals that serve as alternatives to petroleum based fuels and chemicals. Since the product and performance are inherently identical to the incumbent chemical, “drop-in” replacement chemicals must compete on a cost basis.

Certain biobased chemicals can expect favorable price dynamics compared to petroleum-based chemicals due to the increasing costs for fossil fuels, an ex-pectation of stable prices for chemicals through the diversification of feedstock sources, and declining focus on petroleum for chemical feedstocks in favor of natural gas.31 Minimal product development and capital costs will be incurred for the downstream manufacturer if the replacement is identical to the incum-bent molecule; existing equipment can be used in identical processing methods.

Some examples of biobased molecules nearing commercialization include isobutanol, n-butanol, acrylic acid, succinic acid, butanediols, polyols, and the range of molecules found in diesel, gasoline, and jet fuels.

For these products, downstream partners are critical for commercialization, as these arrangements reassure investors of market demand and adequate technical performance.

Renewability and life cycle greenhouse gas (GHG) assessment have the po-tential to provide additional competitive advantage for some markets, though these attributes are unlikely to sustain a premium price for the product. Thus, cost competitiveness and rapid expansion to economies of scale are critical.

Novel proprietary chemicals In addition to drop-in chemicals, development of novel, biobased chemicals with new functionality can provide a clear value proposition for customers.


Among the properties that can be improved through the use of novel propri-etary biobased chemicals are environmental and toxicity profiles, strength, flexibility, and biodegradability. Such improvements can provide a strong competitive advantage for the owners of proprietary chemicals, especially if the molecule provides a platform for multiple applications.

In certain applications, regulatory policies can ban or discourage the use of incumbent petroleum-based chemicals due to product safety or toxicity con-cerns. Such regulations can reduce the barriers of entry to new chemicals with an improved toxicity profile by giving final-product manufacturers an incen-tive to use alternative materials.

However, the pendulum on regulation can go against the commercialization of new chemistry. Regulatory uncertainty on the approval of new chemicals can hamper a company’s ability to cost effectively develop and manufacture new biobased chemicals, thus limiting commercial adoption.

In addition to regulatory hurdles, successful market entry can entail switching costs for the end user. In some cases, these costs can crowd out the value of new functionality. Though there are exceptions, these factors combine to cause market penetration to require extended time for chemicals new to the materials industry.

Thus, partnerships with downstream partners are even more critical, as joint development for specific applications is necessary for market adoption. These partners can confirm the value of physical properties and toxicity impacts, as well as sharing resources for application development.

In summary, commercializing a new chemistry entails a need to understand unique business risks associated with the product. Significant losses can be accrued while functionality and marketing is proven, making commercial-izing new chemistries a potentially risky endeavor for capital-constrained start-ups. However, should commercialization be successful, a differentiated molecule provides a strong competitive position for growth.

Bioindustrial processing moving toward cellulosic feedstocksAs the advanced biofuels and biobased chemicals industry grows, so too will the demand for fermentable sugars beyond what is available from starch. Cellulose is an abundant source. Several factors are leading to reliance on cellulosic biomass, including the food-versus-fuels debate, efforts to mini-mize life cycle GHG emissions, concerns about genetically modified organ-isms, and a constant drive to minimize costs as commodity prices increase. Bioindustrial processing that leverages cellulosic feedstock is expected to add value to agricultural and forest-based resources.

Cellulosic biomass from agricultural supply chains, including corn cobs, corn stover, soybean straw, and wheat straw, is projected to provide a benefit to farmers through the addition of a new revenue stream. However, the supply chain for agricultural residues has not been developed at the industrial scale. Significant efforts over multiple years are needed to establish these supply chains. Relationship-building with farmers and harvesters is necessary in order to ensure delivery of biomass with specifications and efficiencies required for


large commercial operations.32 For the supply chain to be sustainable, opportu-nities must be clear for farmers to gain a profit. Thus, biomass prices must be sufficient to cover cost and nutrient value removed with biomass.

In Minnesota, the supply chain logistics for wood are well known as a result of the state’s vast experience in building the lumber and pulping industry. Increasing interest in the harvest of tops and limbs of trees will continue as demand for woody biomass continues to grow. However, attention must be paid to factors that influence competitive impacts on existing industries, such as the location and scale of operations, species of trees required, and if tops and limbs of trees can be processed.

The assurance of a reliable supply is among the most critical factors for cost-effective production of advanced biofuels and biobased chemicals. Creative business models that ensure mutually beneficial relationships across this supply chain can accelerate the market’s growth.

oPPoRTuNITIES AND CHAllENGES

leverage Minnesota’s existing biorefinery infrastructureFor the last century, Minnesota has proven itself to be a global leader in the sustainable growth of the conventional biobased industry, including the man-ufacturing of food, feed, and fiber. More recently, the state pioneered the development of the ethanol and biodiesel industry.

The capabilities and infrastructure of the conventional biobased industry provides a base to build upon for the growth of the emerging biobased industry. Minnesota companies will continue to see opportunities to se-cure investment for expansions into production of advanced biofuels and biobased chemicals.

Agriculture industryMinnesota has over 26 million acres of high-quality farmland, ranking fourth in the nation for the produc-tion of corn, and third in the produc-tion of soybeans.33 In 2008, there were nearly 150,000 direct and indirect jobs in Minnesota from ag-riculture production and processing, making up approximately 5 percent of employment across the state.34

Figure 1.4, Minnesota’s Ethanol, Biodiesel, Pulp and Paper Mills, Sawmills, and Engineered Wood Products Facilities

Additional facilities, such as sugar refineries and food processing facilities, are also relevant for the emerging biobased industry, but are not shown on this map.

200 km100 mi

SearchBiorefinery Infrastructure Map


The seeds for rapid growth in the U.S. conventional biofuels industry in the 1990s and 2000s were planted in Minnesota, giving the state relevant experi-ence on industry creation. This growth was achieved through the leadership of farmers in setting up cooperative businesses, the surplus production of corn, and policy support from the state and federal government. The industry increased farm incomes and revitalized rural communities.

Today, Minnesota has 21 ethanol plants with 1.1 billion gallons of production ca-pacity, which is the fourth highest in the U.S.35 Total direct and indirect employ-ment is over 8,000.36 Biodiesel capacity totals 63 million gallons per year, putting Minnesota in the top 10 states in the U.S. for the production of biodiesel.37

By leveraging the need for companies to use capital-efficient commercializa-tion models, Minnesota’s conventional biofuels facilities are well-positioned to establish mutually beneficial partnerships. This is generally done by retro-fitting existing biorefineries or co-locating new technologies with the existing facility to process by-products.

Forest productsIn the northern half of Minnesota, the forest products industry has served as a bellwether in the state’s economy for decades. Direct and indirect employ-ment across Minnesota’s forest products industry totaled 31,300 statewide in 2009.38 Of this total, over 5,500 individuals were directly employed in the logging industry and manufacturers of paper mills, engineered wood prod-ucts, and lumber.39 Minnesota’s forest product manufacturing ranks 10th of all states in value-added per capita.40

In 2008, 6.57 million green tons of wood was harvested.41 Of this total, 75 percent of wood processed in Minnesota was used in pulp and paper and OSB production, while 17 percent went into lumber and specialty products markets. The final 8 percent of the annual harvest, pri-marily made up of logging residues and mill by-products, was used to produce heat and electricity.42

According to a Minnesota Department of Natural Resources analysis completed in 2010, today’s harvest level leaves at least 3.2 mil-lion green tons of surplus wood avail-able before the market reaches its economic maximum harvest.43 A vast majority of the surplus is made up of pulpwood and logging residual.44

In the next decade, advanced biofuels and biobased chemicals provide oppor-tunities to increase employment in this sector.45 As an example, three former

Figure 1.5, Minnesota’s Renewable Materials Family Tree. Many Minnesota companies draw their lineage of technologies

or leadership to the set of companies listed above.


oriented strand board (OSB) facilities are primed for redevelopment in the emerging biobased industry.

Expand Minnesota’s emerging bioindustrial clusterIn addition to the feedstock supply and processing that provide the basis for bioindustrial processing, Minnesota has been a leader in the development of new companies in the renewable materials industry. As shown in Figure 1.5, the state is on its fourth generation of strong biobased materials companies and is well on its way to the development of a regional cluster.

The primary reason for the cluster’s development is the talent available to companies in Minnesota. Below are some categories of strength:

• Leading-edge agriculture and forestry scientists and bioproducts and biosys-tems engineers who understand the characteristics of the feedstocks and the opportunities for conversion.

• Skilled chemists, chemical engineers, and materials scientists who design valuable products from biobased chemistries.

• Experienced executives who have been groomed to understand the unique strate-gies for bioindustrial success.

• Accountants, engineers, and legal pro-fessionals who provide a rich business ecosystem, having premier experience in the agriculture, forestry, and bioindustrial processing industries.

STRATEGIC RECoMMENDATIoNS

Ensure availability of funding options for bioindustrial processing

For emerging companies, availability of capital is a high priority for developing the industry as it is the tool that can most quickly accelerate growth. Funding across the stages of company development is necessary for industry growth, including seed, angel, venture capital, and long-term debt capital. However, financing tight-ened significantly during the recent recession, as demonstrated by a 36 percent decline in venture capital investment in biotechnology between 2008 and 2009.46 As a result, start-up companies in emerging industries have had difficulty raising necessary funds.

Programs to accelerate capital flow and diffuse risk are critical to ensure the vi-ability of the industry. The following tactics have been identified as most critical:

Figure 1.6, BioIndustrial Processing Companies with headquarters or major operations in Minnesota

The map is intended as a list, not an indication of location.


• Investor education on the unique opportunity to develop industry op-portunities in this region.

• Ensuring awareness and providing assistance to companies in pursuit of federal grants and loan guarantees.

• Providing state support in the form of grants to support research and pilot-scale development.

• Enable manufacturing capacity development through the develop-ment of loan guarantees as well as a favorable tax environment for long term capital investment.

• Developing an incubation and acceleration system to prepare entre-preneurs for market success.

Communicate Minnesota’s competitive advantage as a global leader for bioindustrial processing It is important for Minnesota to be recognized for its position as the No. 1 place in the world to build companies that manufacture products in the emerging biobased industry. Minnesotans need to tell their own story and share experiences of industry growth to communicate assets that provide the state with a competitive advantage, including:

• Minnesota’s agricultural and forestry resources and conventional bio-based industry provide a strong base for industry growth.

• Existing industries provide a complete value chain necessary for developing a cluster of companies that can manufacture biobased chemicals.

• A cluster of companies has been developing for the past 10 years, and all indications are that this industry will continue to grow.

• Minnesota is home to scientists and engineers who understand both the production and conversion of feedstocks and the design and manufacturing of final products, as well as experienced business lead-ership that propels Minnesota ahead of the pack.

In the implementation of these recommendations, which will entail a collab-orative effort among state agencies, economic development organizations and other nonprofits, results will be shown in three key areas:

• Attracting companies to the region for manufacturing partnerships and location of operations in Minnesota.

• Attracting leadership talent to the region.

• Fostering investment from outside partners into Minnesota.

There is a compelling story to tell about Minnesota if the state can make a com-mitment to telling it. Bioindustrial processing, just like any other industry rely-ing on a knowledge-based economy, thrives in places with Minnesota’s assets.


leverage and expand academic-industry partnershipsInnovations from the state’s higher education system provide a pipeline of technology and talented people to drive industry development. Training the next generation of high-tech business leadership can solidify Minnesota’s position as a global leader.

The University of Minnesota and the Minnesota State Colleges and University system play a crucial role in the development of bioindustrial processing. Multiple factors are critical strengths to build upon:

• Minnesota has world-renowned programs in the broad categories of chemical engineering, materials science, and bioproducts and bio-systems engineering, and bioproducts marketing, as well as technical programs in such areas as nanotechnology, biotechnology, biofuel production, and chemical technology.

• A steady stream of talent is provided to companies developing tech-nologies for bioindustrial processing in Minnesota.

• Industry development to leverage this talent is important to retain graduates in Minnesota, allowing the state to capture the exponential growth in economic activity enabled by knowledge-based businesses.

A concerted effort to facilitate collaboration between industry and academia strengthens the ecosystem of new technology development in Minnesota. Additionally, companies in Minnesota can leverage other nearby universities, including the University of Wisconsin-Madison, Iowa State University, North Dakota State University, and the University of North Dakota. This importance of collaboration between industry and academia was also highlighted in a study on biobased products completed by Agricultural Utilization Research Institute (AURI) in 2011.47

Develop partnerships to improve the regulatory environmentDelayed production due to permitting issues can be detrimental to the eco-nomics of bioindustrial processing facilities. Efficient and clear policies for obtaining permits to build facilities need to be set forth and maintained over time at the state and local level. Investments into facilities are more likely to occur if the regulatory risk can be mitigated through clarity on expected cost and timeline for the business.

Developing mutually beneficial relationships between industry and regulators is critical. Minnesota should prepare itself to be considered in the top 10 states for business-friendly regulatory environments in the country, even while main-taining the natural resources of the state. Over the past two years, progress has been made in acceleration of the permitting processes.48 In January 2011, an executive order was signed by Governor Mark Dayton to ensure permits are issued within 150 days.49 A similar recommendation is also included in the above-mentioned study on biobased products completed by AURI in 2011.50


organize industry-led efforts to develop a voice for the industrySuccessful implementation of the strategy described above is likely to rely on the development of a stable voice for the industry. Given Minnesota’s exist-ing strengths in the industry, trade group capabilities will be critical, with the overall driver of the organization centering on industry growth.

Leveraging collective efforts to develop and communicate clear and con-cise messages to raise the profile of bioindustrial processing would provide multiple benefits.

• Investment would be accelerated within Minnesota and from sources of funding outside of the state as institutional and individual in-vestors became comfortable with the opportunity and understand Minnesota’s competitive position.

• A strong network and understanding of different segments of the value chain would help businesses build successful business partnerships.

• Prudent policies would build opportunities for existing and emerging Minnesota businesses.

Diverse interests must be brought together, including the advanced biofuels and biobased chemicals industry, existing agricultural and forestry industries, and downstream users of fuels and chemicals. The audience for education ef-forts includes investors, businesses, and policymakers.

In summary, building trade group capabilities to organize the industry could accelerate industry development by ensuring access to partnerships and nur-turing a supportive community.

endnotes10. BBAM analysis.

11. Pike Research, Inc. (2011). Global biofuels market value to double to $185 billion by 2021. October 11, 2011. Retrieved on February 27, 2012, from http://www.pikeresearch.com/newsroom/global-biofuels-market-value-to-double-to-185-billion-by-2021.

12. Passed in the Energy Independence and Security Act of 2007, the current Renewable Fuels Standard (RFS2) requires 15 billion gallons of corn based ethanol, 1 billion gallons of bio-diesel, 4 billion gallons of advanced biofuels, and 16 billion gallons of cellulosic biofuels. See Chapter III, Downstream Market Development- Biofuels for details.

13. Renewable Fuels Association. (2011). Building bridges to a more sustainable future: 2011 ethanol industry outlook: Renewable Fuels Association. Pg. 2. Retrieved on November 30, 2011 from http://www.ethanolrfa.org/page/-/2011%20RFA%20Ethanol%20Industry%20Outlook.pdf?nocdn=1.

14. US biodiesel production surpasses 1 billion gallons in 2011 (2012, January 30, 2011). Biodiesel Magazine. Retrieved on February 27, 2012 from http://www.biodieselmagazine.com/articles/8310/us-biodiesel-production-surpasses-1-billion-gallons-in-2011.

15. A USDA regional roadmap to meeting the biofuels goals of the renewable fuels standard by 2022 (2010). Washington, DC: United States Department of Agriculture.


16. Assuming that technological innovation to produce cellulosic ethanol can occur quickly, in-creasing capacity and decreasing capital costs, the Brattle group estimates total capital expen-diture to total $58.3 billion, including corn ethanol, cellulosic ethanol, and fuel distribution. Celebi, Metin, Evan Cohen, Michael Cragg, David Hutchings, and Minal Shankar. (2010). Can the U.S. congressional ethanol mandate be met? The Brattle Group. May 2010. Retrieved on Mady 26, 2011 from http://www.brattle.com/_documents/uploadlibrary/upload849.pdf.

17. Securities and Exchange Commission (2011) Myriant S-1 Page 58 http://www.sec.gov/Archives/edgar/data/1485026/000095012311054952/b86680sv1.htm.

18. A majority of this value is derived from specialty and fine chemicals, which have an especially large range of end products within the category. U.S. biobased products market potential and projections through 2025. (2008) Washington DC: U.S. Department of Agriculture, Office of the Chief Economist. OCE-2008-1. February 2008. Retrieved on March 12, 2011 from www.usda.gov/oce/reports/energy/biobasedreport2008.pdf.

19. U.S. biobased products market potential and projections through 2025 (2008). Washington DC: U.S. Department of Agriculture, Office of the Chief Economist. OCE-2008-1. February 2008. Retrieved on March 12, 2011 from www.usda.gov/oce/reports/energy/biobasedre-port2008.pdf.

20. It is important to note that the chemicals end markets are more fragmented, limiting the addressable marketplace for any particular product. This is why the fuels market remains a more valuable market at high volumes for many companies in this space.

21. Biobased chemicals and products: A new driver for green jobs (2011). Washington DC: Biotechnology Industry Organization. Retrieved on March 12, 2012 from http://www.bio.org/sites/default/files/20100310_biobased_chemicals.pdf.

22. Cox, M. E., & Ritzentahller, M. J. (2011). Industrial biotech monthly: Bio-based chemicals embark on ambitious ramp. Industry Note. Minneapolis, MN: Piper Jaffray & Co.

23. Battelle Technology Partnership Practice. (2010). Batelle/BIO state bioscience initiatives 2010. Washington, DC: Biotechnology Industry Organization. Pg. 49. Retrieved from http://www.areadevelopment.com/article_pdf/id45428_Battelle_Report_2010.pdf.

24. Pricewaterhouse Coopers/ National Venture Capital Association (2011). Total U.S. invest-ments by year Q1 1995- Q2 2011. Retrieved October 3, 2011, from http://www.nvca.org/in-dex.php?option=com_docman&task=doc_download&gid=773&Itemid=93.

25. IPO’s and IPO candidates includeCodexis, Amyris, Gevo, Solazyme, Kior, Myriant Corporation, Ceres, Petroalgae, Renewable Energy Group, Genomatica, Mascoma, Elevance, Fulcrum Biofuels

26. BBAM analysis.

27. Turning plants into products: Delivering on the promise of industrial biotechnology (2011). The Milken Institute. April 2011. Pg. 4-5. Retrieved from http://www.milkeninstitute.org/publications/publications.taf?function=detail&ID=38801269&cat=finlab.

28. Ibid.

29. Unpublished BBAM analysis.

30. Marshall, J. (2007) Biorefineries: Curing our addiction to oil. Retrieved on October 3, 2011 from http://www.newscientist.com/article/mg19526111.500-biorefineries-curing-our-addic-tion-to-oil.html.

31. For details, refer to the Section II: Downstream Market Development – Biobased Chemicals.

32. Shaffer, David (2011). Harvesting a New Kind of Fuel. Minneapolis, MN: Star Tribune. August 10, 2011. Retrieved on September 2, 2011 from http://www.startribune.com/busi-ness/126850538.html.

33. Ye, S. (2012). Minnesota’s agriculture profile. Retrieved February 27, 2012, 2012, from http://www.mda.state.mn.us/~/media/Files/agprofile.ashx.

34. Ye, S. (2011). Economic impact of Minnesota’s agricultural industry. Saint Paul, MN: Minnesota Department of Agriculture.

35. Renewable Fuels Association. (2011). Building bridges to a more sustainable future: 2011 ethanol industry outlook: Renewable Fuels Association. Pg. 2. Retrieved on November 30, 2011 from http://www.ethanolrfa.org/page/-/2011%20RFA%20Ethanol%20Industry%20Outlook.pdf?nocdn=1 pg 2.


36. Minnesota’s ethanol plants. (2011). St. Paul: Minnesota Department of Agriculture. Retrieved August 26, 2011, from http://www.mda.state.mn.us/ethanol/.

37. Email Communication with Dave Ladd. February 3, 2012.

38. Deckard, Don (2011) Minnesota’s Forest Products Industry at a Glance. Saint Paul, MN: Minnesota DNR, Division of Forestry.

39. Skurla, J.A. (2011) Northern MN Forestry Analysis. St. Paul: Minnesota Forest Resources Council. June 2011. Pg. 21. Retrieved on December 10, 2011 from http://www.frc.state.mn.us/documents/council/MFRC_Report_NMN_Econ_Skurla_2011.pdf.

40. Deckard, Don. (2011) Minnesota’s Forest Products Industry at a Glance. Saint Paul, MN: Minnesota DNR, Division of Forestry.

41. Calculated using a conversion factor of 2.25 Green Tons/ Cord of wood. Minnesota’s forest resources 2010. (2010) Saint Paul, MN: Minnesota Department of Natural Resources. Pg. 19. Retrieved on October 15, 2011 from http://files.dnr.state.mn.us/forestry/um/forestresources-report_10.pdf.

42. Minnesota’s forest resources 2010. (2010) Saint Paul, MN: Minnesota Department of Natural Resources. Pg. 19. Retrieved on October 15, 2011 from http://files.dnr.state.mn.us/forestry/um/forestresourcesreport_10.pdf.

43. Deckard, Don. (2010) Economic Opportunities for Minnesota’s Wood. Unpublished Document. May 2010.

44. Deckard, Don. (2010) Economic Opportunities for Minnesota’s Wood. Unpublished Document. May 2010.

45. Minnesota’s Forest Biomass Value Chain: A System Dynamics Analysis. (2010) Minneapolis, MN: The BioBusiness Alliance of Minnesota. November 2010. Retrieved on November 30, 2010 from http://www.biobusinessalliance.org/Northeast_Forest_Biomass.asp.

46. Battelle Technology Partnership Practice. (2010). Batelle/BIO state bioscience initiatives 2010. Washington, DC: Biotechnology Industry Organization. Pg. 49. Retrieved from http://www.areadevelopment.com/article_pdf/id45428_Battelle_Report_2010.pdf.

47. Russel, C., & Bucholz, D. (2011). Biobased products, Minnesota’s opportunity and challenge: A focus on BioPlastics. Crookston, MN: Agriculture Utilization Research Institute. Pg. 73-74. Retrieved on July 23, 2011 from http://www.auri.org/research/Biobased.Products.Report.pdf.

48. Policy Committee Meeting. December 14, 2011.

49. Dayton issues executive order to speed permitting process (2011). Retrieved December 15, 2011, from http://mn.gov/governor/newsroom/pressreleasedetail.jsp?id=9385.

50. Russel, C., & Bucholz, D. (2011). Biobased products, Minnesota’s opportunity and challenge: A focus on BioPlastics. Crookston, MN: Agriculture Utilization Research Institute. Pg. 73-74. Retrieved on July 23, 2011 from http://www.auri.org/research/Biobased.Products.Report.pdf.


II: Downstream Market Development – Biobased Chemicals

intRoductionPetroleum has been the basis for many of the products consumers use every day, though biobased materials are beginning to displace this dominance. Market forces are driving fundamental changes in the chemical industry, leading to increasing demand for biobased chemicals.

Global market drivers that are pushing the industry forward include:

• Demand for safer materials that are regulatory compliant, • Unfavorable petroleum price dynamics, • Materials shortages resulting from shifts in the chemical

manufacturing industry, and• Increasing consumer demand for green products.

The market pull created by these factors puts the renewable materials in-dustry in a strong position for growth. By 2025, the global market value is projected to reach $483 to $614 billion across a broad range of chemicals as detailed by the USDA.51 This represents more than a 20 percent market share of the global chemicals industry.52 The market value for biobased chemi-cals was estimated to be between $130 billion and $180 billion in 2010, and is projected to grow up to 9 percent annually.53 Employment in this sector across the United States totaled 5,700 in 2007.54

Biobased chemicals can be used in a wide array of products, ranging from cleaning products, adhesives, plastic products, and cosmetics. The supply chain is complex with many players involved in the conversion of chemicals to final products, making partnerships a critical factor for commercialization. An overview of the path from field to a product is detailed in Appendix A.

Minnesota communities that understand the factors leading to demand for renewable materials will be well-positioned to benefit from the development of the renewable materials industry.

INDuSTRY lEVEl TRENDS

Chemical regulatory regimes becoming more stringentThe chemical industry is increasingly under scrutiny from the public and governments due to concerns over possibility toxicity of chemicals. Multiple chemicals are being phased out across the globe as a result of increasingly stringent regulatory policies. In some cases, regulatory policies can ban or discourage the use of incumbent petroleum-based chemicals.


