July 15, 2008

Biofuels Plan Wins Grant: Refinery Proposed at Flambeau River Papers

By Joel Dresang and Thomas Content, Milwaukee Journal Sentinel

Jul. 15--After missing out twice before, a northern Wisconsin biofuels project got word Monday that it will receive federal funding, which one expert called historic for the state's emerging renewable energy industry.

The U.S. Department of Energy said it would provide up to $30 million for the $84 million biorefinery proposed at the Flambeau River Papers mill in Park Falls.

Executives for Flambeau River BioFuels said they're still negotiating on an exact amount, but the federal grant will accelerate the start-up of a refinery for renewable sulfur-free diesel fuel made from forest byproducts. The company expects the refinery to begin production of a projected 6 million gallons of transportation fuel a year in 2010.

The funding is good news both to the refinery project and the paper mill, said Bob Byrne, president of Flambeau River BioFuels, which will be able go fossil-fuel free thanks to excess energy generated by the refining process.

"There is a natural marriage between the paper mill and this biofuels plant," Byrne said. By locating the refinery at the mill, Flambeau can take advantage of the wood-handling skills, equipment and logistics of papermaking.

Masood Akhtar, president of CleanTech Partners of Madison, a consulting firm that has been working with Flambeau, sees the biorefinery concept as a way for struggling paper mills to find another product to sell. For the nation's leading papermaking state, it provides a parlay into new forms of energy production.

"This is really history that we are making in Wisconsin, because two of our paper companies have gotten the funding for biorefineries and only one mill in the U.S. was funded through this," Akhtar said. "That's really a significant milestone that we have accomplished in a relatively short period of time."

Next generation biofuels

In January, the Department of Energy announced a $30 million grant to NewPage Corp. for a biorefinery at its Wisconsin Rapids mill. The Ohio-based company has said it would study the feasibility of that project, which had been proposed by the mill's previous owner.

The Department of Energy also has granted an estimated $125 million to the establishment of the Great Lakes Bioenergy Research Center at the University of Wisconsin-Madison. The center and the paper mills are working to develop next-generation forms of biofuels that don't come from corn, soybeans or other foods.

Papermakers have another incentive to set up biorefineries because they rely heavily on natural gas, and natural gas prices have risen dramatically over the past 10 years. Prices are six times the level they were in the 1990s, and the price of natural gas has soared by 87% in the last year.

"It really provides an additional product for us," Byrne said. "It plays to our strengths. It allows us to diversify and really to set our business up to be successful for the coming couple of decades at least."

Business investors led by Hayward lumberman William "Butch" Johnson have been proceeding on engineering work for the biorefinery even though the Department of Energy passed up the project in January and April. Flambeau had state support and financial backing from Citigroup Global Markets, but executives said the federal funding approval will help win greater investor support.

Johnson, who grew up in Park Falls, helped reopen Flambeau River Papers after it closed two years ago. He has stressed that reducing energy costs at the plant would be crucial to continuing operations, which employ about 305 workers. According to Byrne, the mill has been hitting production records and shown profits in two of the last three months.


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