The Fulcrum Sierra Biofuels project groundbreaking ceremony, led by Nevada Governor Brian Sandoval (center) and Fulcrum BioEnergy CEO Jim Macias (second from right)
Long before the advent of renewable jet fuels, we learned about how choice works at the fuel pump from the 1980 classic The Blues Brothers:
Elwood Blues: What kind of music do you usually have here?
Cocktail Waitress: Oh, we got both kinds. We got Country AND Western!
Yes, until recently you could have any kind of jet fuel, any kind at all, so long as it was made from petroleum. So it wasn’t completely in jest that Fulcrum BioEnergy CEO Jim Macias invoked the Blues Brothers in opening remarks at Fulcrum’s first commercial groundbreaking.
“It’s unusual in the energy business to quote the Blues Bothers, but as Elwood put it, ‘We’re on a mission from God’.
Near Reno, Nevada, Fulcrum BioEnergy broke ground today for its 10 million gallon per year first commercial plant that makes jet fuel from municipal solid waste.
For thousands of years we have had a love/hate relationship with waste. We love to make it, we hate to deal with it. For 10,000 years we buried it, dumped it, incinerated it, agonized over it, smelled it, and flushed it. Now we’re going to try something new. We’re going to fly on it.
Fulcrum, clean fuels, and the New Nevada
“We knew seven years ago, and I knew,” reflected Nevada Governor Brian Sandoval, who was on hand for the groundbreaking, “when Nevada led the nation in unemployment and was in its worst shape ever, we needed to do better in economic development. Now, the Tahoe-Reno Center is a centerpiece of what some people call the Fourth Industrial Revolution.
“Now, we have the largest data center up the road, and the largest advanced manufacturing center on planet earth. It’s the new Nevada, And there’s the third piece, which is clean energy. Now, we have $250 million invested, and jobs, good-paying jobs.
“When we saw Back to the Future all those years ago and they were flying DeLoreans based on trash, looks what happening today? To take trash and change into cleaner fuel for the Department of Defense and airlines, and have the first facility of this kind right here in Nevada, this is an exciting day.”
The Project that Refused to Die, and finally broke through
This is the Project That Refused to Die, despite all the roadblocks that have sidelined so many clean fuels projects.
Jim Macias credited the stakeholders around the project.
“First, our founding investors. A lot of boards have steered their renewable fuel companies into real trouble, but our board has provided just the right push, focus and guidance, and our differentiation begins there and we wouldn’t be here without them.
“And, our technology and contracting partners. Like United Airlines and Cathay Pacific here with us today. A lot of companies talk about sustainability, but these companies are doing something about it. Money has come in from as far away as Hong Kong to support this project. And partners like Air BP and Andeavor, companies leading us to a new generation of fuels. Our banks, and EPC and everyone else.
“And, our employees, many with us since day one.”
The idea of creating more domestic energy production and energy security, building a new industry, while getting ourselves around the skies in a cleaner, more sustainable manner has such obvious benefits that we might wonder why it has taken us so long to figure out a way to do it.
The saga of Fulcrum BioEnergy from formation to today’s groundbreaking is proof positive that neither the technology nor the financing was a no-brainer. The path towards cleaner fuels has been obvious for some time, but the path towards affordable, cleaner fuels made in a way that sustains companies and rewards investors for running the risks — that’s been more difficult than untying a Gordion knot, until along comes Fulcrum in Alexandrine fashion to slash the knots within which we had fouled ourselves and our journey towards better tech.
The future Fulcrum Sierra Biofuels project
In the end, it took a company that compared itself to clean water to make a renewable fuel from dirty solids.
“In this sector, you’re always like water,” Fulcrum BioEnergy CEO Jim Macias has told the Digest, “following the path of least resistance. There’s always Plan B and Plan C, and there are times when you shift to an alternative.”
The Fulcrum Financing: How the financing got done
“For us, the financing goes back to the DOE loan guarantee program,” Macias told the Digest.. “We competed for one, and were selected and were proceeding. But that process was frustratingly slow. Then, after the Solyndra problem, things got really bogged down. So we switched to the USDA program we applied and were successful in that. It was not as lengthy and frustrating as DOE, but there were differences in the program which caused problems. For instance, the USDA program requires a bank as the lender of record, and that is somewhat challenging. We had Bank of America and we thought it was a pretty good deal for them. But as a bank they were slow and frustrating, and cautious. We were ready to close last December when the election came, and then all these political issues came up. Would the new administration continue with the program. We got all our confirmations from everyone we needed, but it was just so frustratingly slow.”
“We always talked to a lot of people about financing, and finally we said ‘let’s get out’ via the bond market, which was looking attractive for us. You see, all this time that its taken us to get the financing, we haven’t been standing still. We’ve still been adding pieces. And by this time, it was starting to look to the municipal bond market like an infrastructure project. We had secure fixed prices, the output is contracted is contracted and hedged, the process is guaranteed or highly reliable. So as we kept adding those pieces we found that we qualified for tax-free municipal bonds which are very attractive to investors. So we shifted, and we closed.”
Ratings? They’re not rated bonds. We wondered why.
“No, they’re not rated, it was a non-necessity, based on advice from Morgan Stanley that we didn’t need a rating for the type of bond investor that we ended up securing. These are very sophisticated investors and they don’t rely on ratings, they do their own work.”
The Fulcrum backstory: the investors
See it Now: The Multi-Slide Guide to Fulcrum BioEnergy
The Digest’s 2017 Muti-Slide Guide to Fulcrum Bioenergy is here.
The expansion geography
“It is Chicago second,” Macias noted, “and that should be no surprise as it is major hub for United, BP and also Cathay is big there. Waste Management and and Waste Connections have big market shares there as well.
“The third one will be on the west coast because of how attractive the California market is, very attractive to sell fuel into, and it is also a tight fuel market and that makes it a high priority for our fuel partners. It could be in California, or we could transport into California. moving up and down the coast.
“So, we have two plants ready to go. In my experience, you want to make sure to have several projects in development, and let the cream rise to the top. Each of them has to have a good site, location, good labor market, but without being coy we want there to be competition between several potential sites, say, on the West Coast.
The expansion timeline
Last September, we reported that Fulcrum is planning to develop eight of its MSW-to-biofuel facilities by 2022, including the first 11 million gallon facility that is expected be online during the second half of 2018. Those new facilities, five of which will be developed by United Airlines as part of their investment deal sealed in June 2015, will be between three and six times the size of the Reno facility.
“If anything we are under pressure to expand faster but for now, the plan is the same,” Macias told The Digest. We have the same plan and program size, but some of the prioritization of the plants has changed because of our fuel partner needs. Our investors are strategic United, Cathay, BP. They haven’t invested because of this project. They are helping us get through this first plant and proceed with others because they want large volume. The presence of the whole program has helped us get through this first one.”
The Bottom Line
As Fulcrum’s senior project developer Jeannie Benedetti put it at the ground-breaking, pointing at the representatives from the project’s EPC, Abengoa, tongue in cheek: “Abengoa, you can now officially start construction.”
But after all the drama and the heartache and the fluid deal-making and the weariness and the often comic-craziness of bringing trash-to-fuels alive in the United States, we’ll leave the final words on Fulcrum today to Jake and Elwood Blues:
Elwood: It’s 106 miles to Chicago, we got a full tank of gas, half a pack of cigarettes, it’s dark… and we’re wearing sunglasses.
Jake: Hit it.