The U.S. chemical product law, the Toxic Substances Control Act (TSCA), is under pressure for reform. Proposed changes to the law would make chemi-cal manufacturers responsible for showing that their products, especially new chemicals, are safe. In addition, reforms would make it easier for the U.S. Environmental Protection Agency (EPA) to ban chemicals deemed dangerous to human health and the environment. Among states developing chemicals policy, California is leading the way in drafting regulations to demand safer alternatives for priority chemicals of concern.

Additionally, advocates for stronger regulation point to Europe’s chemical regulatory frameworks, known as REACH, as a model because of its extensive toxicity testing and life cycle exposure assessment requirements for all chemi-cals. However, even if U.S. policy does not model itself after the European regulations, they are already having an impact for U.S. companies due to the global nature of the industry.

In summary, regulation can provide final-product manufacturers an incentive to use alternative materials, significantly reducing barriers to entry for biobased chemicals that are competing with an alternative that is targeted in regulatory policies. Even in such cases, however, performance of emerging chemicals re-mains of prime importance, in addition to meeting increasingly stringent safety and toxicity standards and regulatory requirements.

Regardless of whether the biobased chemical is chemically identical to a petro-leum-based chemical or is a new chemical, the regulatory expectation is that

case study: Minnesota Companies Answer the Call for New ChemistryPhthalates are a class of chemicals commonly found in consumer products. These products are used as a plasticizer to make plastics flexible, with the most widely used plasticizer being diethylhexyl phthalate (DEHP). Studies have shown the chemical has impacts on cancer growth and reproductive health as an endocrine disrupter.2.1 A steady drumbeat to regulate the materials has followed, especially for toys and other products that come in contact with children. In 1999, the European Union placed a ban on using certain phthalates in toys made for children under the age of 3. In the United States, a phthalate ban in toys was imple-mented in California, setting the stage for the debate across the country and forcing companies to adjust. However, for bans of chemicals to reach successful outcomes, alternatives that perform well need to be on the market.Biobased alternatives are emerging for DEHP in consumer goods. A Minnesota-based company named Segetis is developing one of those alternatives with its Javelin technology. Their new-to-the-world molecule performs as well or better than the incumbent chemical in many applications, in addition to providing improved toxicity profiles over the petroleum-based plasticizers.2.2 Another company headquartered in Minnesota, BioAmber, is also replacing potentially harmful plasticizers by “developing biobased succinate esters to replace adipate esters and general-purpose phthalate esters.” BioAmber hopes to have a range of their new plasticizers for sale in 2012.2.3 A strategic partnership with Lanxess is expected to accelerate this development.2.1 Case study: Phthalates. Retrieved October 15, 2012, from http://www.chemicalbodyburden.org/cs_phthalate.htm.2.2 Segetis applications: Plasticizers. Retrieved September 15, 2011, from http://www.segetis.com/app1.html.2.3 BioAmber products: Plasticizers. Retrieved January 15, 2012, from http://www.bio-amber.com/bioamber/en/.

products/plasticizers


there must be sufficient toxicity data to prove the safety of the chemical and its impurities. Unfortunately, it can be difficult for start-up companies to meet regulators’ demands for data about emerging biobased chemicals.

The challenge for chemical regulators is to derive a balanced system that provides incentives or disincentives intended to mitigate negative health and safety impacts, while avoiding unintended consequences that hinder the abil-ity for industry to deliver safer chemicals.

Petroleum prices driving demand for alternative chemical feedstocksFossil fuels are the primary feedstock for production of chemicals, and price volatility for those fuels has made it difficult for the chemical industry to man-age production costs. Projections for raw material prices are critical compo-nents for long-term investments, and interest has developed to build alternative supply chains through biobased chemicals.

There is unlikely to be a reprieve from high oil prices in the foreseeable future, making this trend critical to consider. A number of factors are at work.

• The sources of oil today are in deeper water, trapped in shale, or are otherwise more difficult to extract than a decade ago. This leads to a higher baseline cost of petroleum production. Between 2000 and 2010, the average cost of bringing a new oil well to production doubled.55

• Supply disruptions of oil exports from politically unstable regions of the world periodically put upward pres-sure on prices.

• U.S. regulatory delays con-tinue on construction of the Keystone XL pipeline, which is intended to transport emerging oil supplies from the Canadian Oil Sands to Gulf Coast refineries.56

• Finally, the thirst for energy from emerging economies will continue to buoy de-mand, especially as the global economy recovers.

In addition to the overall upward movement in prices, a short history of crude oil prices demonstrates the trend toward rampant volatility. The price of oil rose from $60 per barrel in 2006 to $140 per barrel in 2008. The next cycle saw a return to $60 per barrel in 2010, only to reach another peak above $100 per barrel a year later.57

Figure 2.1 Composite of Petroleum Product Prices, Reference Case, High Oil Case, and Low Oil Price




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The prospect of customers lever-aging biobased chemicals as a hedge against the price volatility of petroleum-based products is often cited in Securities and Exchange Commission filings by initial public offering (IPO) candidates from bioindustrial processing companies.58 The “hedging” role of alternative feedstocks for chemi-cal production can ensure a level of interest in demand for biobased chemicals in the traditional chemi-cal industry, even when oil prices temporarily decrease.

Supply and demand pressure for key petrochemical platformsIn addition to petroleum price increases, recent developments in natural gas production have con-tributed to production shifts in the traditional chemical industry. The natural gas industry has taken ad-vantage of technological innovation to enable economically viable access to natural gas trapped in shale for-mations throughout the globe, even as petroleum becomes scarcer.59

These innovations helped boost nat-ural gas production 18 percent be-tween 2005 and 2011,60 and enabled the United States to overtake Russia as the world’s largest producer of natural gas in 2009.61 According to the U.S. Department of Energy’s Energy Information Administration, U.S. production from shale formations stands at 3.28 trillion cubic feet per year, and is set to increase to 12.25 trillion cubic feet per year by 2035.62 In this time frame, shale gas is projected to make up 47 percent of U.S. production from virtually no production at the beginning of the decade.63

The subsequent decline in natural gas prices has changed the relative prices of natural gas and petroleum. The relatively low prices of natural gas accelerated the shift in chemical industry feedstocks away from naphtha, a crude oil derivative, to-ward using natural gas liquids found in shale gas, which include ethanes, propanes, and butanes. The dominance of natural gas feedstocks has been especially appar-ent for the production of ethylene, the largest-volume global chemical commodity. See Appendix B for an overview of the petroleum based chemicals industry.

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Figure 2.2, U.S. Environmental Protection Agency- Energy Information Administration.

Source: Annual Energy Outlook 2011.

Figure 2.3 Calculated by dividing the spot price for West Texas Intermediate Crude Oil

by spot prices for Henry Hub Gulf Coast natural gas. Natural Gas Spot Prices. (2012) Retrieved on February 14, 2011 from

http://www.eia.gov/dnav/ng/ng_pri_fut_s1_m.htmhttp://www.eia.gov/dnav/pet/pet_pri_spt_s1_m.htm

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Ratio of Crude Oil toNatural Gas Prices


Additionally, this transition has made an impact on markets for chemicals with higher carbon content. By-products of naphtha cracking had provided sufficient supply of three-carbon and four-carbon molecule platform chemi-cals to satisfy demand (Examples include propylene and butylene).

However, since natural gas-based production of ethylene does not produce these by-products in large quantities, the supply for these platforms has been squeezed in the process. The relative pricing increases for higher carbon intermediate molecules has then allowed biobased drop-in alternatives to be cost competitive. Example markets of intermediate chemicals with biobased alternatives being commercialized include isobutanol, n-butanol, polyure-thanes, butanediols, and a range of organic acids. See Appendix C for more information on biobased chemicals being developed for particular markets.

Emerging bioplastics applications spur industry growth Bioplastics, which comprise a prevalent market segment within renewable materials, are a major driver for the growth of bioindustrial processing.

While bioplastics currently represent less than 1 percent of the overall plastics market, rapid growth is projected. A study by researchers at the University of Utrecht indicated that the market for bioplastics would quickly grow from 0.36 million metric tons in 2010 to 2.94 million metric tons in 2020.

To this point, bioplastics have most commonly been used in packaging and single-use disposable goods. However, the industry is in a transition toward production of higher value durable goods, such as electronic casings and building products. By 2011, up to 40 percent of bioplastics produced were expected to be used in downstream manufacturing of durable goods, which is an increase from 12 percent in 2010.64

While bioplastics represent just one category of products made from renew-able feedstocks, the transition toward more valuable durable goods is a sign of technological advances in the area of biobased chemicals and materials.65

Increasing consumer interest in renewable materials

Consumer perspectivesAt the end of the value chain, retail consumers are demanding products that utilize green chemistry principles, where these principals are intended to reduce

case study: XlTerra’s Technology for Durable BioplasticsXLTerra is developing a radically new bioplastic with exceptional properties that will allow for its entry to the markets of materials with durable applications. These properties include: high heat deflection, high tensile strength, ductility and optical clarity.XLTerra Technology. (2011) Reluceo. Retrieved on February 28, 2012 from http://www.reluceo.com/technology_xl-

terra.htm.


or eliminate the use or generation of hazardous chemicals.66 One of the practices that qualify a chemistry process as green is the use of biobased materials.67

Additionally, the market for green products is large. So-called LOHAS (lifestyle of health and safety) consumers are a subset of the marketplace that tends to favor products with green properties, including products based on green chem-istry, due to the perception that they are safer for both consumers and the envi-ronment.68 These consumers spend $300 million per year on green products.69

An indicator of the strength of this consumer subset is the growing number of “green” products being found on the market. A study by TerraChoice, a marketing consulting firm focused on green products standards, evaluated the “green” marketing claims of consumer products. The study found that be-tween 2009 and 2010, there was a 73 percent increase in the number of con-sumer products on the market that claimed green attributes on their labels.70

It is important to consider that only in the near term consumers may pre-fer biobased and green materials given equal properties and performance. However, a premium price or acceptance of compromised performance is unlikely to be sustained for green and biobased products.71

Certification regimes emergingMarketing of sustainable products is complicated by the fact that few prod-ucts satisfy all concerns that may allow a product to legitimately be consid-ered “green.” In response, a range of certification regimes has developed to distill manufacturers’ claims of green attributes. Certification labels are de-signed to provide objective confirmation of products deserving of any recog-nition for a “green” attribute. Examples of parameters for biobased products include: the proportion of the product made with biobased materials, com-postability for disposable products, and sustainable feedstock production.

By using certifications as a tool to counteract false and misleading green claims in the market, consumer confidence in the purchase of sustainable products can be improved. This can strengthen a competitive advantage for biobased products.72 As one example in the building products market, certification standards set forth by the U.S. Green Building Council through its Leadership in Energy Efficiency and Design (LEED) certification program can forge a clear path to the market for biobased products due to their renewability.

case study: Nalgene Bottles Removed due to Consumer PressureIn 2007, news of the dangers of Bisphenol A (BPA) exposure and the resulting consumer outcry led to Nalgene pulling their polycarbonate bottles from the market. The company did not wait for regula-tion or a definitive scientific study to make this move; in response to consumer demand, it voluntarily replaced the product with BPA-free plastic alternatives. Austin, Ian. (2008). Bottle Maker to Stop Using Plastic Linked to Health Concerns.

http://www.nytimes.com/2008/04/18/business/18plastic.html.


In addition, government programs have been developed to support growth in demand for biobased products. For example, beginning in 2002, the BioPreferred Program requires federal government agencies to purchase bio-based products rather than petroleum-based products when price and perfor-mance parameters are met. The program further expanded in 2010 to develop a label certifying biobased content. This provides an established market for manufacturers of final products using renewable chemicals to sell to, as well as establishing clear standards for biobased content across the industry.73

Maintaining and improving environmental impactThe environmental record of the renewable materials industry is not without public scrutiny, however. Subsets of consumers have concerns about feed-stock sources relying on genetically modified organisms (GMO), agricultural practices that impact water quality, and diversion of food and feed to indus-trial products. Companies have developed strategies to address the concerns, whether perceived or real, in recognition that doing so will be critical to their ability to access the green-consumer market.

As an example, investments have been made to develop sustainable and non-food biomass supply chains across bioindustrial companies to circumvent de-bates over food versus fuels, GMOs and indirect land use change (ILUC). For the industry to be economically viable, consumer education must be clearly delivered, and investments in response to consumers’ shifting environmental concerns must continue.

Market development driven by brand owner leadershipIn response to the growth of a “green” consumer base, large companies are beginning to lead initiatives that drive renewable products forward. Coca-Cola, PepsiCo, Nestle, Danone, Ford, Toyota, Mazda, Procter & Gamble, and AT&T all are using biobased materials in their product lines, with more companies expect-ed to follow suit.74 Walmart and other retailers are helping to drive this trend as well, putting healthy pressure on their suppliers to manufacture green products.75

Adoption and marketing of biobased materials by these large companies has a ripple effect across the industry. Brand owners who bring a renewable materi-al to the market are likely to have high standards of quality and performance, upping the ante for performance of biobased materials. The benefits of brand ownership of biobased products include:

• Increasing consumers’ comfort with new materials by using them in products associated with a trusted brand.76

• Spurring innovation to develop new products and creating incentives for the biobased chemicals industry to increase scale and drive down costs.77

• Driving supply chain development through large companies’ recogni-tion of the need to pay a premium for a short period of time to bring new supply chains to full-scale production.78


In an example of this trend taking hold, Coca-Cola and PepsiCo are compet-ing to be the first to sell soda in bottles made from 100 percent biobased PET (polyethylene terephthalate), which is the plastic used throughout the indus-try to bottle carbonated soft drinks. The companies’ collective decision cre-ates opportunities to spur significant research and development spending by supply-chain partners that are eager to participate in this new value stream.


leverage downstream industries Minnesota has an opportunity to leverage private-sector and academic assets to become a leader in the design and engineering of materials from biobased ma-terials. The state is home to numerous large companies that could be significant drivers in the value chain for renewable materials, including Cargill, CHS, 3M, Ecolab, Target, H.B. Fuller, and Valspar. Additionally, there are currently 20 Fortune 500 companies headquartered in Minnesota,79 and there are 300 plastics manufacturers located across the state who employ upwards of 15,000 people.80

Within these companies exists established capabilities that could be lever-aged to provide logistics systems for commodity supply chains, formula-tion and manufacturing capabilities, and distribution of goods to end users. Furthermore, many Minnesota companies have already participated in initia-tives to drive toward sustainability and “green chemistry.”

The region’s academic institutions have shown leadership in supporting de-velopment of final products.

For instance, the University of Minnesota has established the Center for Sustainable Polymers to conduct basic research in conjunction with industry to make biobased plastics that perform. Additionally, the Bioproducts and Biosystems Engineering Department has a strong history of research and graduation of skilled students in the science of conversion of biobased re-sources into valuable products.

Finally, the capability of the Minnesota State Colleges and University system to provide services that accelerate commercial opportunities is well established. One example that is of particular relevance to the renewable materials industry is the Composite Materials Technology Center (COMTEC) at Winona State University, which provides testing and product development services to industry.

Traditional chemical manufacturing outside of MinnesotaWhile Minnesota is home to many companies that are large consumers of chemicals, the industry’s growth in Minnesota is challenged in another way because the chemical manufacturing industry is largely centered outside of the state. Chemicals manufacturers continue to maintain positions close to their feedstocks, and this continues to be dominated by petroleum and natural gas supply centers. As shown in Figure 2.4, most of the petrochemi-cal manufacturing industry resides outside of the Midwest, and is especially


concentrated on the Gulf Coast. Texas alone accounts for 71 percent of U.S. employment in petrochemical manufacturing.81 However, these formula-tors and refiners are key pieces of the downstream value chain for renewable chemical production.

Thus, access to the downstream market is a critical issue for bio-based chemicals manufacturing in Minnesota, strong transportation infrastructure is required for bio-refineries to reach chemical manu-facturing and formulation facilities across the industrial Midwest and the Gulf Coast. In some cases, exist-ing oil refineries within the upper Midwest could be well positioned to differentiate themselves through cost-effective access to locally pro-duced biobased chemicals.

End-of-life issues slowing market growth for bioplasticsMarket growth for bioplastics is a critical component for the development of bioindustrial processing. An emerging issue is that a recycling infrastructure for these materials has yet to be built, and this could slow growth in demand. Barriers have been demonstrated during the adoption of PLA, the world’s most ubiquitous biobased plastic. Similar issues will need to be confronted as other biobased polymers enter the market.

Since there is a lack of separation capability for emerging biobased polymers, the recycling stream for petroleum-based plastics can then be contaminated, mak-ing the existing recycled plastic supply chains less valuable.82 Studies are under way to develop separation technology, but some environmentally conscious consumers and businesses pause at the purchase of PLA because of this issue.

An array of businesses would need to collaborate to build a recycled biopoly-mer supply chain, including the manufacturers of the biopolymer, down-stream molders of plastic products, waste management companies, product designers, and the manufacturers who use the biopolymer for end products. If successful, the development of capacity to separate and recycle PLA could help a region differentiate itself as a place for biobased materials innovations.

Solutions could be on the horizon. First, independent companies are in-creasingly interested in developing PLA recycling capability as the bioplastic becomes more ubiquitous. Secondly, PLA has some advantages in recyclabil-ity over traditional polymers. The product can be hydrolyzed back to its base components, building a virgin polymer from the recycled materials, preserv-ing the original material’s quality.

Biodegradation is another option for disposal. However, this also relies on the build-out of infrastructure, as it requires high-heat composting for the product

Figure 2.4, Map of Oil Refineries http://www.energysupplylogistics.com/map/


to biodegrade. Only 113 industrial composting facilities exist across the country, and the average consumer of PLA may not have access to these facilities.83


leverage regional industry to access marketsFor bioindustrial companies to grow, whether in the fuels or chemicals indus-try, existing petroleum companies and large chemical companies are needed to validate and use the products.

Development of the bioindustrial processing industry can be accelerated by building a community of players and potential partners that occupy space throughout the value stream. Minnesota already has strengths across many parts of the value stream, including the availability of feedstock and technology devel-opers. The state is home to many large downstream companies that could extend Minnesota’s position as a leader in the expansion of bioindustrial opportunities.

In addition, since bioindustrial processing is working in the context of a global in-dustry, partnerships cannot stop at the Minnesota border. Creating a supportive environment for developing partnerships with companies across the globe would certainly accelerate the industry’s growth in the state.

Develop support capability for testing and product development The initial investment required for businesses to replace petroleum-based products with biobased materials is a significant barrier in the development of products that use renewable materials. Depending on whether the material being used is a drop-in product or new chemical, manufacturing processes need to be refined, and in some cases, new molds and chemical formulations need to be designed. These switching costs can be prohibitive for small manufacturers.

To support the development of a market, and the capability to use biobased materials in an assortment of applications, identifying and organizing the re-sources available to assist in this transition could help move companies along the product development chain. In addition, the state may need to consider providing resources to companies interested in using biobased and green materials. Continued growth of technical assistance is recommended, such as the services provided by the Agriculture Utilization Research Institute (AURI) and university partners.

Provide information to businesses on consumer perspectives about biobased materialsMarket development efforts for biobased materials start with an understand-ing of the industry and the value proposition for biobased materials. The fac-tors that lead to market success for a green product, and consumers’ concern for the environment, are very complex. In the past decade, such information was not something the average manufacturer needed to know. Thus, it will be critical to provide businesses with information on this market to ensure wise investment decisions are made.


There is a wide array of organizations that already understand the need to bring information forward on the marketing of renewable products, and they have begun to hold forums and events on the topic. Collaboration across industry, academia, and government on clarification of this value proposition for con-sumers must continue. Private-sector leadership must prevail, and information provided to entities along the value chain must be relevant to be effective.

endnotes51. A majority of this value is derived from specialty and fine chemicals, which have an especially

large range of end products within the category. U.S. biobased products market potential and projections through 2025. (2008) Washington DC: U.S. Department of Agriculture, Office of the Chief Economist. OCE-2008-1. February 2008. Retrieved on March 12, 2011 from www.usda.gov/oce/reports/energy/biobasedreport2008.pdf.

52. U.S. biobased products market potential and projections through 2025. (2008) Washington DC: U.S. Department of Agriculture, Office of the Chief Economist. OCE-2008-1. February 2008. Retrieved on March 12, 2011 from www.usda.gov/oce/reports/energy/biobasedreport2008.pdf.

53. Securities and Exchange Commission (2011) Myriant S- Registration.1 Page 58 http://www.sec.gov/Archives/edgar/data/1485026/000095012311054952/b86680sv1.htm.

54. Biobased chemicals and products: A new driver for green jobs. (2011) Washington DC: Biotechnology Industry Organization. Retrieved on March 12, 2012 from http://www.bio.org/sites/default/files/20100310_biobased_chemicals.pdf.


56. Solomon, D., & Meckler, L. (2011). Obama says no, for now, to Canada pipeline. New York, NY: Wall Street Journal, Retrieved on January 30, 2011 from http://online.wsj.com/article/SB10001424052970204468004577168892140746430.html.

57. Spot prices from crude oil and petroleum products (2012). Retrieved February 14, 2012, available from: http://www.eia.gov/dnav/pet/pet_pri_spt_s1_a.htm.

58. BBAM analysis.

59. Shale formations described as geologic structures deep under the earth’s surface with low permeability, where hydraulic fracturing below the surface is required to extract oil and gas. Shale gas: An unconventional resource. Unconventional challenges (2008). Halliburton. Retrieved on March 2, 2011 http://www.halliburton.com/public/solutions/contents/shale/related_docs/H063771.pdf.

60. Tracy, T. (2011) Companies seek to export U.S. gas in wake of production boom. New York, NY: The Wall Street Journal. August 12, 2011. Retrieved November 1, 2011 from http://online.wsj.com/article/SB10001424053111903918104576502554089821220.html.

61. Alesci, C. and Ken Wells. (2011) The Underground Solution. New York, NY: Bloomberg Business Week. November 7-13. Pg. 66-72.

62. Annual energy outlook 2011, with projections to 2030 (2011). Washington, DC: US Department of Energy: Energy Information Administration. No. DOE/EIA-0383(2011)). Pg. 143. Retrieved on November 1, 2011 from www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf.

63. Annual energy outlook 2011, with projections to 2030 (2011). Washington, DC: US Department of Energy: Energy Information Administration. No. DOE/EIA-0383(2011)). Pg. 79. Retrieved on November 1, 2011 from www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf.

64. Li, Shen, Haufe, Juliane, and Patel, Martin K. (2009) Product overview and market pro-jection of emerging bio-based plastics. Utrecht, The Netherlands: Copernicus Institute for Sustainable Development. Utrecht University. June 2009. Pg. iii.

65. Lunt, Jim. (2011) The Future of Bioplastics. Presented April 27, 2011 in Moorhead, MN.


66. Green Chemistry (2011) U.S, Environmental Protection Agency. Retrieved December 4, 2011 from http://www.epa.gov/greenchemistry/.

67. Introduction to the Concept of Green Chemistry (2012). U.S. Environmental Protection Agency. Retrieved on March 12, 2012 from http://www.epa.gov/greenchemistry/pubs/about_gc.html.

68. LOHAS: What is it? (2011) LOHAS. Retrieved on December 7 from http://www.lohas.com/.

69. Ning, T. (2011) Presentation given June 22, 2011 at LOHAS 2011, Boulder CO.

70. The Sins of Green Washing, Home and Family Edition 2010 (2010). TerraChoice. Pg. 11. Retrieved on September 1, 2011 at http://sinsofgreenwashing.org/.

71. Russel, C., & Bucholz, D. (2011). Biobased products, Minnesota’s opportunity and challenge: A focus on BioPlastics. Crookston, MN: Agriculture Utilization Research Institute. Pg.16. Retrieved on July 23, 2011 from http://www.auri.org/research/Biobased.Products.Report.pdf.

72. “Greenwashing” is defined as making false and misleading green claims, and is present in some degree in up to 95 percent of consumer products marketed as green. The Sins of Green Washing, Home and Family Edition 2010 (2010). TerraChoice. Pg. 16. Retrieved on September 1, 2011 at http://sinsofgreenwashing.org/.

73. Procurement (2011) Biopreferred Program. Retrieved on September 1, 2011 at http://www.biopreferred.gov/FederalProcurementPreference.aspx.

74. Guzman, Doris (2011) Brand owners rally on bioplastic use. ICIS Chemicals. November 18, 2011. Retrieved on September 15, 2011 from http://www.icis.com/Articles/2011/11/21/9509806/brand-owners-rally-on-bioplastic-use.html.

