Sundrop Fuels staking future on biofuels plant in Rapides Station

01 04, 2012 by The Town Talk

Sundrop Fuels Inc. is betting $450 million on a planned biofuels facility near Alexandria.

More than that, the company is betting its future.

The plant off Interstate 49 in the Rapides Station area will be Sundrop's first production facility for its "green gasoline" -- a vehicle-ready transportation fuel made from woody biomass and natural gas.

It is the first step in an aggressive expansion plan. Within a decade, company executives envision Sundrop producing a billion gallons of fuel per year.

Fail to show its process is viable at the Alexandria plant, though, and those ambitious plans are likely dashed.

"In a small company like ours, this is the ball game," Chief Executive Officer Wayne Simmons said. "The reality with startups like ours is some fail at the lab level. Some fail at the pilot level. And some do fail at the demonstration level with their first commercial plant. The good news is we have gone over a lot of those hurdles already, but we still have to get over that last hurdle."

Sundrop was founded in 2008 with a $20 million investment from venture capital firms Oak Investment Partners and Kleiner Perkins Caufield & Byers.

It started with the acquisition of Los Alamos Renewable Energy, which was working on commercializing a process to "crack" carbon dioxide -- or split it into separate components -- using concentrated solar power.

Later that year, Sundrop acquired Copernican Energy, a University of Colorado-based company involved in high temperature biomass-to-gas conversion systems. Some of the core elements in the technology Sundrop uses were developed by and are licensed through the University of Colorado and the National Renewable Energy lab.

Eventually, equipment costs and restrictions in areas such as geography, weather patterns and limited exposure led Sundrop to look for alternatives to solar to power its reactor technology.

Natural gas, which could be more cheaply acquired, was a good fit. It also provided the huge advantage of making the "gasification" process much more efficient.

The key to Sundrop's green gasoline is the proprietary RP Reactor, which uses high-speed heat transfer to convert biomass material into synthetic gas.

Biomass converted fuels, though, generally have too low a hydrogen content to work in commercial engines. By adding hydrogen-rich natural gas as a feedstock, virtually all the biomass can be utilized, rather than wasting up to half of it, as some conversion processes do.

The synthetic gas is then converted to ready-to-use transportation fuels by a process developed by ExxonMobil.

In July, Sundrop announced a $155 million investment from energy giant Chesapeake Energy Corp., as well as additional investment from its other partners. Chesapeake, among other interests, is a major player in the Haynesville Shale, and gave Sundrop not only a potentially limitless supplier of natural gas, but also another layer of credibility.

"It's a lot more than money," Simmons said. "Obviously the money is a critical component. But there is a lot of knowledge Chesapeake brings to the table and a lot in terms of relationships already built. For example, as we began looking at the state as a potential site, (Louisiana officials) were probably wondering, 'Are these guys for real?' (Chesapeake) had a vice president come down to our meetings with Secretary Moret (head of Louisiana Economic Development Stephen Moret) and Secretary Angelle (head of the state Department of Natural Resources Scott Angelle)."

"None of us has the capacity to look so far in the future and say, 'This technology will work, and this technology won't work,'" said Jim Clinton, president of Central Louisiana Economic Development Alliance. "What makes us have a high level of confidence in Sundrop is their level of due diligence and their investors. To have invested at this level is a really significant factor."

Clinton called Sundrop's backers "a gold-plated group of investors," including Kleiner Perkins Caufield & Byers, which "developed the model for venture capital."

The Alexandria-area plant will be, relatively speaking, small. At least smaller than Sundrop's planned facilities for the future.

According to company releases, the local facility will produce 40 million to 50 million gallons of fuel annually. Planned future plants will produce four to five times that.

Simmons said "there are a lot of different places we can go" to market and sell the fuel. Much of it could be sold to refineries or other "blenders" to be mixed with traditionally made gas. Environmental Protection Agency regulations require refiners to blend a certain percentage of renewables into their petroleum fuels.

In its larger plants, Sundrop expects to be able to produce fuel for less than $2 a gallon. Since the Alexandria-area plant will be producing a lower volume, production costs should be higher.

But the facility isn't being built as a big moneymaker, just as a proving ground for the technology and a gateway to larger things.

"To step all the way to a billion and a half dollar plant is a really big step," Simmons said.

By at least generating enough income to service its debt, Simmons said, Sundrop's first production facility can be the key to securing financing for the dreamed-about larger plants.

Sundrop officials hope to have several more plants online by 2020.

Simmons called Sundrop's expansion plans "aggressive but doable."

"If you don't have line of sight to getting a billion gallons a year, you're not going to impact things much," he said.

That is the company's larger goal -- having a major impact on the direction of the country's energy future. A future that will see creative, more environmentally friendly solutions to reducing America's dependence on foreign oil.

"I think we can make a big change," Simmons said. "We're going to have to make a lot of big changes to get out of the hole we're in. I'm excited about being a significant part of that."