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From the New Uses Council's EverGreen newsletter Testimony before the United States Senate Committee on Agriculture, Nutrition and ForestryMarch 29, 2001Patrick R. Gruber, Ph.D.Vice President & Chief Technology Officer, Cargill Dow LLCExcerpts: "Our long-run business vision calls for us to process biomass (like stover), produce biofuels, feed products, chemical intermediates, specialty products and converted polymer products. . . Our biorefinery will have an advantage because it is geared to an industrial business system -- in contrast to a corn-wet mill, which is geared to food products. . . I suspect that with PLA market success we will see a full-fledged biorefinery grow up faster than anyone imagines. Marketplace economics will drive it. . . Biomass technology will also result in tremendously increased production of fuels and electricity without the need for subsidies or incentives because it is part of a biorefinery system." Mr. Chairman and distinguished members of the Committee, thank you for allowing me the opportunity to tell you about our company, products, technology, and how biomass fits into our plans -- although it appears that Senator Lugar and this committee have already figured out our plans from what I've read in the "National Sustainable Fuels and Chemicals Act of 1999." This bill is on target and it should be fully funded. However, while the bill authorized several U.S. Department of Agriculture biomass programs over the next several years, with all due respect, we believe that related programs at the U.S. Department of Energy should be authorized as well. The March 14, 2001 issue of Chemical Week Magazine has pictures of our new plant in a cover article titled: "Bioprocessing No Longer Field of Dreams". The article's main point is that bioprocessing targeted to chemical and polymer products is beginning this year. Contrary to what many believe, we are in fact commercializing a new family of polymer materials made from renewable resources that compete on price and performance with petrochemical based products. Cargill Dow LLC, formed in 1997, is a startup company seeded by Cargill Incorporated and The Dow Chemical Company and a number of banks. We carry our parent's name for the time being because it helps to open doors in the marketplace, but we are independent from them and "on our own." We have 150 direct employees, with an additional 50-75 under contract. Our headquarters and main laboratories are in Minneapolis, Minnesota. We also have offices and staff near Amsterdam and in Tokyo. I expect us to grow to approximately 300 direct employees by 2005. We are building a world-scale manufacturing facility in Blair, NE. This facility represents a capital investment of several hundred million dollars and is a result of approximately a $200 million investment in research and development over a period of 10 years. At capacity this plant will produce 300 million pounds per year of a polymer product. Our Blair plant starts up in November of this year. Let me step back and tell a more complete story. Our basic process technology combines biotechnology with bioprocessing and chemical process technology to produce a new family of polymers called PLA. It allows us to "harvest" the carbon that plants remove from the air during photosynthesis. Carbon is stored in plant starches and biomass, which can be broken down into simple sugars. These sugars are then fermented to make lactic acid (like making a wine or a beer), then the lactic acid molecules are chained together to make polymers, called polylactide (PLA). You are all familiar with lactic acid; it is the tart flavor in yogurt. Our long-run business vision calls for us to process biomass (like stover), produce biofuels, feed products, chemical intermediates, specialty products and converted polymer products. We realize that the market pull for PLA will provide a tremendous opportunity due to economies of scale for all of the products people discuss within the context of a biorefinery. Our biorefinery will have an advantage because it is geared to an industrial business system (in contrast to a corn-wet mill, which in geared to food products). We also realize the technology we are developing will have broad application for other industrial chemicals, polymers, and biofuels. We are already funding and developing biotechnology that can be applied to fuel ethanol as well as lactic acid. We'll back integrate to starches, whole corn, stover, then other biomass crops. The rate at which we can back integrate will depend on when the technologies are advanced enough and the risks are reduced enough so that we can convince investors to capital up. I suspect that with PLA market success we will see a full-fledged biorefinery grow up faster than anyone imagines. Marketplace economics will drive it. Market opportunity is created because the products work well, are cost competitive and are made from renewable resources (and therefore don't need price support in the market). PLA is the first family of polymers derived entirely from annually renewable resources with the cost and performance necessary to compete with traditional fibers and packaging materials. For fibers consumers, this will mean a new range of apparel and carpeting options using a material that "bridges" the gap between natural fibers such as silk, wool, and cotton, and conventional synthetic fibers. Clothing made with NatureWorks PLA products will feature a unique combination of attributes such as wrinkle resistance, superior hand, touch and drape, wicking and resilience. Fiber end-use markets are carpet, home and office furnishings, apparel, personal care products, and home and institutional products. In packaging applications, consumers will have the opportunity to use packaging that