75. Walmart is formalizing their expectations in the development of a Sustainability Index for their products, immediately driving their 60,000 suppliers to evaluate the sustainability of their products. Sustainability Index (2011) Walmart. Retrieved September 15 from http://walmartstores.com/Sustainability/9292.aspx.

76. Davies, Steve (2011) Presented April 27, 2011, Moorhead, MN.

77. Davies, Steve (2011) Presented April 27, 2011, Moorhead, MN.

78. Guzman, Doris (2011) Brand owners rally on bioplastic use. ICIS Chemicals. November 18, 2011. Retrieved on September 15, 2011 from http://www.icis.com/Articles/2011/11/21/9509806/brand-owners-rally-on-bioplastic-use.html.

79. Fortune 500 Ranking of America’s Largest Corporations (2011). CNN. Retrieved on October 1, 2011 from http://money.cnn.com/magazines/fortune/fortune500/2011/states/MN.html.

80. 2007 Economic Census Data-Minnesota. Plastics Manufacturing: NAICS 3261. (2009) Retrieved on March 5, 2011 at www.census.gov.

81. 2007 US Economic Census Data. NAICS 22511: Petrochemical Manufacturing. Retrieved on September 1, 2011 from www.census.gov.

82. Royte, E. (2006). Corn Plastic to the Rescue. http://www.smithsonianmag.com/science-nature/plastic.html?c=y&page=2.

83. Royte, E. (2006). Corn Plastic to the Rescue. http://www.smithsonianmag.com/science-nature/plastic.html?c=y&page=2.


III: Downstream Market Development – Biofuels

intRoductionConventional biofuels boomed in the last decade, driven by long-term market trends and policy support. In the next decade, a similar boom in production and demand for advanced biofuels will be required to satisfy existing na-tional mandates for consumption of advanced biofuels set forth in the federal Renewable Fuels Standard 2 (RFS2).84

Consumers and policymakers remain interested in alternatives to petroleum that ensure energy independence, maximize local wealth creation, and reduce greenhouse gas (GHG) emissions. As a result, the global market for biofuels is projected to increase from $82.7 billion in 2011 to $185.3 billion by 2021.85

Minnesota is in an advantageous position to benefit from market develop-ment in the fuels sector due to an abundance and variety of biomass feed-stocks that are currently underuti-lized. For example, woody biomass and crop residues are two natural resources that will be used to replace petroleum-based fuels and chemicals in next-generation biorefineries.

Moreover, the biodiesel and etha-nol infrastructure built in the past decade provides a strong base to build upon for bioindustrial process-ing capacity. Given the high levels of U.S. fuel consumption, the market will likely support production of both the emerging biobased indus-try as well as conventional biofuels for years to come, and Minnesota is positioned to be a leader in both market segments.

industRy tRends

Support for biofuels maintained, though challenged

Energy IndependenceAfter decades of rising dependence on foreign oil, the portion of overall U.S. oil consumption derived from oil imports decreased from 60 percent in 2005 to

Figure 3.1 Net Import Share of Product Supplied. (2011) US Department of Energy: Energy

Information Administration. Annual Energy Outlook. Retrieved February 10, 2012 from http://www.eia.gov/oiaf/aeo/tablebrowser/

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Figure 3.3 Annual energy outlook 2011, with projections to 2030 (2011). No. DOE/EIA-0383(2011).

Washington, DC: US Department of Energy: Energy Information Administration. Table A14. Pg. 143. Retrieved on November 1, 2011 from www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf

47 percent in 2010.86 Factors driving this shift include a drop in demand as a result of the economic downturn along with increasing production of biofuels and fossil fuels. To continue progress in displacing demand for petroleum, the transportation sector will play a major role, since over 60 percent of global petroleum produc-tion is used for vehicle fuel.87

Biofuels hold great promise for reducing U.S. reliance on imports of fossil-based resources for transpor-tation fuels. The biofuels consump-tion mandated in the RFS2 is expect-ed to displace 13.6 billion gallons of gasoline and diesel and decrease oil imports by $41.5 billion. The U.S. Department of Energy projects this shift away from reliance on foreign oil will result in up to $2.6 billion in savings on defense spending.88

Also contributing to declining imports was a 10 percent increase in production of oil from domestic wells between 2008 and 2010.89 The increased domestic production of fossil fuels has been driven by higher prices, new extraction technologies, and new discoveries of oil and gas. Leading the growth is the Bakken oil field in North Dakota, where pro-duction has grown from 100,000 to 400,000 barrels of oil per day.90

Meanwhile, natural gas production is on the rise, increasing 18 percent be-tween 2005 and 2011.91 Scientific breakthroughs in the early 2000s enabled economic extraction of natural gas from shale rock over the last decade.92 Production from shale gas formations is projected to increase from 2.23 tril-lion cubic feet per year in 2009, to 12.25 trillion cubic feet per year by 2035, as seen in Figure 3.3.93 Overall, natural gas production is set to increase from 20.29 to 26.32 trillion cubic feet per day over the same time period.94

For the natural gas industry, the glut of supply that continues to grow com-bined with a mild 2011/2012 winter to cause natural gas prices to reach low prices of $3/ MMBTU, down from a high of $13/MMBTU in 2008.95 As a result of the trend toward lower prices, the use of natural gas for heat and power increased 18.7 percent between 2006 and 2010.96 However, the impact on the transportation fuels market has been less significant,97 largely due to

Figure 3.2U.S. Field Production of Crude Oil (Thousand Barrels) (2011) US Department of Energy:

Energy Information Administration.. Annual Energy Outlook. Imported Low Sulfur Light-Crude Oil. Retrieved February 10, 2012 from http://www.eia.gov/oiaf/aeo/tablebrowser/

1,600,000

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the pervasiveness of petroleum-based fuels. For natural gas or non-liquid bio-fuels, such as hydrogen, to reach critical mass, a turnover in the vehicle fleet and significant investment in distribution infrastructure would be required.

economicIn the last decade, growth in the biofuels industry played a role in the 70 percent increase in U.S. farm incomes between 2001 and 2011, providing a lift to rural communities across the country.98 Overall, annual farm incomes are projected to increase $13 billion due to the production of biofuels required under the RFS2.99 The impact on rural jobs has already been significant as well. For example, 8,600 people were employed in the U.S. corn ethanol industry in 2010.100 The resulting economic activity supported an additional 70,000 indirect and induced jobs.101 Indirect jobs include business activity to supply the plant, while induced jobs refer to jobs in the community supported by increased spending by employees and the business.102

Most importantly, because jobs that rely on U.S. agriculture and forestry materials are not likely to be outsourced to other countries, the employment created by this industry is more likely to be stable over time. This contributes to sustained strength in the U.S. manufacturing sector. These factors together help generate both political backing and market demand for biofuels.

EnvironmentalThe positive environmental impact of biofuels production continues to be a major driver of maintained interest in alternative fuels. Despite perceptions to the contrary, life cycle assessments for biofuels continue to show positive re-turns on energy balance and greenhouse gas emissions (GHG).103, 104 However, the magnitude of GHG reduction depends on feedstock source and processing methods.105 In the U.S., displacement of petroleum fuels with biofuels, under the assumptions defined by the RFS2, is projected to reduce greenhouse gases by 138 million metric tons by 2022.106

Ethanol demonstrates another example of positive environmental impact through reduction of certain pollutants, including nitrous oxides (NOx), vola-tile organic compounds (VOC), and carbon monoxide.107 For example, a 10 percent blend of ethanol in gasoline reduces carbon monoxide (CO) emissions by 25 percent.108 In Minnesota, an ethanol blending mandate played a signifi-cant role in the Minneapolis and St. Paul region’s success in complying with all CO regulations in the winter of 1992-1993, the first time it had done so since 1975.109 The reduced emissions, which are the result of biofuels’ combustion temperatures being lower than gasoline’s, serve to improve air quality.110

However, education of the public on the benefits of biofuels continues to be critical. Uncertainty about factors influencing the greenhouse gas impact of biofuels has plagued the industry, contributing to declining political sup-port for biofuels. Additionally, the environmental record will be improved as biofuel production efficiency increases and cellulosic biomass is leveraged to produce advanced biofuels. These developments can ensure the environmen-tal impact of biofuels remains a positive driver for market growth.


Policy development helps drive demand

HistoryMinnesotans used innovative policies and cooperative business models in the 1980s and 1990s to build the foundation of the conventional biofuels indus-try. The “Minnesota Model” is a case study in successful industry develop-ment. A number of factors contributed to this perfect storm.

• The agricultural commodities were readily available.

• Consumption mandates were put in place to create downstream markets.

• Private sector capital was leveraged through farmer-owned cooperatives.

• Technological innovation increased the efficiency of production.

• Financial incentives were available in the form of low-interest loans and a production subsidy.

Roots of the Minnesota industry Mandated ethanol consumption has been a reality in Minnesota for nearly two decades. In 1991, the Twin Cities was designated a federal non-attain-ment area for carbon monoxide (CO) emissions under the Clean Air Act of 1990. One of the mitigation requirements was to mandate a gasoline oxygen content of 2.7 percent to be used over the winter months, as carbon monoxide emissions tend to increase with cold weather.111

To comply with the law, Minnesota had to include an additive in gasoline that would increase its oxygen content, known as oxygenates. In Minnesota, ethanol was chosen over the fuel additive being used in many other parts of the country, called methyl tertiary butyl ether (MTBE).

The fact that this initial mandate was implemented without much pain or con-troversy reduced the opposition to statewide mandates for ethanol blending. In 1991, the Minnesota legislature passed a law expanding ethanol mandates to require a 10 percent blend across the entire state.112 The mandate was implement-ed starting in 1997.113 The biodiesel mandate passed the MN legislature in 2002, requiring that all diesel fuel sold in the state include a blend of 2 percent biodiesel by volume.114 These mandates created certainty to Minnesota biofuels producers.

The spread of biofuels to the nation Supportive policies at the national level followed suit, as The Energy Policy Act of 2005 first set a national blending goal of 7.5 billion gallons of ethanol with gaso-line by 2012, which represented 2.78 percent of 2006 gasoline consumption.115

Meanwhile, MTBE had been found to contaminate California groundwater in the 1990s, eventually leading to the product being phased out across the country. State-level bans began in 1999, and the EPA officially recommended use of MTBE be phased out completely by 2000.116


Ethanol provided an attractive alternative to MTBE since it has high oxygen content and is non-toxic. As a result, national demand quickly grew,117 and production of corn ethanol easily exceeded the 2012 mandates of 7.5 billion gallons by 2007. It is important to note that functional requirements played a major role in the market’s growth. The swift satisfaction of the initial man-date then spawned further policy development to speed growth and support next-generation technologies.118

Renewable Fuels Standard 2In 2007, the original Renewable Fuels Standard was updated and aggres-sively expanded in the Energy Independence and Security Act. The RFS2 set forth specific goals for the consumption of fuels in the United States, with a par-ticular focus on supporting markets for cellulosic ethanol and other advanced biofuels. The law requires producers and importers of gasoline and diesel fuels to purchase 36 billion gallons of renew-able liquid biofuels by 2022. Additionally, greenhouse gas targets were included to ensure positive environmental impact, as detailed in Figure 3.5.

A portion of the mandate also required the use of non-food feedstocks.119

Biofuels that qualify for the cellulosic biofuel mandate must use qualified biomass feedstocks. The EPA requires identification and certification of the biomass source to qualify, and can include agriculture residues, municipal solid wastes, and forest biomass. 120 The policy is generally less restrictive for agricultural residues than for forest biomass.

Provisions of the final rule designed to protect native forests limit qualified sources of woody biomass to: wood from trees planted on land that was cleared prior to December 2007, pre-commercial thinning, and logging slash from tra-ditional logging operations.121 EPA clarification is needed regarding the eligibil-ity of naturally regenerated aspen forests and northern hardwood forests that dominate Minnesota’s forest resource. It is important that future changes to the RFS2 should take this sustainably managed resource into account.

The policy’s implementation has also been hampered by a lack of advanced biofuels production capacity. In the past two years, the EPA drastically reduced the mandate for cellulosic biofuel because of a lack of cellulosic ethanol produc-tion capacity. In 2011, the RFS2 statute mandated that fuel distributors pur-chase 250 million gallons of cellulosic ethanol, though the EPA has enforced a

Figure 3.4 Renewable Fuels Standard. (2010) Pew Research: Center on Global Climate Change. Retrieved on September 1, 2011 from http://www.pewclimate.org/federal/executive/renewable-fuel-standard.

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mandate of only 2 percent of this, or 6.6 million gallons.122 Shifting the mandate in this manner has served to undermine its original purpose, which was to pro-vide assurance of a certain level of demand for advanced biofuels.123

Since the building of production capacity is a limiting factor for enforcement of the mandates, it appears that government programs to support technology development and capital investment will continue to be required. Programs have been implemented at the federal level, and it will be critical for these programs to be available and improved going forward.124

overall policy outlookHowever, in an era of increasing austerity, biofuels policy will be under scru-tiny. Dollars flowing to biofuels will be more difficult to secure in Congress, as demonstrated by a July 2011 vote in the U.S. Senate to eliminate the federal subsidy for corn ethanol, known as the Volumetric Ethanol Excise Tax Credit (VEETC).125 Although the program was not immediately killed in July 2011, the VEETC was allowed to expire at the end of 2011.126

Industry groups had already supported the phase-out of the VEETC in favor of market expansion programs, such as blender pump investments. However, the sudden move to end the credit was symbolically important. The policy had been considered untouchable by U.S. senators and congressmen from the Corn Belt. Furthermore, the Senate vote demonstrated the risk of relying on policy, rather than market forces, to support successful bioindustrial develop-ment over the long term.

Figure 3.5, Renewable Fuels Standard 2 Chart Renewable Fuels Standard (2010) Pew Research: Center on Global Climate Change.

http://www.pewclimate.org/federal/executive/renewable-fuel-standard.

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Renewable fuel 20% Fuel produced from renewable biomass and that is used to replace or reduce the quantity of fossil fuel present in a transportation fuel.

Advanced biofuel 50% Renewable fuel other than ethanol derived from corn starch.

Biomass-based diesel 50%

Includes both biodiesel (mono-alkyl esters) and non-ester renewable diesel (including cellulosic diesel). It includes any diesel fuel made from biomass feedstocks. However, EISA included three restrictions. EISA requires that such fuel be made from renewable biomass. The statutory definition of “biomass-based diesel” excludes renewable fuel derived from co-processing biomass with a petroleum feedstock.

Cellulosic biofuel 60% Renewable fuel derived from any cellulose, hemicelluloses, or lignin each of which must originate from renewable biomass.


Environmental issues create pressure for technological advancesWhile prospects for additional supportive policies may be grim, adjust-ments to policies are likely to include metrics of environmental performance. Policies are being developed with three major issues related to environmental impacts of biofuels production:

• life cycle greenhouse gas (GHG) emission,

• the food versus fuels debate, and

• indirect land use changes (ILUC).

life cycle greenhouse gas emissionsThe RFS2 signaled a shift to provide incentives for biofuels’ environmental performance by installing thresholds for GHG reductions from the use of bio-fuels. California took this one step further with the adoption of a Low Carbon Fuels Standard, measuring alternative fuels by their CO2 intensity, with the overall mandate being a 10 percent reduction in carbon intensity of transpor-tation fuels sold in California. California designed credits into the system for GHG reductions, the value of which is based on the degree to which an alter-native fuel’s carbon intensity improves upon that of petroleum-based fuels.127

The drive to satisfy mandates and increase the value of biofuels through reduc-ing carbon intensity is designed to impact investments made into the industry. For example, these policy mandates provide incentives for the existing biofuels industry to make investments in process efficiencies, alternative energy to power production facilities, and alternative co-products. However, alternative feed-stocks hold the most promise for significantly reducing life cycle GHG emissions.

Food versus fuelsThe debate over utilization of food crops to produce biofuels has posed a chal-lenge for the conventional biofuels industry, heightened by the fact that the industry’s most rapid growth coincided with a period of increasing prices for agricultural commodities. A major event that drove this debate was a spike in food prices in 2008. However, multiple studies have shown that biofuels production has had only a minimal effect on food prices.128

Research suggests that other factors played a greater role in the sharp increase in food prices than did biofuels. One such factor was financial speculation. Around this time period, significant “new” money entered the physical com-modities markets, which inflated prices for agricultural products, energy, and metals.129 This is demonstrated by the financial sector holdings of commodities in index fund investments increasing five-fold between 2007 and 2008.130

A second factor was fossil-fuel prices. Increases in fossil fuel prices are tied to increasing input costs across the agricultural value chain, including fertilizers and fuels for producing and transporting grains.131 The reliance on petroleum across the agriculture supply chain has increased the correlation between prices


for fuel- and food-based commodities, making this factor increasingly critical to consider.132 While biofuels likely solidified this relationship in the near term, the fossil fuel inputs of production are a critical reason for the correlation.

Finally, ethanol production preserves 30 percent of the corn mass enter-ing the plant as dried distillers grains (DDGs), a high-protein animal feed.133 Thus, a significant portion of the feed value is preserved. Since livestock feed consumed nearly 42 percent of 2011 U.S. corn production, the preservation of protein feed value mitigates the impact of first-generation biofuels production on overall food prices.134

As next-generation biorefineries develop, multiple food, feed, and fiber products can come out of the same facility, and many of these will leverage biomass feedstocks that do not intersect with the food value chain. These developments will further mitigate the impact biofuels have on other markets, while extracting maximum value from biomass resources.

Indirect land use change (IluC)Deriving momentum from the food-versus-fuels debate, ILUC impacts are becoming critical factors for biofuels policy.

In recognition that increased demand for corn and soybeans for biofuels displaces supply for export markets, ILUC assumes that an increase in agri-culture production is required somewhere else in the world to satisfy growing demand for food and feed. Thus, any GHG emissions from induced changes in agriculture production, such as the clearing of forest land to expand agri-cultural land, are modeled and included in domestic biofuel life cycle analy-ses.135 However, the complexity of societal impacts on food choices, energy costs, values for feed by-products, and global agricultural productivity issues make the quantification of ILUC an inexact science.

Petroleum prices driving demand for alternative fuelsThere is unlikely to be reprieve from high oil prices in the foreseeable future, making this trend critical to consider. A number of factors are at work.

• The sources of oil today are in deeper water, trapped in shale, or are otherwise more difficult to extract than a decade ago. This leads to a higher baseline cost of petroleum production. Between 2000 and 2010, the average cost of bringing a new oil well to production doubled.136

• Supply disruptions of oil exports from politically unstable regions of the world periodically put upward pressure on prices.

• U.S. regulatory delays continue on construction of the Keystone XL pipeline, which is intended to transport emerging crude oil supplies from the Canadian Oil Sands to Gulf Coast refineries.137

• Finally, the thirst for energy from emerging economies will continue to buoy demand, especially as the global economy recovers.


Volatility has proven to be rampant. The price of crude oil rose from $60 per barrel in 2006 to $140 per barrel in 2008. The next cycle saw a return to $60 per barrel in 2010, only to reach another peak above $100 per barrel in 2011.138

Concerns over crude oil price trends demonstrate the need to continue fos-tering private-sector investments and developing government policies that can support the growth of biofuel pro-duction. Furthermore, these factors combine to make biofuels increasingly cost competitive with the petroleum incumbents, and providing opportu-nities for a return on investment.

Technology development increasingly focused on drop-in fuelsAn increasing number of companies are developing technologies that focus on bringing fuels to the market that are chemically identical to existing petroleum-based fuels. By using these so-called “drop-in” biofuels, downstream capital expenditures can be minimized through leveraging existing petroleum refin-ing and transportation infrastructure. As an example, the interest in biobased isobutanol is partially driven by the option to process the molecule into high-performance fuels that are chemically identical to petroleum-based resources.

Aviation fuels provide another example of this trend taking hold. In addition to military activity (detailed below), large private-sector consumers of jet fuel are demonstrating keen interest in exploring these developments.139 By 2050, biofuels are expected to contribute 30 percent of the global market for avia-tion fuels. While performance specifications are more stringent, logistical barriers for aviation fuels are generally lower than automotive fuels because there are fewer vessels and refueling stations in the aviation market.140

The shift to develop technologies for production of drop-in fuels is enabled by the innovation and efficiencies developed in the mature biofuels industry. As such, the emerging biobased industry will seek partnerships with the conven-tional biobased industry to build capacity.

Military driving demand for high-performance fuelsThe U.S. military has provided a significant boost to the drop-in biofuels in-dustry. This has been driven by cost increases due to a reliance on petroleum, as well as a recognition that externalities associated with securing foreign supplies of oil makes the true cost of petroleum-based fuels significantly higher than the market value.141

For the biofuels industry, partnerships with the military are a significant catalyst for growth and innovation. The military’s consumption of biofuels provides an

Figure 3.6 Composite of Petroleum Product Prices, Reference Case, High Oil Case, and Low Oil Price




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end market to achieve economies of scale, in addition to credible testing and certification capability of a fuel’s performance. This interest is set to ex-tend into direct investments in strate-gic companies for national security.142

Several military branches have set goals for the use of alternative fuels, providing the end-use market com-panies desperately need to secure investments. The Air Force intends to use alternative fuels for half of its domestic aviation needs by 2016. The U.S. Marine Corps and the Navy’s Great Green Fleet plan to use alternative energy sources to meet 50 percent of their operational energy requirements by 2020. Finally, the Army is plan-ning to increase the use of non-petroleum fuels by 10 percent annually in non-tactical vehicles.143 This provides a very large market as the DoD used more than 375,000 barrels of oil per day in 2009. This level of fuel consumption is higher than all but 35 countries.144

To accomplish these aggressive goals, there has already been significant test-ing and certification of military vehicles using biofuels. For example, the Air Force was the first to fly a plane with a 50/50 blend of hydro-treated renew-able jet fuel, made from camelina. Today, 99 percent of the Air Force fleet is certified to fly on biofuel blends.145 Military consumers have among the highest standards in the world for drop-in fuels, as the supply needs to be consistent across global operating parameters, and malfunctions can result in the loss of life in the field. Thus, passing certification from the military virtually assures commercial viability from a technical perspective.

Finally, direct investment into the industry is being realized. In August 2011, President Obama announced that the Navy, Department of Energy, and the USDA would invest up to $510 million in alternative sources of energy. This set of strategic investment will co-finance the development of plants and refin-eries capable of producing large amounts of biofuels in the next three years.146 Thus, the military is taking a holistic approach: It is ensuring that the market has the capability to provide it with stable sources of fuels while also providing those same markets with a stable source of demand.


Market access issues are preventing further growth in demandEthanol from any feedstock will have a market barrier to overcome in the coming years. First, the blending laws of the country limit the amount of etha-nol blended with gasoline. Second, the infrastructure to pump higher blends of ethanol is not available to consumers.

Figure 3.7, Figure 3.7. Department of Defense Investments for Clean Energy- Mobility

From Barracks to the Battlefield. (2011) Washington DC: Pew Charitable Trusts. Pg. 25. Retrieved on October 1, 2011 from http://www.pewtrusts.org/uploadedFiles/wwwpewtrusts-

org/Reports/Global_warming/DoD-Report%20FINAL.pdf

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Until recently, a mixture of 10 percent ethanol and 90 percent gasoline was the highest ethanol blend allowed by the EPA, and this created a ceiling for ethanol’s market penetration. At a 10 percent blend, the maximum demand for ethanol is projected to be 15.2 billion gallons by 2012. This market can be extended through significant growth in sales of E85, which is a blend of 85 percent ethanol and 15 percent gasoline. However, this would likely require infrastructure investment as well.147

Recent efforts by industry trade groups led the EPA to soften this policy to allow E15 for vehicles built in 2001 and later.148 However, this represents only about 50 percent of the vehicle market, making significant E15 penetration un-likely because of the high cost required to serve only a segment of consumers.149

Even to meet mandated levels of consumption for ethanol, significant infra-structure build-out will be required. By 2022, infrastructure investments total-ing $12 billion will be needed to ensure sufficient consumer access to ethanol fuel. Installation of ethanol blender pumps are the primary tool, providing the consumer an array of options for ethanol fuel blends up to E85.

Minnesota has taken a leadership position on pushing the issue. A statute requiring 20 percent of the fuel sold in Minnesota to be ethanol was passed by the state legislature in 2005.150 Additionally, Minnesota government programs played a significant role in leading the nation in concentration of E85 stations, having 385 stations across the state. Additionally, the state also has 68 blender pumps, and this number is expected to grow.151

Thus, the policy and infrastructure barriers are a cause for concern in the effort to satisfy mandated consumption of biofuels. Without higher blends of ethanol, other fuels will need to be relied on to satisfy mandated biofuels consumption. These will include advanced drop-in fuels and biodiesel.

