Isobutanol a lifeline for struggling Minn. ethanol plants?

A major conversion to a Minnesota ethanol plant in a couple of months could spark change for the state's $3 billion ethanol industry.

The former Agr-Energy plant in Luverne will end production of the corn-based fuel. Instead, it will start making another type of alcohol called isobutanol that can still be sold as fuel, but is largely used to make plastics, solvents and other products.

Construction workers are finishing work on a new building that will hold equipment to make isobutanol.

Gevo of Englewood, Colo., bought the plant in Luverne at a cheap price in 2010, during a downturn in the industry. The company is pioneering the use of corn to produce isobutanol and won't have to greatly change the manufacturing process that ferments corn into alcohol, said David Glassner, its executive vice president of technology.

"Instead of the yeast making ethanol, it's going to make isobutanol," he said.

But there will be a substantial change in the end product. Isobutanol is structurally more complex than ethanol, which has only two carbon atoms in each molecule. Isobutanol has four.

Glassner said the extra carbon makes Gevo's isobutanol identical to the isobutanol made from petroleum so that products made with it will match their petroleum-based counterparts.

"The beauty of this molecule is when we make that plastic we'll be making exactly the same thing that they make today from crude oil," Glassner said.

The fact that isobutanol is made from a renewable source, corn, could give Gevo an extra selling point over its petroleum-based rival. This environmental angle has already attracted the attention of one of the world's largest consumer products companies.

Coca Cola's various drinks add up to 1.7 billion servings per day. Many come in plastic bottles.

Scott Vitters, general manager of PlantBottle, a packaging innovation center for Coca-Cola in Atlanta, hopes some of those plastic bottles will eventually contain a specific chemical made from Gevo's isobutanol. The soft drink company is working on a plastic bottle made totally from renewable materials.

Vitters said there's money to be made in going green.

"We think consumers are interested in companies that are able to provide them with quality products, that remain affordable, put deliver an improved environmental performance," he said.

Gevo signed an agreement with Coca-Cola last year to produce one ingredient for that bottle from its corn-based isobutanol, something called paraxylene. Vitters said the new bottle should be on the market in about three years.

Besides plastics and other industrial products, Gevo's isobutanol can also be used as a fuel. But the company is running into problems there, at least in Minnesota. Isobutanol can be blended with gasoline in most states, but according to Minnesota law only ethanol qualifies as a renewable blendstock. Gevo is lobbying state lawmakers to include isobutanol.

But Gevo's decision to concentrate on the industrial products market instead of fuel sales makes good financial sense, said Kalib Kersh, a biobased materials and chemicals analyst for Lux Research, based in Boston.

"Generally speaking, the margins on chemicals are going to be larger than the margins on fuels," Kersh said.

Those smaller profit margins are a problem for the ethanol industry, where fuel sales are the only market. Many companies have been losing money on their ethanol sales the past few months.

Kersh says isobutanol's steadier profit margins could lead more ethanol companies to switch production to that product.

"People are going to sit down and run the numbers and see if there's a business case for tying themselves to isobutanol production," he said.

At least one other Minnesota plant, Highwater Ethanol, is considering a switch to isobutanol production.

Gevo has already started working with a second plant, in South Dakota, and plans to make isobutanol there as well.

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