is natural, compostable, and based on renewable resources without any tradeoffs in product performance. The end use markets are film packaging, bottles, deli-containers, food and consumer packaging in Western Europe, Japan, and the United States. Market potential is very large. Long term, PLA should be able to compete successfully in several markets with an annual volume of more than 6.6 billion pounds. With technology and cost improvements, the markets expand to about 10 billion pounds of annual potential for PLA. The potential market value of annually renewable-resource-based thermoplastics based on PLA would be at least $6-$10 billion per year. The market is global. In addition, lactic acid can serve as a chemical intermediate. As our scale increases and the costs are driven out of the lactic acid manufacturing process, by switching feedstocks to biomass, we expect that lactic acid will be inexpensive enough to enable several other end markets in the chemical industry. These chemicals total an additional 3-4 billion pounds and market value of $1-4 billion per year. The market potential increases further and rate of penetration increases dramatically with lower production costs and corresponding lower sales price. The biggest cost component in our product is the sugar feedstock, hence we are committed to obtaining biomass sources of sugars and developing the technology suitable for our business. Very large quantities of crop and biomass-based fermentable sugar will be required. Our initial production facility of 300 million pounds per year will require 400 million pounds of lactic acid and 500 million pounds of corn dextrose. This amount of dextrose translates to 40,000 bu/day of corn, or on an annual basis 14 million bushels per year. We plan on purchasing dextrose from a corn-wet mill in the first few years until we are ready to back integrate into biomass. Our Blair plant alone should provide enough scale such that biomass processing becomes economical. Our business plan calls for us to have developed a market world wide of approximately a billion pounds of PLA by 2008 (one tenth of the available market). This translates to a business system requiring over 1.8 billion pounds per year of fermentable sugars just from PLA. Additionally we plan to out-license our polymer technology which would serve approximately another billion pounds polymer potential requiring an additional 1.8 billion pounds per year of fermentable sugars. If we are successful in broadening our technologies and if the key biomass enzyme suppliers, like Genencor and Novozyme are successful under their DOE funded programs, then the potential use of biomass derived sugars could go up by an order of magnitude to tens of billions of pounds use driven just by PLA products and related technologies. As a side benefit, biomass to biofuels becomes fully enabled, because the underlying bioprocess technology and infrastructure on the raw material side is the same. Biomass technology will also result in tremendously increased production of fuels and electricity without the need for subsidies or incentives because it is part of a biorefinery system. The biomass sugars can be converted to chemicals and fuels. The lignin can be converted to chemicals and fuels and can be combusted to generate steam and electricity. The result is that biomass derived fuels and chemicals use almost no fossil fuel inputs, thus reducing natural gas and petroleum dependency. Already PLA has attractive environmental performance. In addition to its product performance PLA has attractive LCI profiles. Using standard methodology and making conservative assumptions, PLA uses 20 to 50 percent less fossil fuels than is required to produce conventional plastic resins. In addition, because 100% percent of the carbon in PLA comes from atmospheric carbon dioxide, the overall carbon dioxide emissions are lower, compared to petroleum-based polymers. For example PLA has 67% less carbon dioxide emissions compared to Nylon and 50% less than polyester in its commercial form using LCI methodology. As we move to improved fermentation technology, biomass feedstocks and alternative energy sources, PLA fossil resource use could be as low as 10% of use for petrochemical plastic and fiber materials, with zero or negative net carbon dioxide emissions. On the waste management side, PLA fits into any waste management system. It can be incinerated, landfilled, recycled-both to polymer or to lactic acid, composted, or anaerobically digested. This versatility removes a barrier for commercialization. Composting of PLA is particularly interesting, in that it may actually provide a competitive advantage for PLA. PLA biodegrades in active composts within about 45-60 days. In Western Europe and Japan composting infrastructure is already being built. The hope in these regions is that the plastic waste mixed with green waste can all be composted. A Vision 2020 look at Carbon Emissions and Rural Economic Impact from a PLA driven Business System. If we take a Vision 2020 look, and assume success for a PLA driven business system which uses biomass as feedstock and produces other chemicals closely derived from lactic acid, including biofuels, then this system alone could account for a 3% reduction in carbon dioxide emissions in the United States. The total direct rural economic impact for chemical products from this system could be as much as $10 billion per year, with 50% from the producer level and 50% at the processor level, based on the collection and processing of 128 million tons of agricultural produce in total. In this case, the impact on our economy with the macro-economic multiplier effect will be on the order of $50 billion per year by 2020. Issues around "sustainable agriculture practices" in the United States In the marketplace, particularly in