STRATEGIC NEEDS

Parity among options for liquid fuel moleculesPolicies to support biofuels must be agnostic to the molecule being used for fuel to be effective in driving the biofuels market’s overall growth, while rec-ognizing varying performance characteristics of biofuels where needed.152 A level playing field must be created for emerging drop-in and alternative biofu-els, as various options for biofuels have properties that make market penetra-tion advantageous in certain applications. For example, high-performance aviation fuels have properties that allow biofuels to enter markets not acces-sible to conventional biofuels.

These fuels generally rely on the same feedstock and similar infrastructure. All types of biofuels will play a role to maximize the impact on local wealth creation, energy independence, and greenhouse gas reductions; an “all of the above” approach is required.


Financial support needed to build infrastructure for higher blends of biofuelsWhile new fuels provided some opportunities for growth, investments into blender pumps for growth in ethanol consumption are likely to be required. Investments into such infrastructure have proven difficult from the private sector because of the generally low margins fuel stations operate under.153 Thus, investments into blender pumps that increase consumer choice are unlikely to occur without government support. Minnesota must maintain its leadership position on this issue.

endnotes84. Passed in the Energy Independence and Security Act of 2007, the current Renewable Fuels

Standard (RFS2) requires 15 billion gallons of corn based ethanol, 1 billion gallons of biodies-el, 4 billion gallons of advanced biofuels, and 16 billion gallons of cellulosic biofuels.

85. Pike Research, Inc. ( 2011). Global biofuels market value to double to $185 billion by 2021. October 11, 2011. Retrieved February 27, 2012, from http://www.pikeresearch.com/newsroom/global-biofuels-market-value-to-double-to-185-billion-by-2021.

86. Urbanchuk, J. (2011) Contribution of the ethanol industry to the economy of the United States. Pg. 5-6. Retreieved on September 15, 2011 from http://ethanolrfa.org/page/-/Ethanol%20Economic%20Contribution%202010%20Final%20Revised%20010411.pdf?nocdn=1.

87. King, D. Inderwildi, O.R and Williams, A. (2010) The future of industrial biorefiner-ies. Prepared by McKinsey and Company. Geneva, Switzerland: World Economic Forum. Pg. 24. Retrieved on July 15, 2011 from http://www3.weforum.org/docs/WEF_FutureIndustrialBiorefineries_Report_2010.pdf.

88. Renewable Fuel Standard Program (RFS2) – 2010 and Beyond (2010). Office of Transportation and Air Quality, US Environmental Protection Agency. February 2010. Retrieved on February 29, 2011 from http://www1.eere.energy.gov/cleancities/toolbox/pdfs/renewable_fuel_standard_program--2010_and_beyond.pdf.

89. Oil production from the Bakken oil fields in North Dakota increased from 100,000 to 400,000 barrels of oil from 2003-2011. Source: Yergin, D. (2011) There will be oil. New York, NY: The Wall Street Journal. Retrieved on October 1, 2011 from http://online.wsj.com/ar-ticle/SB10001424053111904060604576572552998674340.html.

90. Ibid.

91. Tracy, T. (2011) Companies seek to export U.S. gas in wake of production boom. New York, NY: The Wall Street Journal. August 12, 2011. Retrieved November 1, 2011 from http://online.wsj.com/article/SB10001424053111903918104576502554089821220.html.

92. Shale formations described as geologic structures deep under the earth’s surface with low permeability, where hydraulic fracturing below the surface is required to extract oil and gas. Shale gas: An unconventional resource. Unconventional challenges (2008) Halliburton. Retrieved on March 2, 2011 http://www.halliburton.com/public/solutions/contents/shale/related_docs/H063771.pdf.

93. Annual energy outlook 2011, with projections to 2030 (2011). Washington, DC: US Department of Energy: Energy Information Administration. No. DOE/EIA-0383(2011)). Table A14. Pg. 143. Retrieved on November 1, 2011 from www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf.

94. Ibid.

95. Strumpf, D. and Dezember, R.(2011). Natural Gas Ends 2011 at 27 month low. New York, NY: The Wall Street Journal. December 31, 2011. Retrieved on January 5, 2011 from http://online.wsj.com/article/SB10001424052970204720204577130482684060876.html.


96. Demand for heat in 2011 has, of course, moderated with the mild winter. Table 16. Natural Gas Delivered to Consumers by Sector, 2006-2010, and by State and Sector, 2010 (2010). Washington DC: US Department of Energy: Energy Information Administration. Retrieved on September 15, from http://www.eia.gov/naturalgas/annual/pdf/table_016.pdf.

97. Ibid.

98. Farmer income forecast (2011). USDA Economic Research Service. Retrieved on September 20, 2011 from http://www.ers.usda.gov/briefing/farmincome/nationalestimates.htm.

99. Renewable Fuel Standard Program (RFS2) – 2010 and Beyond (2010). Office of Transportation and Air Quality, US Environmental Protection Agency. February 2010. Retrieved on February 29, 2011 from http://www1.eere.energy.gov/cleancities/toolbox/pdfs/renewable_fuel_standard_program--2010_and_beyond.pdf.

100. Urbanchuk, J. (2011) Contribution of the Ethanol Industry to the Economy of the United States. Pg. 5-6. Retrieved on January 15, 2012 from http://ethanolrfa.org/page/-/Ethanol%20Economic%20Contribution%202010%20Final%20Revised%20010411.pdf?nocdn=1.

101. Ibid.

102. Ibid.

103. EPA Lifecycle Analysis of Greenhouse Gas Emissions from Renewable Fuels (2009). Retrieved on December 15, 2011 from http://www.epa.gov/oms/renewablefuels/420f09024.htm.

104. Wang, Michael, Ph.D. (2007) Ethanol: The complete lifecycle picture. Washington, DC: U.S. Department of Energy Office of Energy Efficiency and Renewable Energy. March 2007. Second Revised Edition. Retrieved on November 29, 2011 from http://www.transportation.anl.gov/pdfs/TA/345.pdf.

105. Ibid.

106. Renewable Fuel Standard Program (RFS2) – 2010 and beyond (2010). http://www1.eere.en-ergy.gov/cleancities/toolbox/pdfs/renewable_fuel_standard_program--2010_and_beyond.pdf.

107. M.J. Bradley & Associates LLC (2011) American Lung Association Energy Policy Development: Summary. Washington DC: The American Lung Association. Pg. 32. Retrieved on August 24 from http://www.lungusa.org/healthy-air/outdoor/resources/energy-overview.pdf.

108. Young, B.W (2008). Power for a Green Planet: How Renewable Energy is Ending the Age of Oil. April 24, 2008. Unpublished Work. Pg. 17.

109. Ibid.

110. Ibid. Pg. 15.

111. State Winter Oxygenated Fuel Program (2011). US Environmental Protection Agency. November 21, 2011. Retrieved on October 1, 2011 from http://www.epa.gov/otaq/fuels/gaso-linefuels/winterprograms/index.htm.

112. Young, B.W (2008). Power for a Green Planet: How Renewable Energy is Ending the Age of Oil. April 24, 2008. Unpublished Work. Pg. 16-17.

113. About the Minnesota Ethanol Program (2011). Minnesota Department of Agriculture. Retrieved on February 1, 2012 from http://www.mda.state.mn.us/renewable/ethanol/about.aspx.

114. Biodiesel Mandate- Minnesota (2011) The New-Rules Project. Retrieved on March 2, 2011 from http://www.newrules.org/environment/rules/ethanol-and-biodiesel/biodiesel-mandate-minnesota.

115. EPA Finalizes Regulations for a Renewable Fuel Standard (RFS) Program for 2007 and Beyond (2007). Retrieved on November 2, 2011 from http://www.epa.gov/oms/renewablefuels/420f07019.htm.

116. Young, B.W (2008). Power for a Green Planet: How Renewable Energy is Ending the Age of Oil. April 24, 2008. Unpublished Work. Pg. 17.

117. McPhail, Lihong et. Al. (2011). The Renewable Identification Number system and U.S. Biofuel Mandates. Nobember 2011. USDA Economic Research Service. Retrieved on November 29, 2011 from http://www.ers.usda.gov/Publications/BIO03/BIO03.pdf.


118. EPA Finalizes Regulations for a Renewable Fuel Standard (RFS) Program for 2007 and Beyond (2007). Retrieved on November 2, 2011 from http://www.epa.gov/oms/renewablefuels/420f07019.htm.

119. McMartin, C., Noyes, G. (2010) America Advances to Performance-Based Biofuels. Co-published by Stoel Rives and Clean Fuels Clearinghouse. February 26, 2011.

120. For more information from the US Environmental Protection Agency, please visit http://www.epa.gov/otaq/fuels/renewablefuels/index.htm.

121. United States Environmental Protection Agency. (2010) National Renewable Fuel Standard program overview. April 14-15, 2010. Pg. 18. Retrieved on November 1, 2011 from http://www.epa.gov/oms/fuels/renewablefuels/compliancehelp/rfs2-workshop-overview.pdf.

122. Maron, D. (2011). Much-Touted Cellulosic Ethanol Is Late in Making Mandated Appearance. Retrieved on November 3, 2011 from http://www.nytimes.com/cwire/2011/01/11/11climatewire-much-touted-cellulosic-ethanol-is-late-in-ma-13070.html?pagewanted=all.

123. Celebi, Metin, Evan Cohen, Michael Cragg, David Hutchings, and Minal Shankar. (2010). Can the U.S. congressional ethanol mandate be met? The Brattle Group. May 2010. Retrieved on May 26, 2011 from http://www.brattle.com/_documents/uploadlibrary/upload849.pdf.

124. Erickson, B. (2011) Out from Solynra’s Shadow. The Biofuels Digest. Retrieved on November 18, 2011 from http://biofuelsdigest.com/bdigest/2011/11/17/out-from-solyndra%E2%80%99s-shadow/.

125. Spencer, J. (2011). Senate Deals Setback to Ethanol Industry. Retrieved on September 5, 2011 from http://www.startribune.com/business/124024559.html.

126. Amanda Bilek, Personal Communication. December 14, 2011.

127. Kahn, D. (2009). California Adopts Low-Carbon Fuel Standard. Retrieved on September 30, 2011 from http://www.scientificamerican.com/article.cfm?id=california-adopts-low-car.

128. Mueller, Sherry A. et. Al. (2009) Impact of biofuel production and other supply and demand factors on food price increased in 2008. Biomass and BioEnergy. Volume 35. Pg. 1623-1632.

129. Baffes, John. And Tassos Haniots. (2010) Placing the 2006/08 Commodity Price Boom into Perspective. The World Bank: Development Prospects Group. July 2010. Policy Research Working Paper 5371.


131. Ibid.

132. Baffes, John. And Tassos Haniots. (2010) Placing the 2006/08 Commodity Price Boom into Perspective. The World Bank: Development Prospects Group. July 2010. Policy Research Working Paper 5371.


134. Corn Use Table. (2012) U.S. Department of Agriculture, Economic Research Service. Retrieved on March 5, 2012 from http://www.ers.usda.gov/Briefing/Corn/Gallery/Background/CornUseTable.html.

135. Marshall, E., Caswell, M., Malcolm, S., Motamed, M., Hrubovcak, J., Jones, C. and Nickerson, C. (2011). Measuring the Indirect Land-Use Change Associated With Increased Biofuel Feedstock Production. Retrieved on November 20, 2011 from http://www.ers.usda.gov/Publications/AP/AP054/AP054.pdf.


137. Solomon, D., & Meckler, L. (2011). Obama says no, for now, to Canada pipeline. Wall Street


Journal. Retrieved on January 5 from http://online.wsj.com/article/SB10001424052970204468004577168892140746430.html.

138. Spot prices from crude oil and petroleum products (2012). Retrieved February 14, 2012, available from: http://www.eia.gov/dnav/pet/pet_pri_spt_s1_a.htm.

139. Kinder, J. and Rahmes, T. (2009) Evaluation of Bio-Derived Synthetic Paraffinic Kerosene (Bio-SPK). The Boeing Company. June 2009. Retrieved on February 1, 2012 from http://www.ascension-publishing.com/BIZ/Boeing-BioSPK.pdf.

140. King, D. Inderwildi, O.R and Williams, A. (2010) The future of industrial biorefiner-ies. Prepared by McKinsey and Company. Geneva, Switzerland: World Economic Forum. Pt. 23. Retrieved on July 15, 2011 from http://www3.weforum.org/docs/WEF_FutureIndustrialBiorefineries_Report_2010.pdf.

141. From Barracks to the Battlefield (2011). Washington DC: Pew Charitable Trusts. Pg. 34. Retrieved on October 1, 2011 from http://www.pewtrusts.org/uploadedFiles/wwwpewtrusts-org/Reports/Global_warming/DoD-Report%20FINAL.pdf.

142. President Obama announces major initiative to spur biofuels industry. (2011) Washington DC: The White House Office of the Press Secretary. August 16, 2011. Retrieved on February 10, 2012 from http://www.whitehouse.gov/the-press-office/2011/08/16/president-obama-announces-major-initiative-spur-biofuels-industry-and-en.

143. From Barracks to the Battlefield. (2011) Washington DC: Pew Charitable Trusts. Pg. 34. Retrieved on October 1, 2011 from http://www.pewtrusts.org/uploadedFiles/wwwpewtrusts-org/Reports/Global_warming/DoD-Report%20FINAL.pdf.

144. Karbuz, S (2010). DoD Energy Use in 2009. http://karbuz.blogspot.com/2010/07/dod-ener-gy-use-in-2009.html.

145. Yonkers, T (2011). Leading by Example: How Energy Innovation is Strengthening America’s Military. Briefing to Pew Charitable Trusts. Retrieved on November 12, 2011 from http://www.pewtrusts.org/events_detail.aspx?id=85899361093.

146. President Obama Announces Major Initiative to Spur Biofuels Industry and Enhance America’s Energy Security (2011). Washington DC: The White House Office of the Press Secretary. August 16, 2011. Retrieved on November 15, 2011 from www.whitehouse.gov/the-press-office/2011/08/16/president-obama-announces-major-initiative-spur-biofuels-industry-and-en.

147. Celebi, Metin, Evan Cohen, Michael Cragg, David Hutchings, and Minal Shankar. (2010). Can the U.S. congressional ethanol mandate be met? The Brattle Group. May 2010. Pg. 3. Retrieved on May 26, 2011 from http://www.brattle.com/_documents/uploadlibrary/upload849.pdf.

148. E15 (a blend of gasoline and ethanol) (2011). US Environmental Protection Agency. February 17, 2011. Retrieved on August 23, 2011 from http://www.epa.gov/otaq/regs/fuels/additive/e15/.


150. Bailey, J. (2005). Minnesota Passes 20 Percent Ethanol Mandate. May 12, 2005. Retrieved on August 23, 2011 from http://www.newrules.org/energy/news/minnesota-passes-20-percent-ethanol-mandate.

151. Connelly, C. and Groschen, R. (2011). Legislative Report on Ethanol: Review of E20. St. Paul, MN: The Minnesota Department of Agriculture. January 15, 2011. Retrieved on November 23, 2011. http://www.mda.state.mn.us/~/media/Files/news/govrelations/legrpt-e20-2010.ashx.

152. As an example, ethanol provides oxygenate properties to fuels that are critical to environmen-tal and overall fuel performance.



IV: Agricultural-Based Supply Chain Partnerships

intRoductionBioindustrial processing, which includes the manufacture of advanced biofuels and biobased chemicals, provides an opportunity for growth in Minnesota’s ag-riculture based economy. Collectively, these industries constitute a significant portion of the emerging biobased industry, which is set for rapid growth for products derived from agriculture and forest based resources.154

The state is home to significant production capacity for the conventional biobased economy, which includes agriculture and processing of agricultural products.155 Owners and operators of existing processing infrastructure can partner in the processing of those resources toward new markets. In total, the manufacturing of advanced biofuels and biobased chemicals has the poten-tial to add 1,600 to 4,500 direct and indirect jobs across rural Minnesota, in addition to jobs created in forestry biorefineries and company headquarters. Additional details can be found in Appendix E.

Over the next decade, the development of bioindustrial processing will bring op-portunities for agriculture producers to sell their output to increasingly diverse markets. These additional markets will rely on growth in production of existing ag-ricultural commodities and the development of emerging biomass supply chains.

Furthermore, many of these investments will leverage existing infrastructure.

Innovation in such areas as precision farming equipment, agricultural biotechnolo-gy, and no-till farming is positioning the country’s agricultural sector for growth in supplying new industries. These innovations contribute to increasing yields while minimizing inputs, and improve the economic and environmental performance of

case study: An Example of an Integrated BiorefineryInvestments at a corn wet mill in Blair, Nebraska, owned by Cargill provide one example of a model for a large, integrated biorefinery. The wet mill had primarily produced food products such as high fructose corn syrup. Today, however, the mill operates as an integrated biorefinery, providing an infrastructure base for an array of biobased chemicals. This includes the Natureworks product known as polylactic acid (PLA), which is based on fermentation of corn starch to lactic acid (PLA is the most ubiquitous bioplastic on the market today.) The addition of PLA manufacturing has diversified the revenue streams for the processing facility while adding value to the local corn crop, each of which are critical outcomes of future development of bioindustrial processing. Stebbins, Christine. (2010) Big Cargill corn plant feeds green economy. Rueters. Retrieved on March 5, 2011 from http://www.reuters.com/article/2010/09/29/us-usa-biorefinery-cargill-idUSTRE68S4Y020100929.


farming. Agriculture has the capability to increase its output to meet the growing demand for sustainable supplies of food, feed, fiber, and chemicals.

Bioindustrial processing can leverage the state’s strong assets, including farm production, industrial assets, and university research. With these assets in place, Minnesota is well positioned to add value through development of next-generation biorefineries.

Minnesota’s agriculture supplyThe state holds strong positions in its ability to supply the emerging advanced biofuels and biobased chemicals industries with key feedstocks, including corn, soybeans, and agricultural residues. Additionally, significant opportunities to partner with the conventional biofuels industry hold the promise of accelerat-ing growth and minimizing capital expenditures for scaling up technologies.

As of 2008, Minnesota’s total direct and indirect employment in agriculture pro-duction was nearly 130,000.156 This level of employment is made possible by the strong resource base, as Minnesota has over 26 million acres of high-quality farm-land, comprising over 50 percent of the state’s land area. Minnesota farmers rank fourth in the nation in production of corn, and third in the production of soybeans.157 Additionally, Minnesota is the top producer of sugar beets in the country.158

Production of agricultural commodities continues to increase, enabling the potential for large-scale manufacturing of advanced biofuels and biobased chemicals in rural areas of the state. In 2009, Minnesota’s corn yields aver-aged 160 bushels per acre. By 2015, yields are expected to be 180 bushels per acre, reaching 300 bushels per acre by 2050.159

These increases in production are being realized even as agricultural inputs are minimized, including fuel and chemical fertilizers, which are critical fac-tors for life cycle environmental impacts of downstream products. Since 2000, Minnesota corn yields grew 22.1 percent while nitrogen application only in-creased by 9.6 percent.160 Across the United States, the amount of fuel used per ton of grain produced decreased 64 percent between 1973 and 2005.161

With increasing yields for traditional commodities, the availability of agricultural residues is expected to increase as well. Furthermore, as biomass markets develop, opportunities for dedicated crop production are likely to materialize in Minnesota.

Overall, the state’s leadership position in agriculture will be a critical factor in the growth of the emerging biobased industry in Minnesota.

industRy tRends

Bioindustrial processing positively impacts the agriculture industryGrowth opportunities in the advanced biofuels and biobased chemicals industry are large and clear in the next decade. Biofuels production under the Renewable Fuels Standard 2 (RFS2) will require a rapid increase in


production to reach the 36 billion gallons of biofuel consumption mandated by 2022.162 Additionally, the market for biobased chemicals is projected to reach over $610 billion in market value by 2025.163 Traditional agricultural commodity producers and processers stand to profit from this growth.164

The development of the conventional biofuels industry provides a recent ex-ample of a new industry’s impact on agriculture. Using cooperative business models and targeted policy support, innovative Minnesota farmers planted the seeds in the 1980s and 1990s for explosive growth in the ethanol industry across the country during the 2000’s. This development increased farmer wealth and re-vitalized rural communities. Bioindustrial processing is set to maintain and build upon the impacts accrued by the economy through the growth of the conventional biofuels industry.

Manufacturing of advanced biofuels and biobased chemicals provides op-portunities to maintain and strengthen existing biorefineries through the addition of revenue streams. This represents a strategic option for long-term sustainability of the conventional biobased industry. These new products are not likely to displace the market for first-generation biofuels, but they will offer access to opportunities in the advanced biofuels and biobased chemicals markets for long-term business growth and profitability.

Moreover, as the demand for agriculture-based products continues to fluctu-ate, the diversification of end markets through bioindustrial processing will be one way to ensure steady demand for local agricultural commodities.

Farmers, and Minnesota as a whole, profited from the first ethanol boom, and with the right strategy, they will be well positioned to leverage this experience and infrastructure to advance the next generation of biorefineries.

Increasing agriculture commodity pricesOver the past seven years, nearly all commodity prices have increased significantly, with agricultural commodities following this trend. For example, the average price of both corn and soybeans doubled between 2005 and 2011.165

The factors giving rise to these price increases are unlikely to wane in the near term, possibly making to-day’s prices a “new normal” for the commodity mar-kets.166 These factors include both demand- and supply-side impacts.

Demand-side impacts include:167

• Global population growth,168

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• Wealthier consumers in emerging economies demanding more and higher-quality food,169 and

• The emergence of biofuels manufacturing capacity.

Supply-side impacts include:

• Rising prices of fossil fuels,

• The tightening of global grain reserves as agriculture logistics are optimized to minimize costs, increasing their susceptibility to mar-ket shocks, and

• Supply disruptions from adverse weather events, such as floods and droughts.

The level and stability of feedstock prices are significant factors for profitable processing of agricultural commodities or biomass feedstocks. In the face of expected increases in costs, the following are some opportunities for biorefin-eries to maintain and grow profitability:

• Diversify and increase revenue through value-added products, includ-ing advanced biofuels and biobased chemicals manufacturing, and co-product utilization;

• Improve processing efficiency to minimize costs; and

• Explore alternative biomass feedstocks available from local producers.

Additionally, it is important to consider the cost structure of feedstock supply in a mutually beneficial relationship with local agriculture producers. Cooperative business models that include supplier equity structure have allowed farmer-owned facilities to more effectively manage feedstock input costs.

Biotechnology is impacting the agriculture industry

General adoptionTo satisfy the growing global demand for food, feed, fuels, fiber, and materials, it will be critical to find ways to increase agricultural out-put. To do so farmers will need to find ways to increase productivity. Increasingly, biotechnology is being leveraged to increase yields through improved manage-ment of pests and weeds that in turn results in more efficient utilization of scarce nutrients and water.



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Today, 88 percent of U.S. farmland acres use seeds with agricultural biotech-nology traits, with 94 per-cent of soybean acres using herbicide-resistant crops.170 According to a USDA analy-sis, adoption of these tech-nologies has enabled, but not necessarily caused, an increase in yields propagated by traditional breeding tech-niques, combined with a de-clining need for pesticides.171

It must be noted, that while agriculture biotechnology provides opportunities for increasing and efficient production, the technology is not accepted by all consumers. Market access and reduction in demand are potential risks from the use of GMO feedstocks.

Continued innovation in existing agricultural commoditiesBuilding on 15 years of experience using genetically modified organisms, the next generation of technologies will continue to realize improvements from both an economic and environmental perspective.

First, advances in genomics are supporting the development of increasingly precise methods of eliminating unwanted traits in plants that limit growth or increase susceptibility to disease.172 This has the potential to mitigate unin-tended consequences and alleviate some concerns from consumers who do not support the use of current genetic modification practices.

Additionally, traits are being developed for drought tolerance, nitrogen effi-ciency, and an array of disease-resistant traits.173 These will very intentionally decrease the resource intensity of agriculture. First, negative environmental impacts of agriculture will be reduced; irrigation requirements, pesticide ap-plication, and fertilizer run-off will be minimized. Second, productivity is ex-pected to increase even under sub-optimal soil and climate conditions, which is critical for farmers across the globe.

Increasing production would play a role in mitigating the food-versus-fuels debate and indirect land use concerns. Moreover, life cycle environmental impacts of biofuels and biobased chemicals would be minimized through resource-efficient production.

