Company Eyes New England Factories for Ethanol Production

New England is a long way from the hub of the nation's ethanol production in the Corn Belt, but a fledgling maker of the clean-burning fuel additive sees the Northeast as fertile ground.

Xethanol Corp. said last week it hopes to use some of the $34 million it recently raised from investors to convert abandoned industrial plants in New England into small-scale factories.

The plants would be among the first ethanol production sites on the East Coast and would supplement two existing Xethanol plants in the Iowa towns of Blairstown and Hopkinton.

Despite rising oil prices that have boosted prospects for alternative fuels, observers say Xethanol faces many economic hurdles in competing with bigger ethanol projects in the Midwest. The six-year-old company, which has yet to make a profit, also faces technical challenges with its relatively untested approach of converting industrial and food processing wastes, rather than corn, into ethanol.

"There are no large-scale plants yet using that technology," said Spencer Kelly, an ethanol analyst for the Oil Price Information Service in Rockville, Md. "The promise is usually more than can be delivered."

Xethanol says its proprietary technologies to convert organic materials ranging from sawmill waste to stale butterscotch candy will make it unnecessary to ship corn from the Midwest to make ethanol, as developers of some other proposed East Coast projects envision.

Ethanol plants in New England would cut transportation costs by bringing production closer to refineries serving the densely populated Northeast, said Christopher d'Arnaud-Taylor, chairman and CEO of New York-based Xethanol. The company also hopes to keep its plants close to the sources of the materials it converts into ethanol, by locating near sawmills in places like timber-rich Maine, or near food processors.

"The advantage for us and for all of New England is geographic proximity," d'Arnaud-Taylor said. "The East Coast is our primary focus. It's probably the country's largest center for ethanol demand, but it doesn't have any ethanol production facilities."

In New England, Xethanol hopes to convert such materials as sludge from beer breweries, pulp from paper recycling, and homeowners' grass clippings diverted from landfills. The company says it can even make ethanol from sugary leftovers from candy factories by mixing the sweets with special yeast.

D'Arnaud-Taylor offered few specific plans in New England, saying the company hopes to open several plants throughout the region, starting in Connecticut.

The Midwest's ethanol industry is focusing much of its current investment on big new production plants. But d'Arnaud-Taylor expects his plans to turn old factories into small-scale plants will ease zoning approval and yield short project startup timelines.

The company's first project in the South — where Xethanol recently announced its initial East Coast expansion plans — involves converting an old paint factory in Savannah, Ga.

Kelly, the ethanol analyst, said Xethanol's New England plans "are ambitious, and in line with a long list of ambitious pronouncements from the company that have yet to take shape."

Gregory McRae, a chemical engineering professor at the Massachusetts Institute of Technology, said Eastern ethanol projects face several barriers that don't exist in the corn-rich Midwest, particularly if the projects rely on sources other than corn. Industrial processes to convert corn into ethanol are far more refined and efficient than they are for alternative sources, McRae said.

The ethanol project that's believed to be closest to fruition in the Northeast is Northeast Biofuels' plan to convert a former Miller Brewing plant in Fulton, N.Y. The project aims to begin producing corn-based ethanol by 2008.