Europe, we are frequently asked about sustainable agriculture practices in the United States. This is actually a reasonable question from the point of view of Sustainable Business Practices, where businesses take responsibility for all aspects of their business system, then work to improve them. Useful data regarding soil conservation, ground water improvement, air quality improvement, decreases in chemical inputs is difficult to obtain. The United States farming community needs to get its information together so that it can speak with credibility that it is in fact improving agricultural practices from a sustainability point of view. If this data were available, it would help companies like ours in the commercial development of our products. Ontario farmers provide an example of a farming community that embraces sustainable business practices. They are very well organized and have environmental plans with target improvements at the farm level. They also have infrastructure that allows identity preservation, and according to their leaders, a desire to switch to any product demanded by the marketplace including biomass. They recognize that this flexibility and documented environmental performance may give them a competitive advantage in the emerging sustainable product area. I wouldn't be surprised at all if we see some kind of biorefinery in Ontario since they have economics, sustainable development farming practices, and infrastructure. Other regions of the world are taking action to become attractive for "green chemical" businesses. Companies like ours will be successful in the sustainable chemicals from renewable resource industry by reducing fossil resource use and emissions, while delivering products with the same or better performance at a competitive price. For full success we require crop or biomass feedstocks, green energy for steam and electricity, and biofuels. 1. Tony Blair, a few weeks ago, set a target that the United Kingdom should be the leader in green chemicals from renewable resources. I've met representatives from their agriculture and wind energy communities. They appear to be serious and committed. The approach combining offshore wind energy and wheat-derived carbohydrate feedstocks appears to be attractive. We'll be watching closely to see what kind of sponsorship the UK provides to accelerate development, and which companies jump at it. 2. Toyota recently announced that they are entering the "sweet potato processing business" in Indonesia with the intent of producing lactic acid and later on PLA. They have in their view a biorefinery based on sweet potatoes. I'm told that they chose sweet potatoes and location based on carbon fixation yield and efficiency. 3. We have had inquiries from England, Canada, Brazil, African countries, France, Belgium, The Netherlands, Germany, Poland, the Ukraine, Taiwan, Indonesia, Australia, Thailand, and China, all interested in chemicals and polymers from renewable resources. The United States has enjoyed a terrific advantage in agriculture. If the marketplace across the world rewards substitution of petroleum-based products by those made from renewable resources on the basis of improved sustainability at similar price, then the United States agriculture system and energy systems have some work to do to keep pace. In order to keep the advantage in the future, the U.S. will need biomass infrastructure, improved biomass processing technologies, economic green alternative energy sources, improvements in bioprocessing and related chemical technologies, and good information about farming practices. Government funding has helped us get to where we are. A few years ago at a critical time in our project we were stumped by some of the fundamental technology of PLA. We were able to move ahead and learn what we needed to faster because of NIST and their ATP program (I understand that the ATP program has been somewhat of a corporate lightning rod). At the time, Cargill was running out of financial patience overall and was unwilling to fund our study of the fundamentals of PLA that we required. The financial pressure would not allow investment in fundamentals. Looking back, even though the ATP funds were a very small amount ($2 million) of the total we have spent on research and development ($200 million), it came at a critical time and helped us "stay alive" and accelerate our overall commercialization. Without understanding the fundamentals, I doubt we would have perceived the commercial opportunity. All of our products today embody some form of the fundamental technology that we developed under the NIST ATP program. Now we have programs funded by DOE that help us to push the technologies further than we would have the appetite to do by ourselves because of the risk involved. These programs are accelerating our technology development and will result in biocatalysts that convert biomass sugars to produce biofuels and lactic acid. Closing thoughts We are able to justify the huge risk we are taking in bringing the PLA technologies to market because of the perceived potential of PLA. We are farther ahead than other companies because we have an excellent product to take to market at a competitive price even though it is made from renewable resources. We expect PLA to be an engine that drives biomass development because we see how we can make our products even more sustainable and expand our markets more fully as well as diversify our product offerings. I think Chemical Week has it right. Bioprocessing isn't a dream. We're doing it. And we'd like lots of other companies to do it too. Thank you for your consideration. |
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All material on this website copyright as indicated and/or by Tim Castleman © 1999, 2000 |
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