Advanced traits for bioprocessing

Agricultural biotechnology can also be leveraged to design traditional grain and oilseed crops for specific industrial processes. These crops are tailored to increase the efficiency and quality of the manufacturing processes for ad-vanced biofuels and biobased chemicals.



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Because of the unique specifications of these crops, contract growing will be a critical aspect for their commercialization to avoid negative impacts of contamina-tion with supply chains for other products. Care must be taken in this regard, and concerns about liability for mistakes along the value chain must be established.

There are three major categories of crops being developed for specific down-stream applications. The first includes traditional crops that enable processing ef-ficiency, such as amylase corn. The second includes energy crops being designed to increase levels of particular components of a plant. For example, energy beets and sweet sorghum are being produced to maximize sugar content for fermen-tation, while oilseed crops are being engineered to maximize lipid content for conversion to biodiesel and other products. Finally, high-value nutraceuticals and pharmaceuticals can be grown and extracted from specially designed crops.

In summary, when appropriate care is taken to avoid contamination of other supply chains, these crops can increase the profitability of bioindustrial pro-cessing while providing an option for agricultural producers to make a steady profit from their land.

Development of new agriculture biomass supply chainsDemand for cellulosic biomass for bioindustrial processing is expected to grow, driven by increasing demand for cellulosic ethanol, development of new technologies for converting cellulose to advanced biofuels and biobased chemicals, and incorporation of agricultural fibers in biocomposites.

Agricultural biomass, which includes corn cobs, corn stover, soybean straw, and wheat straw, is expected to increase the value derived from agricultural land through the addition of a new revenue stream. However, the supply chain for

case study: Amylase CornSyngenta, a Swiss agribusiness company whose Agriculture Seeds division is based in Minneapolis, Minnesota, has developed and commercialized corn seed that directly produces an enzyme used in the ethanol industry to break starch into glucose that is particularly accessible to yeast. By introduc-ing this corn output trait, Syngenta provides ethanol producers with the ability to decrease operating costs and water usage, which can be an important parameter for any product relying on conversion of corn starch to fuels and chemicals. Projecting into an industrial environment, amylase corn can save 450,000 gallons of water, 1.3 million kwh of electricity, and 244 million BTU of natural gas for a 100 million gallon per year (MGY) ethanol plant. An estimated 8 to 10 cents is shaved off the production costs for each gallon of ethanol by incorporating this feedstock into 10 percent to 20 percent of a plant’s total supply.4.1

However, there are risks, associated with amylase enzymes being included in corn processed in tradi-tional applications. For example, introduction of additional amylase to a breakfast cereal manufactur-er would result in soggy outputs. Thus, the value of the crop will only be realized by specific bioindus-trial processing facilities, and closed loop supply chains will be critical to avoid contamination.4.2

4.1 Lane, Jim. (2011). USDA Deregulates Syngenta Seed’s Amylase Corn for Enhanced Ethanol Productivity. http://biofuels-digest.com/bdigest/2011/02/14/usda-deregulates-syngenta-seeds-amylase-corn-for-enhanced-ethanol-productivity/. Retrieved on November 18, 2011.

4.2 Lane, Jim. (2011). Trojan Corn, or 20 billion Reasons to Think Outside the Tank. http://biofuelsdigest.com/bdi-gest/2011/07/14/trojan-corn-or-20-billion-reasons-to-think-outside-the-tank/ Retrieved on November 18, 2011.


agricultural biomass has not been developed at the industrial scale, and farm-ers are appropriately cautious when committing to produce outputs beyond the agricultural commodities that currently drive their business’s cash flow.

The task of developing biomass supply chains cannot be taken lightly. Significant effort over multiple years will be needed to recruit farmers and harvesters willing and capable of delivering biomass at the required specifications and scale.174

One of the challenges to creating a stable market for biomass is a type of a chicken-and-egg problem. On the supply side, there is a lack of reliable infor-mation on the availability of agricultural biomass for local projects; on the de-mand side, there is uncertainty about the existence of buyers. Farmers cannot supply biomass unless there is an assurance of a profitable relationship with a buyer, and a plant cannot be built while relying on uncertain supply. Thus, the industry will likely need to leverage mechanisms to share information on speci-fications and availability of biomass across the supply chain.175

Solving the issues for biomass supply can allow the conventional and emerging biobased industry to access new markets and leverage low-cost feedstocks that avoid competition with food and feed uses.

Enabling no-till farming

For agricultural producers, the creation of new supply chains will have an impact on the production of agricultural commodities. Through additional revenues derived from removal of agriculture residue, as well as agronomic factors associated with residue removal increasing potential yields, no-till and conservation tillage could be more likely to be a profitable farming practie.

One drawback of no-till approaches is the tendency for no-till managed soil to warm and dry slowly in the spring. However, the addition of residue removal to existing no-till regimes can speed the warming of the soil. When no-till plots added the removal of residues, yields remained comparable to tradi-tional tillage in trials from Illinois; the soil temperature was an average of two to three degrees warmer four weeks after planting.176

This effect of residue removal could be especially important in Minnesota, where shorter growing seasons compared to southern portions of the Corn Belt have made farmers reluctant to adopt no-till practices. In Minnesota, only 11 percent of soybean production was under no-till management in 2010, versus 45 percent across the country.177 Through tillage of the soil to expose black dirt, the soil can more rapidly warm and dry in the spring. This acceler-ates planting dates for fields to reach the maximum yield potential. Profitable removal of agriculture residues to overcome this issue has the potential to significantly accelerate the adoption of no-till farming in Minnesota.

Additionally, suppliers utilizing no-till farming can again improve the life cy-cle environmental impact of final products in the advanced biofuels and bio-based chemicals industry by minimizing passes of equipment through fields, resulting in lower fuel consumption. Finally, no-till farming minimizes ero-sion, fertilizer run-off, and the loss of soil carbon. Significant carbon is stored in the roots that remain under the soil. For example, keeping a minimum of


30 percent of residues on the surface of the soil in a no-till management re-gime increases water retention and decreases erosion by 60 to 90 percent.178

Biomass cropsIn addition to harvesting cellulose from agricultural residues, opportunities are emerging for the targeted production of perennial cellulosic biomass crops such as switchgrass, miscanthus, diversified prairie grass, and hybrid poplar. Since these crops can offer high yields of biomass per acre on marginal lands, they have the potential to support the establishment of local supply chains for biomass.

Moreover, some energy crops provide additional value through ecosystem-level benefits. For example, establishing diversified prairie grasses along sensitive waterways creates a natural filter that reduces nutrient run-off. In addition, pe-rennial plants store carbon in their roots while restoring habitats for wildlife.179

Despite these benefits, there are economic challenges that must be overcome before we see the widespread adoption of biomass crops. First, multiple years are required for establishment of these crops. Most importantly, with the high demand for corn and soybeans, there is a high standard for profitability per acre that new crops must meet in order to justify their adoption.

Therefore, marginal lands especially suited for grass-based crops are the most likely locations for biomass crop development. Over the past few years, the Biomass Crop Assistance Program, which was funded in the federal 2008 Farm Bill, was designed to incentivize the introduction of energy crops. However, results have been mixed thus far, and ever-changing political winds are making the future of these incentives uncertain.

Large-scale energy crop establishment can be economically viable once bio-mass markets are fully developed and very targeted environmental benefits are monetized in some fashion. Regions with large grass-crop establishments and harvest capability could provide an assurance of a steady local supply of biomass for the production of advanced biofuels and biobased chemicals.


Build on Minnesota’s agricultural strengths

Conventional biobased industry provides feedstock base and infrastructureWith Minnesota’s fertile soils, the state has the potential to provide a signifi-cant supply of crops and biomass sources. Additionally, the state is home to 21 ethanol plants with 1.1 billion gallons of production capacity, which is the fourth highest in the U.S.180 Total direct and indirect employment impact is over 8,000 jobs.181 Biodiesel capacity totals 63 million gallons per year, plac-ing it in the top 10 states in the U.S. for biodiesel production.182

Development in the emerging advanced biofuels and biobased chemicals in-dustries will thrive in situations that capital requirements for production can


be minimized. Thus, companies developing new technologies are exploring mutually beneficial relationships with existing bioprocessing facilities.

For current producers of ethanol and biodiesel, advanced biofuels and biobased chemicals manufacturing capacity provides an opportunity to move into next-generation technologies and maintain long-term growth and profitability.

In addition, Minnesota’s biorefineries can gain value through technologies that are being developed and deployed to improve water and energy efficiency in biofuels processing. Such technologies will be critical to ensuring the long-term viability of bioindustrial processing facilities, as cost for energy and water treatment, as well as environmental performance are critical factors to enable increasing production production.

Investments into technologies for efficiency, in some cases, can add value to co-products to provide additional revenue to the facility, in addition to im-proving efficiencies. Incorporation of such process improvement technolo-gies alongside manufacturing of advanced biofuels and biobased chemicals could be especially beneficial to long-term profitability. Emerging products can strengthen the value added from corn and soybean, complementing the biofuels market to ensure long-term growth.

Creative business models for financing and supply chain developmentIn the development of the corn ethanol industry, innovative farmers took a risk to ensure stability and maximum value for the agricultural commodities they produced. The “Minnesota Model” of industry creation included the use of coop-eratives to raise capital for risky businesses, thereby diffusing risks and profits across many individuals. Similar business models could accelerate projects in the emerging biobased industry across Minnesota.

The state continues to demonstrate leadership in the use of this business model. For example, 10 of Minnesota’s 21 ethanol facilities continue to be owned and run as independent cooperatives.183 Over 4,880 individuals are investor-members in these cooperatives.184 Additionally, four of the 10 largest cooperative businesses in the United States are based in Minnesota, including CHS and Land O’Lakes.185

As an example of an opportunity to leverage the cooperative business model, the chicken-and-egg scenario on biomass supply chains detailed earlier can be alleviated. Participation in cooperatives assures that both sides have mutually beneficial incentives to develop an efficient, effective, and vertically integrated supply chain. The advanced biofuels and biobased chemicals industries can leverage this capability to accelerate growth in Minnesota.

STRATEGIC NEEDS

Provide support to identify and pursue partnerships in the industry Bioindustrial processing is growing quickly, and the specific opportunities for growth are diverse, ranging from biofuels to plastics to solvents. Numerous options for partnerships exist in the industry. However, the barrage of


information can be overwhelming for individuals with limited time to study these opportunities. Minnesota is in the position to set itself apart by helping owners and operators in the conventional biobased industry:

• Understand the markets for advanced biofuels and biobased chemicals,

• Build relationships with companies pursuing partnerships with exist-ing infrastructure, and

• Analyze the types of partnerships being developed in the broader industry.

Through the successful implementation of next-generation biorefinery proj-ects, the value-added to existing commodity businesses can create jobs and spur rural economic development.

Provide support for projects to navigate regulations and financial programs

Once partners and pathways to commercialization are identified, an analysis of regulations and government financing programs will be a critical aspect to a project’s success. Because policies are complicated and often restrictive, efforts to secure regulatory approval and federal financing for new biopro-cessing projects can be resource intensive. Providing assistance to under-stand these issues could increase the likelihood of leveraging federal funds for Minnesota projects, as well as accelerating the regulatory process, both of which are factors that could ensure the profitability of investments, as well as maximize job creation potential.

endnotes154. The emerging biobased industry includes the value chain for advanced biofuels, biobased

chemicals, bioenergy, biopolymers, and bioplastics.

155. The conventional biobased industry is made up of the manufacturing of traditional agriculture and forest products such as food, feed, and fiber. It also includes corn ethanol and soy biodiesel.

156. Ye, S. (2011). Economic impact of Minnesota’s agricultural industry. Saint Paul, MN: Minnesota Department of Agriculture.

157. Ye. S. (2011) Minnesota’s Agriculture Profile. St. Paul: Minnesota Department of Agriculture. Retrieved on March 8, 2012 from http://www.mda.state.mn.us/~/media/Files/agprofile.ashx.

158. Table 14—U.S. Sugarbeet crops: area planted, acres harvested, yield per acre, and pro-duction, by State and region (2012). Washington DC: USDA Economic Research Service. Retrieved on March 8, 2012 from http://www.ers.usda.gov/Briefing/Sugar/Data.htm.

159. Food and Fuel. St. Paul: Minnesota Department of Agriculture. Retrieved on February 1, 2012 from http://www.mda.state.mn.us/~/media/Files/renewable/ethanol/foodfuelpoints.ashx.

160. Corn Production Trends (2010). St. Louis, MO: National Corn Growers Association. http://www.ncga.com/production/25-minnesota/. Retrieved on November, 18 2011. Table 10: Fertilizer Use and Price (2011). Washington DC: United States Department of Agriculture. http://www.ers.usda.gov/Data/FertilizerUse/. Retrieved on November 18, 2011.

161. Brown, Lester. (2009). The oil intensity of food. http://www.grist.org/article/the-oil-intensity-of-food. November, 18 2011.

162. A USDA regional roadmap to meeting the biofuels goals of the renewable fuels standard by 2022 (2010). Washington, DC: United States Department of Agriculture. June 23, 2011. Pg. 7.

163. U.S. biobased products market potential and projections through 2025. (2008) Washington DC: U.S. Department of Agriculture, Office of the Chief Economist. OCE-2008-1. February 2008. Retrieved on March 12, 2011 from www.usda.gov/oce/reports/energy/biobasedreport2008.pdf.


164. BBAM Analysis.

165. Feed Grains Database. (2011) Washington, DC: Economic Research Service. Retrieved on December 14, 2011 from http://www.ers.usda.gov/Data/FeedGrains/download.htm.

166. Leer, Steve. (2011). Ag economist: Higher commodity prices the “new normal”? West Lafayette, IN: Purdue University News Service. July 5, 2011. Retrieved on October 1, 2011 from http://www.purdue.edu/newsroom/outreach/2011/110705BoehljePrices.html.


168. World population to 2300 (2011). New York: United Nations Department of Economic and Social Affairs/ Population Division. Pg. 4-5 Retrieved on February 27, 2011 from http://www.un.org/esa/population/publications/longrange2/WorldPop2300final.pdf.

169. Leer, Steve. (2011). Ag economist: Higher commodity prices the “new normal”? West Lafayette, IN: Purdue University News Service. July 5, 2011. Retrieved on October 1, 2011 from http://www.purdue.edu/newsroom/outreach/2011/110705BoehljePrices.html.

170. Fernandez-Cornejo, J. (2011). Adoption of Genetically Engineered Crops in the U.S.: Extent of Adoption. July 1, 2011. USDA Economic Research Service. Retrieved on November 13, 2011 from http://www.ers.usda.gov/Data/BiotechCrops/adoption.htm.

171. Ibid.

172. As an example, see Cellectics Plant Sciences. http://www.cellectis.com/about-us/subsidiaries/cellectis-plant-sciences.

173. Godfray, H.C.J, et al. (2010) Food security: The challenge of feeding 9 billion people. Science. Vol. 327, no. 5967, pp 812-818. February 2010. Published online January 28, 2010. Retrieved on January 15, 2012 from http://www.sciencemag.org/content/327/5967/812.full.

174. Shaffer, David. (2011) Harvesting a New Kind of Fuel. Minneapolis, MN: Star Tribune. August 10, 2011.. Retrieved on September 2, 2011 from http://www.startribune.com/busi-ness/126850538.html.

175. For example, see the Minneapolis Biomass Exchange: https://www.mbioex.com/

176. Morrison, L. (2009). Just Say No...Till! November 1, 2009. Corn and Soybean Digest. Retrieved on December 5, 2011 from http://cornandsoybeandigest.com/second-crop-your-cornfields

177. Steil, Mark (2010). No-till Grows, Minnesota Lags. Minnesota Public Radio. December 21, 2010. Retrieved on December 5, 2011 from http://minnesota.publicradio.org/collections/spe-cial/columns/statewide/archive/2010/12/no-till-grows-minnesota-lags.shtml

178. Conservation Practices Minnesota Conservation Funding Guide (2011). Minnesota Department of Agriculture Retrieved on December 5, 2011 from http://www.mda.state.mn.us/protecting/conservation/practices/constillage.aspx

179. David Tilman, Jason Hill, Clarence Lehman ( 2006). Carbon-negative biofuels from low-input high-diversity grassland biomass. Science. Vol. 314, pp. 1598-1600.

180. Renewable Fuels Association. (2011). Building bridges to a more sustainable future: 2011 ethanol industry outlook: Renewable Fuels Association. Pg. 2. Retrieved on November 30, 2011 from http://www.ethanolrfa.org/page/-/2011%20RFA%20Ethanol%20Industry%20Outlook.pdf?nocdn=1.

181. Minnesota’s ethanol plants. (2011). St. Paul, MN: Minnesota Department of Agriculture. Retrieved August 26, 2011, from http://www.mda.state.mn.us/ethanol/.

182. Email Communication with Dave Ladd. February 3, 2012.

183. Ye, S. (2010) Minnesota’s Ethanol Plants. St. Paul: Minnesota Department of Agriculture. Retrieved on February 10, 2011 from http://www.mda.state.mn.us/news/publications/renew-able/ethanol/plantsreport.pdf.

184. Ibid.

185. 4 of nation’s 10 largest co-ops are in Minnesota. (2011) Minneapolis, MN: Twin Cities Business Magazine. Retrieved on October 19, 2011 from http://tcbmag.blogs.com/daily_developments/2011/10/4-of-nations-10-largest-co-ops-are-in-mn.html.


V: Forest-based Supply Chain Partnerships

intRoductionBioindustrial processing, which includes the manufacture of advanced biofuels and biobased chemicals, provides an opportunity for growth in Minnesota’s forest-based economy. Collectively, these industries constitute a significant por-tion of the emerging biobased industry, which is set for rapid growth based on additional value derived from agriculture and forest based resources.186 The state is home to both forest resources and existing processing infrastructure that can work toward processing those feedstocks for new markets.

The conventional forest products industry, which includes pulp and paper, lumber, and engineered wood production, has been an economic engine for the state since the early 20th century and continues to be an important part of the state’s economy. From the forests to the mills and beyond, the industry con-tributed over 31,000 direct jobs and $1.4 billion in wages to Minnesota’s economy in 2009 with a total em-ployment effect of 67,300 jobs. The forest products industry is the state’s fifth-largest manufacturing industry by employment, and generates 8 percent of the revenues from manu-facturing shipments in the state.187

However, global forces have caused the conventional forest products industry to suffer in Minnesota, with 1,995 jobs being eliminated by the recent decline in oriented strand board (OSB) alone.188 To recover these jobs, new markets for the processing of wood will be critical. As a result, there are biorefinery sites ready to be developed in partnership with the advanced bio-fuels and biochemicals industry.

Bioindustrial processing is a high-value industry that can strengthen the for-est supply chain infrastructure while adding new jobs to the region. By 2025, 1,400–2,300 direct and indirect jobs could be added to the northern Minnesota economy through forest based biorefineries, including new biorefineries as well as partnerships with the conventional biobased industry.189 Additional jobs will

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(MMGT), which is the equivalent of 5.5 million cord.Deckard, Don. (2010) Economic Opportunities for Minnesota’s Wood. Unpublished

document. May 2010.Wchwalm, C. (2009) Forest Harvest Levels in Minnesota: Effects of Selected Forest

Management Practices on Sustained Timber Yields. St. Paul: Minnesota Department of Natural Resources. Pg. 1. Retrieved on November 3, 2011 from http://files.dnr.state.mn.us/

forestry/um/sustainedyieldreport.pdf


be created in the development of technology and company headquarters, as detailed in Appendix E.

The impact on small communities across northern Minnesota could be immense. In the fourth quarter of 2011, the unemployment rate was 8.2 percent across the forested areas of the northern half of Minnesota, compared to 5.9 percent state-wide.190 The direct and indirect jobs created from this industry could decrease that unemployment rate by nearly one half of a percentage point.191

Minnesota’s forest supplyWith 15.6 million acres of timberland across Minnesota, there is ample op-portunity for forestry to continue to be the one of the state’s top industries.192 However, the wood harvest declined by 25 percent between 2005 and 2007, for a total decrease of 2 million green tons.193

Recent declines in the conventional forest products industry have led to a systematic underutilization of Minnesota’s forest resources, an inability to manage some forested areas, and lost economic activity and jobs. In some cases, this has provided opportunities for redevelopment of forest products infrastructure that can minimize investment required for bioindustrial pro-cessing companies. Currently, three plants that previously manufactured OSB now stand idle, ripe for redevelopment in the emerging biobased economy.

After accounting for a reserve volume, there is an economic surplus of at least 3.2 million green tons of wood available across the northern half of Minnesota.194 An analysis conducted in 2009 concluded that supporting mar-ket creation efforts for the forest-based industry is unlikely to have negative impacts for the conventional forest-based industry in northern Minnesota.195

CASE STuDY: lonza, Inc. — A Win-Win PartnershipSwiss-based Lonza is a manufacturer specializing in pharmaceuticals manufacturing with annual revenues of $3 billion. Other markets include materials science, agriculture, personal care, and nutri-tion. Since 2006, the company has been operating a plant in Cohasset, Minnesota, that extracts a biochemical known as arabinogalactan from the wood of tamarack larch trees. The facility started operations in the 1990s under the Larex brand.Larch arabinogalactan, more commonly referred to as LAG, was originally sold as an additive to inks, but has since been approved by the Food and Drug Administration for use as a food and feed additive that increases the performance of the digestive tract and immune system. The Lonza facility receives a portion of its wood supply through partnerships with paper companies in northeast Minnesota, which typically don’t use the tamarack because it is less suitable for making paper.As a result, in addition to employing 15 people, the Cohasset facility is finding new ways to use what had been a chronically underutilized tree species. Barzen, M. (2011) Tamarack: The Untold Story. The Marketplace. St. Paul, MN: MN Department of Natural Resources. P. 1. Fall 2011.

The world of Lonza: Closer than you think. (2012) Basel, Switzerland: Lonza, Inc. Retrieved on March 2, 2012 from http://www.lonza.com/en/about-lonza/company-profile/~/media/Assets/about-lonza/Pdfs/Lonza_Corporate_Brochure_EN.ashx.


Levels of consumption are well below long-term sustainable harvest levels for aspen trees, which dominate 30 percent of the state’s timberland cover, and many other major species such as ash, tamarack, basswood, and maple.196 Other species of wood, such as red pine and white spruce, are also showing opportunities for expanded utilization over time.197

Thus, growth in demand for timber and woody biomass would be sustainable from both an environmental and economic perspective. When combined with existing infrastructure, the state is well positioned for growth of new indus-tries. Advanced biofuels and biochemicals provide a high-value market for processing wood, and Minnesota is uniquely positioned to lead the develop-ment of this industry.

industRy tRends

Conventional forest products industry emerging as a viable partnerAs demonstrated in prior chapters, new technologies are creating opportu-nities for woody biomass to be used as a feedstock for the manufacture of advanced biofuels and biochemicals. As such, partnerships between the own-ers of conventional forest processing infrastructure and emerging biobased industries can be beneficial.

Increased RoI through partnershipsThe existing infrastructure that could be leveraged for this new industry in-cludes wood receiving and handling, truck and rail access, and wastewater treatment. In addition, existing consumers of wood already have in place less tangible assets, such as well-established relationships and processes for procur-ing wood supply. In some cases, the emerging advanced biofuels and biochemi-cals companies are likely to rely on feedstocks rejected at the gate for traditional wood-processing operations, as well as by-products of these operations.

When an emerging advanced biofuels and biobased chemicals manufacturer can find a partner in the traditional forestry industry that has compatible in-frastructure and strategy, the savings in capital expenditures for launching the new enterprise can be significant. Such partnerships can accelerate the time to market for new products. For the conventional forest products industry, the ad-ditional revenue streams enabled by expanding bioindustrial processing capac-ity can offset unstable and, in some cases, diminishing, revenues.

American paper industry strugglesThe global pulp and paper industry has been hit hard by the trend toward consumption of information through electronic media.

The pervasiveness of e-mail and electronic filing caused a decline in sales of print-ing and writing paper used for office paper, magazines, books, advertising, and


other uses. For example, PowerPoint presentation and projectors have displaced the need for handouts at many meetings. Additionally, RISI, a forest products industry consulting firm, projects e-books will hold a 15 to 20 percent market share of the over-all book sales by 2015, up from just 3 percent in 2009.198 This increase is propagated by the availability and sale of e-readers and tablets.199

Market demand for printing and writing papers has traditionally correlated with economic activity. However, even as U.S. real GDP expanded between 2000 and 2010, demand growth for printing and writing papers flattened, which combined with cost considerations to cause a 29 percent decline in output, as shown in Figure 5.2.200 Current projections for sales of printing and writing papers are pointing to only flat or minimal growth.201 These have been ominous signs for the pulp and paper indus-try, especially in Minnesota, where a majority of the paper industry relies on this market.202

Fortunately, the subsequent reduction in global capacity has led to a recov-ery in prices. In fact, the prices for market pulp reached historical highs in 2010.203 The industry may be smaller, but healthier business could emerge throughout the industry.

Declining demand for building productsThe collapse in the U.S. housing market that precipitated the recent financial collapse has had a stark impact on the building products industry, affecting lumber, plywood, and engineered wood manufacturing. New construction and remodeling are the primary drivers of demand. U.S. single and multi-family housing starts dropped from their peak of 2.06 million in 2005 to 554,000 in 2009, a decrease of 73 percent, which was the lowest level since the govern-ment began keeping track in 1959.204

The resulting decline for forest-based building products has led to numer-ous mills being closed across the country, including three OSB mills and one engineered lumber mill in Minnesota.205 Figure 5.3 shows a representation of the current location of mills consuming wood.

Figure 5.3, OSB, Plywood, and Lumber OutputU.S. Lumber, Plywood, and OSB Output, 2000-2009

Plywood and OSB: APA-The Engineered Wood Association; Lumber: Western Wood Products Association and Southern Forest Products Association.

010,00020,00030,00040,00050,00060,00070,00080,000

out

put (

Mill

ion

boar

d fe

et)

Year

lumber

plywood

OSB

Figure 5.2Benway, S. (2012) Industry Surveys: Paper & Forest Products. New York, NY: Standard and

Poor’s. February 9, 2012. Standard and Poor’s NetAdantage. pg. 17.

0

5,000

10,000

15,000

20,000

25,000

30,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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u.S. Printing and Writing Paper output


Unfortunately, there are indications that the decline in demand for forest products that support the housing industry is likely to be sustained, as a slow emergence from the recent recession is preventing increases in new home construction over the near term.206


Build on Minnesota’s forest products strengths Minnesota has a diverse array of industries uti-lizing wood as a raw material today. In 2008, the total harvest of wood in Minnesota was 6.57 million green tons (MMGT).207 Of that, 75 percent was used in pulp and paper and OSB production, while 17 percent went into lumber and specialty products markets. The final 8 percent of the annual harvest, primarily made up of logging and mill residues or by-products, was used to produce heat and electricity.208

Below is a brief overview of the major wood-using industries in Minnesota.

Pulp and paper

Many of Minnesota’s paper mills rely on printing and writing paper markets, and they have a proud history of supplying quality products to the global marketplace.

The state is home to eight paper mills. Five of these that use timber directly from the forest, known as virgin wood fiber, consumed a total of 4.3 MMGT (1.9 million cords) of wood in 2008, or 52 percent of all wood used in Minnesota for the year.209 Two other paper mills in the state use recycled fibers, and one purchases pulp on the open market.

For Minnesota mills, low stumpage prices due to low timber demand combined with relative-ly high prices in the broader industry,210 re-sulted in higher revenue potential and declin-ing feedstock costs. This has served to keep pulping mills profitable in the short term.

In 2009, direct employment in pulp and pa-per mills totaled 2,830 people, and revenues totaled over $2 billion.211 However, a paper

Figure 5.4, U.S. Map of Minnesota’s Forest-Based ProductsBecker, Dennis et. al. (2010) 2010 Outlook for Forest Biomass

Availability in Minnesota: Physical, Environmental, Economic, and Social Availability. Retrieved October 19, 2010 from

http://www.forestry.umn.edu/Publications/StaffPaperSeries/index.htm Minnesota’s forest resources 2009. (2010) Saint Paul, MN: Minnesota

Department of Natural Resources. Pg. 9. Retrieved on September 12, 2011 from http://files.dnr.state.mn.us/forestry/um/forestresourcesreport_09.pdf

Figure 5.5Minnesota’s forest resources 2009. (2010) Saint Paul, MN: Minnesota

Department of Natural Resources. Pg. 9. Retrieved on September 12, 2011 from http://files.dnr.state.mn.us/forestry/um/forestresourcesreport_09.pdf

Pulp and Paper52%

Engineered Wood

Products23%

Lumber and Specialty Products

17%

Heat and Electricity

8%

Minnesota Wood Consumption


mill in Sartell, in central Minnesota, announced a significant decrease in ca-pacity, and another mill in Cloquet, in northeast Minnesota, announced a tran-sition to chemical pulp production.212, 213 These stories illustrate the results of shifting demand in the marketplace toward alternative wood-based products.

Engineered wood productsAs recently as 2005, five OSB facilities and one engineered lumber facility were operating in Minnesota.214 However, only two of these facilities are still operating and today, with the result that 1.1 million cords (2.5 MMGT) of pulpwood demand has been taken off the market. According to an analysis by the University of Minnesota-Duluth, shuttering these facilities resulted in the direct loss of 750 jobs, with an additional 1,245 jobs lost due to the spillover effects of the plant closures through the rest of the state’s economy.215

Efforts are now under way to redevelop the three former OSB production facilities. With a significant amount of wood supply available to be processed, these facilities are actively exploring a variety of end markets to use locally available wood. Partnerships are being pursued to manufacture products such as emerging building products, biochemicals, cellulosic biofuels, and pellet manufacturing. Profitable redevelopment of these manufacturing sites will be a critical strategy for the region to gear up for an economic resurgence.

lumber There are over 500 sawmills producing lumber across Minnesota.216 The industry procures 1 MMGT of wood per year,217 and employs 583 people.218 Many of these are small operations, as only four of these sawmills consume more than 79,000 MMGT (about 35,000 cords) per year.219 As mentioned previously, the recovery in demand continues to be slow.

In addition to lumber, these sawmills generate significant amounts of woody biomass by-product, with many operations selling this biomass by-product to downstream processors for markets such as animal bedding. Opportunities for biofuels and biochemicals to create strong partnerships to further process by-products produced by these mills could help diversify production at these facilities while increasing the value-added to wood raw materials.

Heat and electricityAs a cold-weather state with strong power demand from the manufacturing sector and significant biomass resources available, Minnesota has an opportu-nity to increase production of heat and electricity from biomass. As of 2009, Minnesota had 41 facilities that produced energy from biomass, with a ma-jority of the wood consumed by a small number of utility-scale producers of electricity or large industrial facilities.220 Total consumption of wood by these facilities was around 1.8 MMGT, including combustion of by-products from industrial operations, as well as logging residuals harvested from the forest.221 Additionally, residential consumption of fuel wood for residential heating was 1.5 MMGT in the winter of 2007 and 2008.222


Advanced biofuels and biochemicalsMinnesota currently has only one biobased chemicals production facility, the Lonza facility in Cohasset, described in the sidebar on page 63. However, additional opportunities for growing Minnesota’s economy through the devel-opment of liquid fuels and biochemicals are expected over the next decade. A system dynamics model developed in 2010 demonstrated that building two full-scale manufacturing facilities would result in the addition of 625 jobs across the northern Minnesota economy, representing a recovery of nearly one-third of the jobs lost in the recent decline in OSB production. Additional jobs would be created and preserved through partnerships with existing mills, with direct and indirect employment growth from forest biorefineries pro-ducting advanced biofuels and biochemicals estimated at up to 2,000 direct and indirect jobs by 2025.

Increasing biomass supply through silvicultural improvementsThe forestry industry is facing increasing pressure to increase output as a result of concerns about forest health, demand for woody biomass, carbon pricing, and increasing demand for forest-based products due to global population growth. To balance these demands for increased output with economic and en-vironmental concerns will require the active employment of silviculture, which is the practice of caring for and cultivating forest trees.223 Minnesota’s opportu-nity lies in using silvicultural practices to increase biomass supply for emerging industries while improving forest health, productivity, and wildlife habitat.

An example of a silvicultural treatment is the partial thinning of forest stands. In this process, a portion of the trees and biomass in a stand are removed ahead of the scheduled harvest date, thus decreasing competition for light and nutri-ents for the timber left standing. This thinning can lead to greater biodiversity and restoration of healthy stand dynamics, minimize the risk of fires and dis-ease, and increases the total biomass produced in some forest types.224

However, tight government budgets across the country are leading to declin-ing focus on these long-term investments.225 Without ongoing support for silviculture, there is a danger that the growth and health of forests will be impeded, along with the vitality of the industries that depends upon them.

Prosper from Minnesota’s strengths in sustainable forest managementIn addition to a large supply of raw materials and existing bioprocessing infra-structure, Minnesota’s environmental record has the potential to differentiate the state’s resources in the global marketplace for sustainable products. The Sustainable Forest Resources Act 1995 created strong programs to protect for-est health across Minnesota, and established the Minnesota Forest Resources Council to promote long-term sustainable management of Minnesota’s for-ests.226, 227, 228 The Council’s Timber Harvest Site-Level Management Guidelines, landscape-level conservation, and education programs are designed to ensure that Minnesota maintains sustainable and healthy working forests.


One major benchmark of progress for Minnesota’s forest management pro-grams has come through the state’s leadership position in forest management certification. Two of the country’s major certification bodies are the Forest Stewardship Council and Sustainable Forestry Initiative, which together provide oversight to ensure the implementation of management plans that provide for the long-term ecological health of the forest.

The Minnesota Department of Natural Resources, the largest manager of for-estland in Minnesota, is the world’s largest holder of certified lands from the Forest Stewardship Council.229 Over 8.4 million acres of forests in Minnesota are certified as sustainably managed, which is over half of the total timber-land in the state.230

Additionally, nearly all wood consumed in Minnesota is harvested by expert loggers who have been trained on emerging technologies, environmental regulations, and wildlife impacts, which ensures appropriate care of the forest and professional delivery of feedstocks relied on for industrial activity.231

For certain products that rely on green attributes of final materials, certifi-cation of forest supply can be a critical point of differentiation for products made from Minnesota’s wood supply. This can help companies access the market and maintain strong pricing structures for green products.


Support and expand forest management capabilityIt is important that Minnesota ensure the long-term supply of wood through for-est management and increased utilization. This recommendation was first identi-fied in the report “Minnesota’s Forest Biomass Value Chain: A System Dynamics Analysis,” published in 2010.232 This recommendation remains critical today.

Effective forest management involves managing forests to meet the needs of the present without compromising the ability to meet the needs of future genera-tions. This requires practicing a land stewardship ethic that integrates the growing, nurturing, and harvesting of trees for useful products with the conser-vation of soil, air, and water quality; wildlife and fish habitat; and aesthetics.233

Maintaining both forest management capability and long-term supply are prerequisites for successful long-term growth in any forest-based industry. A reliable supply chain is critical for investment into traditional forest products as well as emerging advanced biofuels and biochemicals industries.

Underutilization of Minnesota’s forests is one of the factors threatening Minnesota’s logging infrastructure and the capability to manage its for-estland. Forest products provide a base for the economy, and good forest management programs are a long-term investment into the growth of em-ployment in the forest-based economy. Four tactics were identified by The BioBusiness Alliance of Minnesota and forest industry stakeholders while developing the strategic recommendation:


• Ensure stable financial support for public forest management agencies.

• Maintain and expand active forest management for forest health, long-term forest productivity, and the sustainability of wildlife habitat.

• Support market development efforts in wood based industry to ensure the health of the logging and trucking infrastructure.

• Improve access to capital to ensure the logging industry remains competitive.

Identify and pursue partnerships Bioindustrial processing is growing quickly, and the specific opportunities for growth are diverse, ranging from biofuels to plastics to solvents. However, the barrage of information can be overwhelming for individuals with limited time to study these opportunities. Minnesota is in the position to set itself apart by helping owners and operators of the conventional biobased industry to:

• Understand the markets for advanced biofuels and biochemicals,

• Build relationships with companies pursuing partnerships with existing infrastructure, and

• Analyze the types of partnerships being developed in the broader industry.

Through the successful implementation of biorefinery projects, the value added to existing commodity businesses can create jobs and spur rural eco-nomic development.

leverage partnerships to navigate regulations and financial programsOnce partners and pathways to commercialization are identified for a project, an analysis of regulations and government financing programs are a criti-cal piece to the project’s success. However, the policies are complicated and can be restrictive. Thus, efforts to secure regulatory approval and federal financing for new bioprocessing projects can be resource intensive. Providing assistance to understand these issues can increase the likelihood of leverag-ing federal funds for Minnesota projects, as well as accelerating the regulatory process, both of which are factors that can ensure the profitability of invest-ments, as well as maximizing job creation potential.

endnotes186. The emerging biobased industry includes the value chain for advanced biofuels, biobased

chemicals, bioenergy, biopolymers, and bioplastics.

187. Deckard, D. (2011) Minnesota’s Forest Products Industry at a Glance. Saint Paul, MN: Minnesota DNR, Division of Forestry.

188. The Economic Impact of Declines in Forestry-Related Industries in Minnesota, Wisconsin and a Three-State Region Part 2: Targeted Impacts—Oriented Strand Board Wood Manufacturing. (2008) Duluth: University of Minnesota, Duluth Labovitz School of Business and Econoimcs. Pg. 11.

189. BBAM analysis.


190. BBAM analysis based and Minnesota data from: Minnesota Unemployment Statistics LAUS (Local Area Unemployment Statistics) Data (2012.) St. Paul: Minnesota Department of Employment and Economic Development. Retrieved on February 6, 2012 from http://www.positivelyminnesota.com/apps/lmi/laus/CurrentStats.aspx. Data used: Minnesota Economic Development Regions 1,2,3,5,7E, and Statewide.

191. BBAM analysis.

192. Minnesota’s forest resources 2010 (2010). Saint Paul, MN: Minnesota Department of Natural Resources. Pg. 13. Retrieved on October 15, 2011 from http://files.dnr.state.mn.us/forestry/um/forestresourcesreport_10.pdf.

193. Ibid. Pg. 2.

194. Deckard, Don. (2010). Economic Opportunities for Minnesota’s Wood. Unpublished Document. May 2010.

195. Minnesota’s Forest Biomass Value Chain: A System Dynamics Analysis. (2010) Minneapolis, MN: The BioBusiness Alliance of Minnesota. November 2010. Retrieved on November 30, 2010 from http://www.biobusinessalliance.org/Northeast_Forest_Biomass.asp.

196. Minnesota’s forest resources 2010 (2010). Saint Paul, MN: Minnesota Department of Natural Resources. Pg. 24-54. Retrieved on October 15, 2011 from http://files.dnr.state.mn.us/for-estry/um/forestresourcesreport_10.pdf.

197. Ibid. Pg. 14.

198. Benway, S. (2012). Industry Surveys: Paper & Forest Products. New York, NY: Standard and Poor’s. February 9, 2012. Standard and Poor’s NetAdantage. pg. 12.

199. Ibid.

200. Ibid.

201. Deckard, D. and Skurla, J. (2011). Economic Impact of Minnesota’s Forest Industry-2011 Edition. St. Paul, MN: MN Department of Natural Resources. April 2011 pg. 17. Retreived on November 20, 2011 from http://files.dnr.state.mn.us/forestry/um/economiccontributionMN-forestproductsindustry2011.pdf.

202. Ibid.

203. Ibid.

204. US Census Bureau (2010). New Privately Owned Housing Units Started. Retrieved on September 28, 2010, from http://www.census.gov/const/startsan.pdf

205. Minnesota’s forest resources 2009 (2010). Saint Paul, MN: Minnesota Department of Natural Resources. Pg. 2 Retrieved on September 12, 2011 from http://files.dnr.state.mn.us/forestry/um/forestresourcesreport_09.pdf.

206. Deckard, D. and Skurla, J. (2011). Economic Impact of Minnesota’s Forest Industry-2011 Edition. St. Paul, MN: MN Department of Natural Resources. April 2011 pg. 15. Retreived on November 20, 2011 from http://files.dnr.state.mn.us/forestry/um/economiccontributionMN-forestproductsindustry2011.pdf.

207. Calculated using a conversion factor of 2.25 Green Tons/ Cord of wood Minnesota’s forest resources 2010. (2010) Saint Paul, MN: Minnesota Department of Natural Resources. Pg. 19. Retrieved on October 15, 2011 from http://files.dnr.state.mn.us/forestry/um/forestresources-report_10.pdf.

208. Ibid.

209. Ibid.

210. Deckard, D. (2011) Minnesota Department of Natural Resources. Presentation to the Minnesota Logger Education Program. April 2011. Slide 24,31.

211. Skurla, J.A. (2011) Northern MN Forestry Analysis. St. Paul: Minnesota Forest Resources Council. June 2011. Pg. 21. Retrieved on December 10, 2011 from http://www.frc.state.mn.us/documents/council/MFRC_Report_NMN_Econ_Skurla_2011.pdf.

212. Deckard, Don (2011) Verso to shut three paper machines, cut 300 jobs. Wood Markets Monthly. St. Paul, MN: MN Department of Natural Resources. 26 October 2011.


213. Sappi limited announces major investment in North American operations. (2011) Boston and Johannesburg: Sappi Limited. Retrieved on December13, 2011 from http://www.na.sappi.com/aboutus/news/2011-11-10.

214. Minnesota’s forest resources 2009 (2010). Saint Paul, MN: Minnesota Department of Natural Resources. Pg 8. Retrieved on September 12, 2011 from http://files.dnr.state.mn.us/forestry/um/forestresourcesreport_09.pdf.

215. The Economic Impact of Declines in Forestry-Related Industries in Minnesota, Wisconsin and a Three-State Region Part 2: Targeted Impacts—Oriented Strand Board Wood Manufacturing. (2008) Duluth: University of Minnesota, Duluth Labovitz School of Business and Econoimcs. Pg. 11.


217. Deckard, Don. (2010). Economic Opportunities for Minnesota’s Wood. Unpublished docu-ment. May 2010.

218. 2007 Economic Census Data- Sawmills: NAICS 321113 (2009). Retrieved on March October 30, 2010, from www.census.gov.


220. Anna Dirkswager, Personal Communication, October 21, 2010.

221. Ibid.

222. This figure does not include wood burned for leisure. Barzen, et. Al. (2011) Residential Fuelwood Assessment: State of Minnesota, 2007-2008 Heating Season. St. Paul, MN: MN Departmetn of Natural Resources. Pg. 26. Retrieved on September 7, 2010 from http://files.dnr.state.mn.us/forestry/um/residentialfuelwoodassessment07_08.pdf.

223. Bowyer, Jim (2009). The power of silviculture: Employing thinning, partial cutting systems, and other intermediate treatment. Pg. 2. Minneapolis, MN: Dovetail Partners Inc. Retrieved on June 3, 2010, from http://www.dovetailinc.org/files/DovetailSilvics0509.pdf.

224. Ibid.

225. Anna Dirkswager, Personal Communication, October 21, 2010.

226. Kilgore, et al. (1996). Innovative Forestry Initiatives: Minnesota Prepares for the Future. Journal of Forestry 94(1) 21-25. View the act here: https://www.revisor.mn.gov/statutes/?id=89a&view=chapter.

227. Sustainable Forest Resources Act (2009). St. Paul: Minnesota Forest Resource Council. Retrieved on February 6, 2011 from www.frc.state.mn.us/aboutus_origins_act.html.

228. View the act here: https://www.revisor.mn.gov/statutes/?id=89a&view=chapter.

229. Forest certification: What is forest certification? (2012). St. Paul, MN: Minnesota Department of Natural Resources. Retrieved on January 15, 2011 from http://www.dnr.state.mn.us/forestry/certification/index.html.

230. Minnesota forest certification data (2011). St. Paul, MN: Minnesota Department of Natural Resources. Retrieved on January 15, 2011 from http://www.dnr.state.mn.us/forestry/certifica-tion/certifiedforest_data.html.

231. A lot goes into caring for Minnesota’s forests (2009). Duluth, MN: Minnesota Forest Industries. Pg. 5. Retrieved on January 15, 2011 from http://minnesotaforests.com/resources/pdfs/factbook.pdf.

232. Minnesota’s Forest Biomass Value Chain: A System Dynamics Analysis (2010). Minneapolis, MN: The BioBusiness Alliance of Minnesota. November 2010. Retrieved on November 30, 2010 from http://www.biobusinessalliance.org/Northeast_Forest_Biomass.asp.

233. Sustainable forest management: The role of the USDA Forest Service, Northeastern Area and State Forestry Agencies (2000). Washington DC: USDA Forest Service. Retrieved on December 7, 2011 from na.fs.fed.us/spfo/pubs/sustain/role/roles.pdf.


VI. Policy Development for Bioindustrial Processing

In order to capture the full development potential of Minnesota’s biomass re-sources and create a strong foundation for bioindustial development, policies will be needed for biobased chemicals and next-generation biofuels. This sec-tion provides some policy context for bioindustrial development, background on biobased chemical and commercial-scale next generation biofuel projects, and examples of what other states have done to attract next-generation bio-fuel companies. It concludes with a set of broad policy recommendations that provide a general framework to foster development of a bioindustrial sector in the state of Minnesota.

The policy chapter was prepared with extensive input from a policy commit-tee consisting of state legislators; state agency staff; representatives from the biofuels and bioproducts industry, environmental and conservation groups; and other stakeholders see Appendix F.

The deliberations of the policy committee were informed by a series of in-depth interviews with senior management at Minnesota-based bioproduct companies and other related companies (BioAmber, XLTerra, Reluceo, Segetis, NatureWorks LLC, First Green Partners, and Great River Energy) and next-generation biofuel companies planning projects in the Midwest or headquartered there (Gevo, Poet, Abengoa, INEOS Bio, Quad County Corn Processors, and Virent).

Staff of the Great Plains Institute conducted additional research to create the maps and charts, and benchmark Minnesota’s policy and regulatory environ-ment against competing U.S. states.

Policy overview

Biobased chemicals and bioproductsWhile many public policies are designed to promote biofuels, less has been done to explicitly drive the development of biobased chemicals and bioprod-ucts. The U.S. Department of Agriculture (USDA) has in place a BioPreferred Program that labels biobased products certified by the USDA and gives a pref-erence for federal procurement of biobased products.234 In February 2012, President Obama issued a Presidential Memorandum outlining steps to take greater advantage of the BioPreferred Program and significantly increase federal procurement of biobased products.235 In conjunction with Obama’s announce-ment, Senator Debbie Stabenow (D-MI), chair of the U.S. Senate Agriculture Committee, announced a new initiative to increase biobased manufacturing and procurement of biobased products. The Grow It Here, Make It Here initiative proposes to strengthen the BioPreferred Program, help commercialize biobased


projects, provide biobased manufacturers access to the USDA Biorefinery Loan Guarantee Program, and provide a new tax cut for biobased product manufac-turers that build facilities or purchase new equipment.236

In November 2007, a group of Midwestern states agreed to jointly establish a Midwestern regional biobased product procurement system to support devel-opment of the region’s bioeconomy.237 The system would allow states to pref-erentially procure biobased products. Representatives from Indiana, Iowa, Kansas, Michigan, Minnesota, North Dakota, Ohio, and South Dakota met in 2008 to develop model guidelines for creating a Midwestern system. Many of those states have since adopted biobased product preferences at the state level through statute or regulatory change. Minnesota officials indicated at the time that Minnesota did not need to adopt new policy because it intended to pursue increased procurement of bioproducts under existing statute.

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1 BioAmber MN 12 Cobalt Technologies CA 23 Elevance IL

2 Cargill MN 13 Verdezyne CA 24 Dow MI

3 CHS MN 14 Genomatica CA 25 MBI MI

4 Cortec MN 15 Rivertop Renewables MT 26 Eastman Chemical Company TN

5 Entropy Solutions MN 16 OPX Biotechnologies CO 27 Butamax DE

6 NatureWorks, LLC MN 17 Gevo CO 28 DuPont Tate & Lyle DE

7 Segetis MN 18 Zeachem CO 29 Itaconix NH

8 Butrolix MN 19 SoyGold NE 30 Metabolix MA

9 West Central Renewable Ammonia Development

MN 20 MCPU Polymer Engineering, LLC

KS 31 Celexion MA

10 Syngest CA 21 Agrol AR 32 Myriant Corporation MA

11 Rennovia CA 22 ADM IL

Figure 6.1, Biobased Chemical Company Headquarters


Although federal policy is driving the development of the next-generation fuels industry, and market forces are driving the development of a biobased chemicals industry, state policy is playing a crucial role in determining which states benefit from these industries. Individual states are implementing a range of policies to attract biobased chemical and bioproduct facilities. Figure 1 shows the headquarter information for biobased chemical companies across the United States. Additional information about many of these companies is included in Appendix E.

Biofuels Minnesota’s existing conventional biofuel facilities are adopting innovative technology practices and production efficiencies to improve the performance of the production system and reduce energy and water use. Process improve-ments such as recovery of waste heat or combined heat and power are being used to reduce demand for natural gas in the ethanol production process. In addition, reusing or recycling water at ethanol facilities has not only cut freshwater demands, but also has reduced energy use since recycled water requires less heating. In 2008, the average dry mill ethanol plant used 47 percent less water per gallon of ethanol produced than in 2001.238 In addition to process improvements, adoption of new technology such as biogas recovery systems and biomass combustion can reduce natural gas inputs. These new approaches to achieving energy and water efficiency also can be incorporated at next-generation biofuel facilities.

Development of a next-generation biofuels industry is being driven in large part by federal policy. As discussed above in section “III: Downstream Market Development – Biofuels” the Federal Renewable Fuels Standard (RFS2) mandates the purchase of cellulosic and advanced biofuels. Due to RFS2 re-quirements, several commercial-scale facilities have been announced to come on-line by the end of 2013.

In addition to RFS2, the Federal Farm Bill currently offers many programs that support the development of bioindustrial projects by offering producer payments, tax credits, loan guarantees and/or grants. Farm Bill programs include the Advanced Biofuels Payment Program and Tax Credits, the Biomass Research and Development (BRDI) grant program, the Biomass Crop Assistance Program (BCAP), the Biorefinery Assistance loan guarantees, and the Rural Energy for America Program (REAP). The Farm Bill expires in 2012, and the future of these programs is dependent on reauthorization. Given the tight fiscal constraints at the federal level, the long-term future of these programs is uncertain.

State policies are also steering industry development. As discussed above in Section III: Downstream Market Development - Biofuels, the state of Minnesota utilized a very effective public-private partnership and policy strategy to drive the development of a successful conventional biofuels indus-try. “The Minnesota Model” served as a case study of success for other states as they designed policy and public partnerships to drive biofuel develop-ment. Minnesota currently has the opportunity to replicate its own success


as policies are discussed to support next-generation biofuels. However, this time around, Minnesota will face stiff competition from other states that are aggressively using state financing strategies as they seek to capitalize on the promise of the growing advanced biofuels industry.

Next-Generation biofuel facilities across the countryMany commercial-scale cellulosic and advanced biofuel facilities are expected to become operational by the end of 2013. Figure 6.2 shows facilities that, ac-cording to news reports and company statements, are expected to be operat-ing by the end of 2013. Additional information about these facilities is in-cluded in Appendix C. Some of these facilities are already under construction or gathering feedstock to prepare for production. As shown in the map, there are currently two main clusters of activity: the Midwest and the Southeast.

BlueFire

Elevance

Enerkem

KiOR

Fulcrum

Gevo

Gevo

Butamax

Mascoma

Diamond GreenDynamic Fuels

POET

Dupont

BARD

IneosBIO

Coskata

Fiberight

Abengoa4

5

67

8

9

10

121314

1516

321

11 17

18

1 POET Emmetsburg IA

2 Dupont Danisco Cellulosic Ethanol Nevada IA

3 Fiberight Blairstown IA

4 Abengoa Hugoton KS

5 Mascoma Kinross MI

6 BlueFire Renewables Fulton MS

7 Enerkem Pontotoc MS

8 Fulcrum McCarran NV

9 Coskata Boligee AL

10 Ineos Bio Vero Beach FL

10 Ineos Bio Vero Beach FL

11 KiOR Columbus MS

12 Butamax Lamberton MN

13 Gevo Luverne MN

14 Gevo Redfield SD

15 Dynamic Fuels Geismar LA

16 Diamond Green Norco LA

17 BARD Augusta GA

18 Elevance Natchez MS

Cellulosic Biofuel Advanced Biofuel Biomass-based DieselRenewable Fuel Standard Classification:

Renewable Fuel

Figure 6.2, Next-generation biofuel facilities announced to be on-line by the end of 2013


Although the Midwest has been the dominant region in developing a conven-tional biofuels industry, the Southeast is a major contender for leading the development of next-generation fuels. The Southeast’s strategy is defined by a willingness to aggressively pursue commercial-scale projects using public funds. Section III: Downstream Market Development - Biofuels contains greater detail on RFS2 including the different renewable fuel classifications.

Competitor analysis: How are other states attracting bio-industrial facilities? There are several successful strategies being utilized by other states that can be instructive as Minnesota works to develop its own strategy to attract bioin-dustrial facilities. Three states are profiled in this section: Iowa, Mississippi, and Louisiana.

iowaCurrently, Iowa has five planned next-generation biofuel projects. The state has an abundant corn-stover feedstock and has benefited from long-term leadership from Iowa State University in feedstock and technology devel-opment. In addition, a large existing fleet of conventional ethanol facilities provide the opportunity to co-locate next-generation projects with existing plants. One of Iowa’s strongest elements for attracting facilities, however, has been the existence of the legislatively authorized Iowa Power Fund,239 which has provided funding to all five of the proposed next-generation biofuel facili-ties. See Figure 6.3 for additional details.

MississippiMississippi has been very successful at attracting next-generation biofuel projects. Four companies are planning to build commercial-scale facili-ties in Mississippi (see Figure 6.4 for additional details). One element of Mississippi’s success has been the willingness of state leaders to spend state dollars to attract facilities, in the hopes of a future return on investment in jobs and economic development. State leaders also have articulated a strategy to diversify the state’s energy mix, providing a broad vision to spur private investment. Additional successful elements include:

Iowa Power FundThe Iowa Power Fund was created in 2007. Available funding was appropriated by the legislature, sepa-rate from the general fund. No new money has been appropriated by the legislature to the Fund. The purpose of the fund was to increase research, development, production and use of biofuels and renewable energy, increase energy efficiency and reduce greenhouse gas emissions. An 18 member board reviewed grant applications and made awards from available funds. To date, the Fund has invested more than $71.6 million to 50 projects and has leveraged over $604 million in energy research, development, early-stage commercialization, and education.


• Active recruitment of companies by the Mississippi Development Authority,

• The Mississippi Industry Incentive Revolving Loan Program,

• University partnerships for feedstock characterization and develop-ment, and

• The willingness of state leaders to take high short-term risk in order to possibly gain in the future and reduce risk in the long term.

louisiana Louisiana also has been very successful in attracting commercial-scale next-generation biofuels projects. As shown in Figure 6.5, three companies are cur-rently planning facilities in the state. Among the drivers of the state’s success are an active Louisiana Economic Development Group and a unique “private activity bond” program, which allows the Louisiana Public Facilities Authority to issue bonds for financing of certain private-sector capital projects. In addi-tion, Louisiana’s FastStart program was recently ranked by Business Facilities Magazine as the number one workforce development program in the country. The state offers multiple state level tax incentives, many of which are “per-formance based” and will only be awarded if permanent jobs are created. The state also has abundant natural gas resources, which attracted Sundrop because its process requires natural gas (see Figure 6.5).

Figure 6.3, Next Generation Biofuel Projects – Iowa

Project Name Projected Capacity

million gallons per year (mgpy)

Feedstock Source Biofuel Type Public Funding and Source

PoET Project liberty

20 Corn stover Cellulosic ethanol $14,000,000 Iowa Power Fund

Quad County Corn Processors

2 Corn kernel fiber Cellulosic ethanol

$150,0000IA Dept of Economic Development$1,450,000Iowa Power Fund

Dupont ~25 Corn stover Cellulosic ethanol

$9,000,000 Iowa Power Fund$8,700,000 Tax abatement

$4,600,000Tax credits

Fiberight 6 Municipal solid waste Cellulosic ethanol $2,900,000Iowa Power Fund

BioProcess Algae unknown Waste CO2 from ethanol production Biodiesel $4,100,000

Grants from State of IA





KioR*ColumbusNewton

11 mgpy33 mgpy

Wood Biomass-based hydrocarbon

$75 million loan from State of Mississippi

Enerkem 10 mgpy Municipal solid waste Cellulosic ethanol $130 million in federal funding, negotiating state funding

Bluefire 19 mgpy Wood Cellulosic ethanol Seeking $250 million DOE loan guarantee

Elevance 80 mgpy Natural oils Specialty chemi-cals and fuels

$25 million loan from Mississippi Industry Incentive Financing Revolving Fund, up-grades to Natchez/Adams County port

*KiOR is planning to build five facilities in Mississippi, the proposed projects located in Columbus and Newton have the most details available.

Figure 6.4, Next Generation Biofuel Projects – Mississippi

Figure 6.5, Next Generation Biofuel Projects – Louisiana




Sundrop 50 mgpy Wood waste com-bined with hydrogen Green gasoline

$18.5 million Louisiana Economic Development Group$450 millionPrivate activity bondsGrants for relocation of R&D facilities and employees

Dynamic Fuels 75 mgpy Animals fats and greases Renewable diesel $100 million

Gulf Opportunity Bonds

Diamond Green 137 mgpy Animals fats and greases Renewable diesel Unknown


Recommendations for Minnesota to Develop and Grow the Next-Generation Biofuels and Biobased Chemical Processing IndustryInterviews with leaders of bioproduct companies, research of state policies, and deliberation by the Policy Committee revealed that state policy can and does play a crucial role in attracting both company headquarters and bioin-dustrial manufacturing facilities. In fact, leadership by state policymakers is crucial in attracting these facilities.

The policy recommendations included in this section addresses the following areas in which state can provide leadership to help the bioindustrial cluster grow in Minnesota:

• Ensuring availability of funding options,

• Improving the regulatory environment,

• Encouraging the production and use of all biofuels,

• Providing infrastracture for higher blends of ethanol,

• Supporting state colleges and universities as business and talent incu-bators, and

• Strengthening preferred procurement for bioproducts.

These recommendations provide a broad framework for bioindustrial devel-opment for the state of Minnesota.

Ensure availability of funding optionsIn interviews with bioproduct and biofuel industry leaders, state financial incentives were frequently cited as being the most important element of state policy to attract biofuel and biobased chemical manufacturing facilities. Two main factors were noted:

• States are competing with other jurisdictions to attract facilities, and Minnesota should seek to be competitive.

• When states commit to help finance a facility, they have “skin-in-the-game” and are thus committed to helping prevent roadblocks that can often slow down or stop projects.

Interviewees noted that such financial incentives are relevant primarily for building demonstration or commercial-scale facilities, and are less relevant for attracting corporate headquarters.

RecoMMendationsThe following policy options should be considered:

1. Replicate the success of the conventional biofuels industry by recre-ating financing programs and providing tax credits to local financial

Elements of First Generation Biofuel Industry SuccessPrimary elements of success

• Producer incentives• Volumetric requirements

Secondary elements of success• State fleet fuel purchases• Grants • Low interest loans


institutions that help finance next-generation biofuels and biobased-chemical companies.

2. Reallocate existing payroll taxes from prioritized NAICS240 codes for agriculture-, forestry-, bioenergy- and bioproduct-related businesses to create a dedicated revenue source to fund and benefit innovative bioindustrial ventures. Adequately fund existing programs that support next-generation fuels and biobased-chemical industry development.

3. Leverage impact of state Conservation Improvement Program (CIP) investments with additional funding to help existing biorefineries be-come more efficient and cost-competitive through accelerated adoption of innovative existing and new technology.

4. Update and reform Minnesota’s distributed generation policies in order to support the renewable electricity component of biorefinery projects.

5. Adopt new policies or modify existing policies in order to support the use of biomass-based thermal energy production and heat recovery.

6. Modify existing infrastructure programs to better support the development of the advanced biofuels and biobased chemicals industry in Minnesota.

7. Create a small grant program to help companies obtain the data needed in order to provide highly competitive proposals to federal government grant solicitations, such as Small Business Innovation Research (SBIR) grants.

8. Assure that grant programs document the current status and change in status toward commercialization that will occur as a result of receiving grant dollars in order to provide metrics needed by major funders.

Improve the regulatory environmentAmid the recent economic downturn, bipartisan efforts are underway to optimize the permitting and regulatory process in an attempt to foster business develop-ment and job growth. In January 2011, Governor Dayton signed an executive order that established a goal for the Department of Natural Resources (DNR) and the Minnesota Pollution Control Agency (MCPA) to issue or deny a permit within 150 days from the time a complete application is received. The Minnesota State Legislature passed a bill to reinforce the Executive Order, and Governor Dayton signed it into law in March 2011. This law is commonly referred to as the “Environmental Permitting Efficiency” law. Governor Dayton has subsequently issued an Executive Order to the Environmental Quality Board to iden-tify recommendations to improve the environmental review process.

These measures are starting to show returns. In a February 2012 report to the Minnesota Legislature,241 MPCA documented that of the total number of applications received, the agency was able to process 2,514 permit applications: 1,647 were classified

Permitting for Small-Scale ExperimentationMPCA has a process in place to allow facilities to do future testing of fuels and other preauthorized activities by hav-ing conditions put in the permit ahead of time for expect-ed activity. This allows the facility some flexibility in small-scale experimentation without requiring an amendment to already issued permit. MPCA is willing to work with different industry sectors to develop standard language that could be put in all appropriate permits to facilitate increased small-scale experimentation efforts.


as priority (construction-based projects) and 867 as non-priority. Overall, 81 percent of all permits processed were issued within 150 days, and 99 percent of all priority permits were issued within 150 days.242

The DNR also submitted an efficiency report to the Minnesota Legislature in February 2012 indicating that of the 894 permit applications received be-tween July 1, 2011, and December 31, 2011, the DNR made final decisions on 99.6 percent within 150 days.

In January 2012, the governor announced the “Minnesota Business First Stop,” which will build upon efforts required by the Green Enterprise Assistance statute (Minnesota Statute 116J.437). The statute created a multiagency partnership to advise, promote, market, and coordinate state agency efforts to expedite economic development.

“Minnesota Business First Stop” is facilitated by the state Department of Employment and Economic Development (DEED) in partnership with the Minnesota Departments of Agriculture, Commerce, Transportation and Natural Resources; the Pollution Control Agency; and the Iron Range Resources and Rehabilitation Board. Minnesota Business First Stop will assist businesses seeking to expand or locate in the state by coordinating resources, expertise and assistance to expedite economic development and job creation in the state.

RecoMMendations

There are additional changes or streamlining efforts that could be imple-mented to increase efficiency in the permitting process. The following recom-mendations were identified as strategies to help the development of a bioin-dustrial sector for Minnesota:

1. Make sufficient funding available in order to expedite implementation of an interac-tive online permit submittal process in order to shorten permit review times. Review federal and state rules regard-ing classification of biomass-based materials as solid waste rather than feedstock to avoid additional solid waste regulations being applied to the biorefining industry and to promote environmentally sustainable use of available feedstocks.

2. Continue state efforts to facilitate data collection and sharing of emis-sions data for new biomass-utilizing technologies and feedstocks.

3. Support Minnesota Pollution Control Agency’s (MPCA’s) efforts to allow small-scale experimentation, with appropriate testing, without triggering

General Permit ProcessIf an industry has similar operations, emissions and is subject to the same federal regulation requirements, the MPCA has the ability to develop a general permit and issue a public notice. After the general permit is finalized, indi-vidual facilities can apply for coverage under the general permit. Generally, the approval process can take as little as two weeks. A general permit can allow facility modifica-tion without triggering a major amendment to the permit. MPCA is willing to work with different industry sectors to identify general permit needs and the process works best when an industry sector works closely with MPCA. A gen-eral permit process could be put into place if there is an industry sector that has as little as three planned facilities.


a requirement for a new permit. Encourage permit applicants to apply for a broad range of potential biomass fuels.

4. Review the Certificate of Need (CON) process to determine whether there are ways to shorten the approval time for biopower projects. The state’s Public Utilities Commission (PUC) must grant a CON for energy facilities with a combined generation capacity of 50 MW or greater. Currently, the Department of Commerce encourages project proposers to contact the department prior to filling a CON so that proposers are well-informed about the CON process, including options for requesting exemptions from filing requirements, in advance of filing a request for a CON and to help assure that applications are complete before be-ing submitted to PUC. If PUC guidance documents included a step to “Contact DOC to help assure application is complete” in-between the steps, “Applicant provides notice of intent to file to PUC” and “Applicant submits application to PUC,” then they would more consistently know the information needed prior to filing, avoid the need for lengthy follow-up information requests, and shorten the decision making process.

5. Create an industry-specific taskforce involving MPCA, industry, the Minnesota Department of Agriculture and other relevant agencies to explore ways to expedite permitting for biobased chemicals and next-generation biofuels. Look for ways to make it easier for small-scale (R&D, pilot) projects to be built without the same regulatory require-ments as in place for commercial-scale facilities.

6. Establish generic or general permitting categories for various biofuel/biomass technologies in order to facilitate more rapid permit review and in some cases eliminate the need for a permit or permit renewal.

7. Modernize environmental review mandatory category triggers to eliminate biases for or against specific transportation fuels. Review the efficacy of Environmental Assessment Worksheet (EAW) and Environmental Impact Statement (EIS) requirements for bioconver-sion, and consider creating categories for types of bioconversion that do not require an EAW or EIS.

Encourage the production and use of all biofuelsMinnesota has been a leader in fostering the development of a strong biofuels industry. Several pieces of Minnesota’s pioneering biofuel policies were de-veloped at a time when the renewable fuels available in the marketplace were limited almost exclusively to ethanol and biodiesel. However, technology has evolved, and biobased fuels are anticipated to become commercially available in the next few years. For example, one ethanol plant in Minnesota is now be-ing converted to produce biobutanol, and another has announced plans to do the same. In order for Minnesota to continue to be able to attract additional value-added biobased fuel producers, state statutes should encourage the development and utilization of emerging renewable fuels, while ensuring that previous investments in existing biofuels are protected.


RecoMMendationReview Minnesota statutes and renewable fuel goals to explore their inter-relationships and whether there are opportunities to strengthen the statutes and goals to be more inclusive of all renewable fuels, including those in the marketplace and those that may enter the marketplace, including those that fall under RFS2 and other federal statutes.

Provide infrastructure for higher blends of ethanolIn order to meet the renewable fuel volumetric requirements under RFS2 for ethanol, it will be necessary to increase the amount of ethanol blended into gasoline, in addition to using higher biofuel blends in flex-fuel vehicles. In addition to RFS2 requirements, Minnesota has an E20 mandate, setting a goal that all gasoline sold or offered in the state contain a blend of 20 percent ethanol. This mandate can be met by increasing the sale of E85 and midlevel ethanol blends or by increasing the amount of ethanol blended with gasoline by 20 percent, which requires a waiver from EPA. Currently, ethanol blends of 10 percent (E10) are included in approximately 99 percent of the gasoline mix nationwide. Many cellulosic biofuel producers will be limited by the same blending constraints as corn-based ethanol. In 2011, the U.S. Environmental Protection Agency (EPA) approved a partial waiver allowing ethanol blends of 15 percent (E15) for use in vehicle model years 2001 and newer. There are federal and marketplace issues that will need to be resolved for E15 imple-mentation to occur in individual states.

RecoMMendationsUsing Iowa’s E15 legislation as a model,243 appropriate state agencies should re-view existing statutes, codes, and regulatory actions that limit Minnesota’s abil-ity to sell E15 and higher blends. Minnesota should coordinate with other states that are pursuing similar steps. The review process should consider barriers to utilizing emerging biobased renewable fuels and make recommendations on how to overcome them to allow the sale of E15 and higher blends in the state.

There are also issues at the state level that will need to be resolved. In particu-lar, the following issues should be considered:

• Liability. MN may want to consider providing liability protection for retailers and other parties across the supply chain since E15 has only been approved in specific vehicles and engines.

• Fuel specifications. Code and regulatory fuel specifications should be reviewed to allow the sale of E15, and input specifications may need to be adopted to provide consumer protection without preventing E15 sales.

• Above-ground dispensers. Current fire codes may not account for ethanol blends above E10, and existing dispensers should be evaluated by the appropriate agency to determine if they can dispense E15. State officials should also be aware of evolving Occupational Safety and Health Administration (OSHA) requirements.


• Underground storage tanks (USTs). The appropriate regulatory agency should review UST compatibility based on guidance from the U.S. Environmental Protection Agency.

• Pump labeling. State requirements for pump labeling should be reviewed for interaction with federal requirements. ASTM-certified test methods for determining octane are currently being modified to accommodate E15.

• Consumer education. Industry efforts are currently under develop-ment to prevent misfueling. Minnesota could collaborate with these industry efforts.

Outstanding federal issues limiting E15 implementation at this time include: OSHA regulations for retailer insurance purposes, Reid Vapor Pressure (RVP) waiver for E15, and ongoing vehicle testing and litigation. On February 17, 2012, the EPA approved health effects data submitted by renewable fuel trade associations, and as a result fuel manufacturers and importers are now able to register to use E15. Minnesota should review specific state issues that may cur-rently prevent the sale of E15 and determine appropriate steps to resolve any barriers. This will ensure Minnesota will be ready to implement E15 fuel sales.

Support state universities as business and talent incubatorsDuring interviews conducted for this project, many representatives of Minnesota bioproduct and biofuel companies recommended an active role for the state’s higher education systems. Strong research universities and state colleges can help incubate development and growth of an industry cluster in many ways, including:

• Creating the opportunity for new spin-off companies,

• Partnering on product development,

• Preparing the 21st century workforce by expanding the pool of talent-ed students that can be recruited by Minnesota bioproduct companies,

• Providing seed funding for research to explore new ideas and direc-tions that will help generate the necessary data leading to large-scale research and demonstration projects, and

• Making equipment and laboratories available to companies for a fee.

The University of Minnesota has recently amended its intellectual property policy to make it easier for companies to collaborate with university research-ers while maintaining their intellectual property. Interviewees said that this was a positive step that would make collaboration easier, but they also recom-mended additional steps to make it easier to spin off companies from ideas generated at the university.

RecoMMendations1. Minnesota should provide sufficient resources for the University of

Minnesota and the Minnesota State Colleges and Universities sys-tem to develop additional capacity in bioproducts commercialization


and workforce development and to allow for academic-industry collaboration.

2. Minnesota should provide sufficient financial support for state-of-the-art infrastructure dedicated to bioproducts and biosystems research and education through:

• Supporting the remodeling and redesign of the historic Bioproducts and Biosystems Engineering building on the University of Minnesota’s St. Paul campus. This facility will be poised to house the National Center for Bioproducts and Biosystems Research, the first of its kind in the nation.

• Maintaining facilities that provide a safe environment for cutting-edge research and education.

3. The University of Minnesota should explore policies to make it easier to form spin-off companies.

• One area to consider is changing the university’s leave policy to make it easier for professors to take leave in order to start companies.

• The University should also consider creating endowed positions dedicated to spinning off intellectual property to the private sector to stimulate new start-up companies.

Strengthen preferred procurement for biobased productsMinnesota participated in a regional effort to increase state government pro-curement of bioproducts, and the final project report244 indicated that state officials had the authority without new legislation to preferentially procure bioproducts. However, it is unclear how much progress has been made by the state in implementing a system to increase such procurement or track prog-ress. Some interviewees reported that they had favorable experience with the federal BioPreferred Program, but none were aware of efforts by Minnesota state procurement officials to preferentially procure biobased products. Several reported that they found the USDA program to be very helpful in cre-ating early market demand and awareness of their products.

RecoMMendations1. The state should issue a public report on efforts to date to increase pro-

curement of biobased products.

2. The state should conduct marketing to make Minnesota companies aware of any program by the state to preferentially procure bioproducts. The state should consider extending the program to encourage procure-ment of bioproducts by local governments and the private sector.

3. The state legislature should consider enacting legislation to encourage the use of “bio”-based content in all industrial and consumer products by promoting labeling “bio” content in products. This would widely promote the use of bio-based content in all materials, chemicals, and energy, thus encouraging their more widespread use.


endnotes234. President Obama signs Presidential Memo that requires the federal government to increase

purchases of biobased products (2012). Washington DC: US Department of Agriculture. Retrieved on February 29, 2011 from http://www.biopreferred.gov/?SMSESSION=NO.

235. The White House (2012). Presidential Memorandum – Driving Innovation and Creating Jobs in Rural America thorugh Biobased and Sustainable Product Procurement. February 21, 2012. Retrieved on February 28, 2012 from http://www.whitehouse.gov/the-press-office/2012/02/21/presidential-memorandum-driving-innovation-and-creating-jobs-rural-ameri.

236. U.S. Senator Debbie Stabenow (2012). Chairwoman Stabenow Announces New “Grow It Here, Make It Here Initiatives to Advance Emerging Michigan Industry in Lansing.” February 21, 2012. Retrieved on February 28, 2012 from http://www.stabenow.senate.gov/?p=press_release&id=638.

237. Midwestern Governors Association (2008). The Midwestern Bioproduct Procurement System task Force Report. Retrieved on January 5, 2012 from http://www.midwesterngovernors.org/Publications/Bioproduct%20Report.pdf.

238. Renewable Fuels Association (2011). From farm to biorefinery: Ethanol production efficiency improves. August 18, 2011. Retrieved on February 16, 2012 from http://www.ethanolrfa.org/exchange/entry/from-farm-to-biorefinery-ethanol-production-efficiency-improves/.

239. Iowa Power Fund. (2011) Des Moines: Iowa Office of Energy Independence. Retrieved on March 5, 2012 from http://www.energy.iowa.gov/Power_Fund/.

240. The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyz-ing, and publishing statistical data related to the U.S. business economy.

241. Minnesota Pollution Control Agency (2012). Environmental Permitting: MPCA’s Semiannual Permitting Efficiency Report. February 1, 2012. Retrieved on February 2, 2012 from http://www.pca.state.mn.us/index.php/view-document.html?gid=17185.

242. Minnesota Department of Natural Resources (2012). Semi-Annual Environmental Permit Performance Report. February 1, 2012. Retrieved on February 2, 2012 from http://files.dnr.state.mn.us/aboutdnr/reports/legislative/2012-envpermitperf-report.pdf.

243. Iowa Renewable Fuels Association (2011). Moving E15 to the Consumer: The Iowa Model. August 23, 2011. Retrieved on February 8, 2012 from http://www.ethanol.org/pdf/content-mgmt/Monte_Shaw.pdf.

244. Midwestern Governors Association (2008). The Midwestern Bioproduct Procurement System Task Force Report. Retrieved on January 5, 2012 from http://www.midwesterngovernors.org/Publications/Bioproduct%20Report.pdf.


Retailer Packaged, Consumable Product

Product Manufacturer Final Product• Cleaning products• Mattress pad• Building products• Automotive parts• Cosmetics• Flavors and fragrances

Traditional ChemicalsIndustry

Primary Intermediate Chemical• Solvents• Reaction chemicals• Polymers• Material additives• Specialty chemicals

Next-Generation Biorefinery

Platform Chemical• Ethanol• N-Butanol• Iso-butanol• levulinic ketals• succinic acid

Appendices

APPENDIX A: DETAIlED VAluE CHAIN

Farmers/Foresters Biomass Feedstock• Corn• Soybean• Agricultural biomass• Woody biomass

Formulations and Blends• Polyurethane foams• Plastic products• Adhesives• Flavors and fragrances


Product Manufacturing

Specialty Chemicals and Formulations

Intermediate Chemicals

Super-Commodities, Platform Chemicals

APPENDIX B: CHEMICAl INDuSTRY oVERVIEW

The figure below describes the typical pathway for traditional chemicals manufacturing.Chemicals typically follow multiple processing steps through platform chemi-cals and intermediates before being converted into downstream products.

Renewable chemistry has the opportunity to have a significant impact on the industry in the direct conversion of renewable resources into an array of plat-form, intermediate, and specialty chemicals.

Gas Production oil RefineryNaptha Cracker

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C1- Methane C2- Ethylene C3- Propylene C4- Butylene BTX- Benzene, Toluene, Xylene


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feed

stoc

k

10In

eosB

IO

Cellu

losic

Bio

fuel

Vero

Bea

chFL

820

12Et

hano

lGa

sifica

tion-

Ferm

enta

tion

Yard

, woo

d an

d ve

geta

-tiv

e w

aste

s

11Ki

OR

Cellu

losic

Bio

fuel

Colu

mbu

sM

S63

2012

Bio-

base

d hy

droc

arbo

nPy

roly

sisW

oodc

hips

12Bu

tam

axRe

new

able

Fue

lLa

mbe

rton

MN

5020

13Bi

obut

anol

Ferm

enta

tion

Corn

13Ge

voRe

new

able

Fue

lLu

vern

eM

N18

2012

Biob

utan

olFe

rmen

tatio

nCo

rn

14Ge

voRe

new

able

Fue

lRe

dfiel

dSD

3820

13Bi

obut

anol

Ferm

enta

tion

Corn

15Dy

nam

ic F

uels

Adva

nced

Bio

fuel

Geism

arLA

7520

11Re

new

able

Di

esel

Fisc

her-T

rops

chAn

imal

was

tes

16Di

amon

d Gr

een

Adva

nced

Bio

fuel

Nor

coLA

137

2013

Rene

wab

le

Dies

elHy

drop

roce

ssin

gAn

imal

resid

ue

17BA

RDBi

omas

s-ba

sed

Dies

elAu

gust

aGA

1020

12Bi

odie

sel

Alga

e tr

anse

ster

ifica

tion

Alga

e

18El

evan

ce

Rene

wab

le

Scie

nces

Biom

ass-

base

d Di

esel

Nat

chez

MS

8020

13Bi

obut

anol

Tran

sest

erifi

catio

n/ca

taly

sisO

ils

*Cap

acity

: Mill

ion

gallo

ns p

er y

ear (

mgp

y)


APPENDIX D: lIST oF ouTPuTS FRoM BIoINDuSTRIAl PRoCESSING CoMPANIES

Category Base Chemical Carbons Market Company Pursuing Status FeedstockMost Likely Process

Transportation fuels AbengoaSolvent ADM

American Process**Bluefire Renewables

CargillCodexisCoskata

Dupont Danisco Cellulosic Ethanol Simple sugars and starches BiocatalysisGreat Plains Renewable Energy Cellulose* Thermocatalysis

Inbicon A/SIneos BioIogen

Many Indpendent CompaniesFrontier Renewables

MascomaPoetQteros

Virdnia**Solvents DowCoatings Genomatica Cellulose* BiocatalysisFuel Additive Simple sugars and starches ThermocatalysisPreservativeDisinfectant

De‐icing fluidsCosmetics

Transportation fuels GevoFibers ButamaxSpecialty ChemicalPlasticsPolymers Cellulose* BiocatalysisPackaging Simple sugars and starches ThermocatalysisBuytl RubberCoatingsFood PackagingDispersants

Transportation fuels ButrolixSolvent ButamaxPlastics Cathaway Industrial BiotechSpecialty Chemical Cobalt Technologies Cellulose* BiocatalysisTextiles Dow Simple sugars and starches ThermocatalysisCoatings GevoAgricultural chemicals DuPoint Tate & LyleResins Green BiologicsSealantsCosmeticsEngineered Plastics GenomaticaAdhesives BioAmberCoatings Myriant Corporation Cellulose* BiocatalysisUrethane Foams Simple sugars and starches ThermocatalysisElastic fibers

Vitamin C ADMCosmetics CargillHealthcareSweetner

Polyerethane foams SD Soybean ProcessorsAdhesives AgrolSealants BASF

Cargill BiohMCPU Polymer Engineering LLC

* In general, conversion of cellulose to fuels and chemicals is less developed than conversion of starches and sugars.** Produces mixed sugars for an array of products made from fermentation

FeedstocksSimple sugars and starches

CellulosicsOil

ScalesCommerical

Near CommercialPre‐ Commerical

ProcessBiocatalysis

ChemocatalysisThermocatalysis

Ethanol Commerical2

4

6

DuPoint Tate & Lyle Commercial

Isobutanol

Sorbitol

Isopropanol

n‐Butanol

Near Commercial

Simple sugars and starches BiocatalysisCommercial

4 Near Commerical

Butanediol 4 Pre‐Commercial

Eastman Chemical Company (formerly Tetravitae)

Oil Chemocatalysis

Commercial

Soy Polyols

1,3 Propanendiol Simple sugars and starches

Commercial

3

16, 18

3

Conversion performed by enzymes or microbes Conversion performed by non‐enzyme chemical reactionsConversion performed by heat

Agricultural Residues, Wood, Municipal Solid Wastes, Miscanthus, Switchgrass, Corn Stover, Wheat Straw, SorghumRapeseed, Soy, Palm, Algae, Jatropha

Large quantities produced for marketDemonstration/pilot facilities running, small quantites for saleNo revenue

Biocatalysis

Alcoho

ls

Corn, Sugarbeet, Sugarcane, Sweet Sorghum, Cassava, Molasses, Wheat Bran, Bagasse, Sugarbeet

Note: Not an Exhuastive List



PlasticsSolvent Cellulose* BiocatalysisSpecialty Chemical Simple sugars and starches ThermocatalysisPaints/Adhesives

Plastics (PLA) Purac Cellulose*Food Additive Galactic Simple sugars and starches

Myriant CorporationAbsorbants Myriant CorporationPaint Dow Cellulose* BiocatalysisCoatings OPX Biotechnologies Simple sugars and starches ThermocatalysisFibers ZeachemPigments BioAmberEngineered Plastics DSM/Roquette

Detergents MBI

Food Additives Myriant Corporation Cellulose* BiocatalysisClothing fibers Simple sugars and starches ThermocatalysisPolyerethanesDe‐icing fluidsResins & CoatingsCosmeticsSolvents

Food AdditiveSpecialty Chemical Cellulose* BiocatalysisPaper Sizing Agent Simple sugars and starches ThermocatalysisResin

Plasticizers Segetis Solvents Reluceo Cellulose* BiocatalysisPolyols Simple sugars and starches ThermocatalysisFuels, Fuel AdditivesPolyerethane foams

Detergents

Super Absorbant Polymers Simple sugars and starches

Water treatment Cellulose*Dispersants

DetergentsCorrosion inhibitors Cellulose* Biocatalysis

Building material additives Simple sugars and starches Thermocatalysis

Chemical Exfoliants

Food Additives VerdezyneEngineered Plastics BioAmberTextiles CelexionCarpets DSMResins GenomaticaUrethanes RennoviaCandles DuPoint Tate & LyleHydraulic Fluids BIOTORLubricantsPlasticizers

Fuels Renewable Energy GroupGreases CargillLubricants CHSBiodiesel Elevance (specialty chemicals)Modified Soy Oil Many Indpendent Companies

Detergents McGyan Biofuels

Personal Care Products MN Soybean ProcessorsPlastics Blue Marble Biomaterials

LS9SoyGold

* In general, conversion of cellulose to fuels and chemicals is less developed than conversion of starches and sugars.


CellulosicsOil

ScalesCommerical


ProcessBiocatalysis


2

5

Rivertop Renewables

Itaconix

Myriant Corporation

Sebacic Acid

Near‐Commercial

Biocatalysis

Chemocatalysis

Biocatalysis

?Oil

Simple sugars and starches

Pre‐Commercial

Commercial

Near Commercial

Pre‐Commercial

Oil

Levulinic Acid Derivatives

Fumaric acid

Succinic acid

12‐24

5

6

6

10

Near Commercial

Near Commercial

Pre‐Commercial

Pre‐Commercial

3

4

4

Organ

ic Acid

Corn, Sugarbeet, Sugarcane, Sweet Sorghum, Cassava, Molasses, Wheat Bran, Bagasse, SugarbeetAgricultural Residues, Wood, Municipal Solid Wastes, Miscanthus, Switchgrass, Corn Stover, Wheat Straw, SorghumRapeseed, Soy, Palm, Algae, Jatropha


Conversion performed by enzymes or microbes Conversion performed by non‐enzyme chemical reactionsConversion performed by heat

Acetic acid


Zeachem

Wacker Chemie

Lactic acid 3 Commercial Scale Biocatalysis

Pre‐Commercial

Fatty Acids

Glucaric acid

Adipic acid

Itaconic acid

Acrylic acid



Fertilizer Syngest

AerosolsFuels

PackagingMolded products BiocatalysisFibers Chemocatalysis

Precursor for Bisphenol‐A Butrolix

Cleaning Agent ButamaxCosmetics Cathaway Industrial BiotechSolvent Cobalt Technologies Cellulose* Biocatalysis

Dow Near Commercial Simple sugars and starches ThermocatalysisEastman Chemical Company (formerly

Tetravitae)Gevo

Green BiologicsSovert

Cosmetics AllylixFlavors and Fragrances Blue Marble Biomaterials

Food ingredients

Adhesives

Medical and Personal CareTires

Medical products MetabolixPackaging Tephin Cellulose*

Tianen Biopolymer Simple sugars and starchesTianjin GreenBio Materials Co., Ltd.

Packaging Natureworks Cellulose*Molded products Galactic Simple sugars and starchesFibers

Transportation fuels LS9Amyris

EnvergentGenencorGevo Cellulose* BiocatalysisKiOR Oil Chemocatalysis

Lanzatech Simple sugars and starches ThermocatalysisLS9

SapphireSolazymeTerrebon

* In general, conversion of cellulose to fuels and chemicals is less developed than conversion of starches and sugars.*** Ethylene products occurs through ethanol production.


CellulosicsOil

ScalesCommerical


ProcessBiocatalysis


many Pre‐Commercial

Hydrocarbo

n Fuels

Jet fuels, Renewable Gasoline, Renewable

Diesel

Ethylene 2 Commercial

Terpen

e Natural Terpenes Range Commercial

Alkene

Braskem

many

Genencor

BioP

olym

er

Polyhydroxybutyrate

Ketone

Acetone

Commercial

3 Other Chemical Intermediates

Amine

Ammonia 0 Pre‐Commercial

Pre‐Commercial

Pre‐Commercial

Simple sugars and starches**

Biocatalysis

Isoprene 5

Cellulose* Thermocatalysis

Biocatalysis

Ethe

r

Di‐Methyl ether

Biocatalysis

2 Chemrec

West Central Renewable Ammonia Development LLC

Conversion performed by heat

manyPolylactic Acid BiocatalysisCommercial


Conversion performed by enzymes or microbes Conversion performed by non‐enzyme chemical reactions


Corn, Sugarbeet, Sugarcane, Sweet Sorghum, Cassava, Molasses, Wheat Bran, Bagasse, SugarbeetAgricultural Residues, Wood, Municipal Solid Wastes, Miscanthus, Switchgrass, Corn Stover, Wheat Straw, SorghumRapeseed, Soy, Palm, Algae, Jatropha



Cellulose* Thermocatalysis


APPENDIX E: JoB CREATIoN oVERVIEWExpansion of the advanced biofuels and biobased chemicals industry holds potential for strong employment growth in the state of Minnesota, with the industry already contributing over 2,000 direct and indirect jobs in 2011.E1

As part of this report, a number of scenarios were evaluated, as detailed in the tables and figures below. Employment growth would occur in three categories:

1. Headquarters: The establishment of business centers in the state for administration and sales, research and development, and other central functions.

2. Agriculture biorefineries: The establishment of manufacturing capacity for advanced biofuels and biobased chemicals utilizing agri-culture-based resources for their feedstock.

3. Forest biorefineries: The establishment of manufacturing capacity for advanced biofuels and biobased chemicals utilizing forest-based resources for their feedstock.

The scenarios detailed below ONLY consider job impacts in the advanced biofuels and biobased chemicals industry. Additionally, the scenarios assume that jobs in the conventional biobased industry (including food, feed, conventional biofuels, and forest products) would be, at a minimum, preserved at today’s levels. An employment multiplier of 5.5 was used for all segments.E2 All figures below include both direct and indirect employment.

E1. To clarify these numbers, a more detailed analysis can be conducted on current employment numbers and projected growth.

E2. Biobased chemicals and products: A new driver for green jobs. (2011) Washington DC: Biotechnology Industry Organization. Retrieved on March 12, 2012 from http://www.bio.org/sites/default/files/20100310_biobased_chemicals.pdf

Table A: Total Bioindustrial Employment2011 Direct

Employment Estimate

2011 Estimate

2025 low-Growth

Scenario

2025 Most likely

Scenario

2025 Best Case Scenario

Headquarters 352 1,936 5,686 6,470 7,352

Agriculture Biorefineries 20 110 1,650 2,695 4,510

Forest Biorefineries 15 83 550 1,100 1,925

Totals 387 2,129 7,886 10,265 13,787


02,0004,0006,0008,000

10,00012,00014,00016,000

2011 2025

Num

ber o

f job

s

Bioindustrial Processing Employment

Best Case

Most Iikely

Low growth

Table B: Base Assumptions

Headquarters8% Annual Growth

from 20112025 Low-Growth

Scenario

9% Annual Growth from 2011

2025 Most Likely Scenario

10% Annual Growth from 2011

2025 Best Case Scenario

Agricultural Biorefineries

Retrofits 5 8 4

Bolt-on expansions 5 10 18

New construction 3 4 7

Total 13 22 29

Forest Biorefineries

Retrofits 0 0 0

Bolt-on expansions 2 4 6

New construction 1 2 4

Total 3 6 10

Table C: Job Impacts for Biorefinery Growth options

Definition Permanent jobs added

Total Employees

No Change Optimized first-generation facility, no expansion 0 25

Retrofit Retrofit to new chemical, minimal change to process and output, no new feedstocks 5 30

Bolt-on Expansions

Major investment into additional processing for fuels, chemicals or byproducts, before or after retrofit, OR bolt-on of cellulosic processing capacity to existing facility

25 50

New BiorefineryNew integrated biorefinery leveraging traditional crops with multiple product streams, OR new integrated cellulosic biorefinery

50 50

02,0004,0006,0008,000

10,00012,00014,00016,000

2011 2025 Best Case

Num

ber o

f job

sEmployment Breakdown- Best Case

Forest Biorefineries

Agriculture Biorefineries

Headquarters


APPENDIX F: MEMBERS oF THE MN BIo- INDuSTIRAl PARTNERSHIP PolICY CoMMITTEEAmy Berger, Minnesota Senate

Jennifer Berquam, Minnesota Senate

Ken Brown, Minnesota Department of Commerce-Division of Energy Resources

Neal Feeken, The Nature Conservancy

Kevin Hennessy, Minnesota Department of Agriculture

Kari Howe, Minnesota Department of Employment and Economic Development

Larry Johnson, LLJ Consulting & Business Development

Nancy Lange, Izaak Walton League of Minnesota

Peder Mewis, Minnesota Senate

Thom Petersen, Minnesota Farmers Union

Charlie Poster, Minnesota Department of Agriculture

Shri Ramaswamy, University of Minnesota

Melissa Rahn, Fredrikson & Byron, representing Gevo

Tim Rudnicki, Minnesota Biofuels Association

Mike Saer, Great River Energy

Jim Schmidt, Eide Bailly

Don Smith, Minnesota Pollution Control Agency

Elizabeth Tanner, Minnesota Corn Growers Association

Todd Taylor, Fredrikson & Byron

Dan Toivonen, Boise Inc.


Acknowledgements and Contact Information

The Minnesota Roadmap: Recommendations for BioIndustrial Processing is a combined effort of The BioBusiness Alliance of Minnesota, LifeScience Alley, and The Great Plains Institute.

An industry-led working group of dedicated stakeholders, known as The BioIndustrial Partnership of Minnesota, was heavily relied upon for thought leadership.

authoRsTim WelleProgram ManagerThe BioBusiness Alliance of Minnesota

David WhitehouseResearch AnalystThe BioBusiness Alliance of Minnesota

Ashley SturdevantTechnical Research AnalystThe BioBusiness Alliance of Minnesota

Rachel MannThe BioBusinesss Alliance of Minnesota

AuTHoRS: PolICY SECTIoNBrendan JordanDirector of Bioenergy and Transportation ProgramsGreat Plains Institute

Amanda BilekEnergy Policy SpecialistGreat Plains Institute

contactsThe BioBuisines Alliance of MinnesotaTim WelleProgram Manager [email protected] 952.746.3845

lifeScience AlleyRyan [email protected] 952.746.3818

Great Plains InstituteBrendan Jordan [email protected] 612.278.7152


The BioIndustrial Partnership of Minnesota is an industry-led working group who is dedicated to the growth of the advanced biofuels and biobased chemi-cals industry in Minnesota.

MEMBERS INCluDE:Bob Bossany

Ken Brown

Doug Cameron

John Christianson

Christina Connelly

Steve Davies

Mark Drake

Tess Fennelly

Kevin Hennessy

Georgie Hilker

Jim Hobbs

Kari Howe

Jack Huttner

Larry Johnson

Sherry Larson

Riley Maanum

Don Mattsson

Iain McNerlin

Jim Millis

Shri Ramaswamy

Mike Ritzenthaler

Mike Saer

Lori Sarageno

Jim Schmidt

Olga Selifonova

Steve Snyder

Michael Sparby

Todd Taylor

Bruce Tiffany

Dan Toivonen

Tony Wedell

Luca Zullo


ADDITIoNAl CoNTRIBuToRS:

We thank the industry, academic and government leaders who provided their professional support throughout the project, even though all could not be named.

Note: Institutional affiliations of the participants have not been identified as opinions expressed were those of the individuals that may or may not repre-sent the positions of their organizations.

Jim Benson

Amy Berger

Jennifer Berquam

Jeff Borling

Dave Chura

Don Deckard

Anna Dirkswager

Randy Doyle

Bill Faulkner

Neal Feeken

Tim Gerlach

Brad Heitland

Dave Hengel

Calder Hibbard

Anthony Hicks

Randy Hilliard

Nathan Koenig

David Kolsrud

Dave Krueger

Cathy Kueseman

Dave Ladd

Melissa Legge

Peder Mewis

Mark Lindquist

Cecil Massie

William Meehan

Tim Nolan

Gregg Patterson

Thom Peterson

Charlie Poster

Julie Rath

Steve Renquist

Tim Rhetter

Tim Rudnicki

Brad Saeger

Don Smith

Harold Stanislawski

Steve Stokke

Elizabeth Tanner

Denny Timmerman

Ryan Zemek

Dave Zumeta

Project editor:Gail O’Kane

Layout and Design:Kelsye A. Gould


lIFESCIENCE AllEY AND THE BIoBuSINESS AllIANCE oF MINNESoTA lEADERSHIP:

GREAT PlAINS INSTITuTE lEADERSHIP

Dale Wahlstrom CEO LifeScience Alley andThe BioBusiness Alliance of Minnesota

Jeremy LenzCOO The BioBusiness Alliance of Minnesota

Gregg MastV.P., Agriculture and Biomass Business ClusterThe BioBusiness Alliance of Minnesota

Rachel MannThe BioBusinesss Alliance of Minnesota

Rolf NordstromExecutive Director

Eric SchroederDeputy Director

Liz RammerCOO LifeScience Alley

Shaye MandleV.P. of Government & Affiliation Affairs LifeScience Alley


We don’t have stockholders, we have member-ownersIn many ways, Great River Energy is similar to other electric companies. But here’s where we’re different – we’re a cooperative. We are the wholesale power provider for 28 electric cooperatives who reachmore than 60 percent of Minnesota. These 28 cooperatives own us. Their member-customers own them.Rather than striving to meet the needs of stockholders, we strive to maintain values and priorities that meetour members’ needs. That’s the cooperative way.

The power behind your electric cooperative

greatriverenergy.com

Our Owners And Distribution Partners:Agralite Electric Cooperative, Benson • Arrowhead Electric Cooperative, Inc., Lutsen • BENCO Electric Cooperative, Mankato • Brown County RuralElectrical Association, Sleepy Eye • Connexus Energy, Ramsey • Cooperative Light & Power, Two Harbors • Crow Wing Power, Brainerd • DakotaElectric Association, Farmington • East Central Energy, Braham • Federated Rural Electric Association, Jackson • Goodhue County Cooperative Electric Association, Zumbrota • Itasca-Mantrap Cooperative Electrical Association, Park Rapids • KandiyohiPower Cooperative, Willmar • Lake Country Power, Grand Rapids • Lake Region Electric Cooperative, Pelican Rapids • McLeod Cooperative Power Association, Glencoe • Meeker Cooperative, Litchfield • MilleLacs Energy Cooperative, Aitkin • Minnesota Valley Electric Cooperative, Jordan • Nobles Cooperative Electric, Worthington • North Itasca Electric Cooperative, Inc., Bigfork • Redwood ElectricCooperative, Clements • Runestone Electric Association, Alexandria • South CentralElectric Association, St. James • Stearns Electric Association, Melrose •Steele-Waseca Cooperative Electric, Owatonna • Todd-WadenaElectric Cooperative, Wadena • Wright-Hennepin Cooperative Electric Association, Rockford


“Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” ~ Margaret Mead

Promoting the vital work

of Minnesota farmers since 1978.

mngrownethanol.info “Minnesota Corn” twitter.com/mncorn

MCGA blog at minnesotacornerstone.

wordpress.commncorn.org


Contact: Don Mattsson PhDButrolix LLC

2030 Lakeview Drive | Duluth, MN 55803

218.349.6075

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