When Paul Woods looks at the Texas Gulf Coast, with its heavy industry, large tracts of flat land and muddy salt water, he thinks two words: algae farms.
In his vision, these farms would span hundreds of acres each, heading south from Freeport. On them would be long, clear plastic tubes filled with salt water and algae. And when pumped with carbon dioxide from nearby oil refineries and chemical plants, they would yield a valuable crop: ethanol.
“I really see Texas as just an ideal location,” said Woods, the CEO of Algenol Biofuels, a company in Bonita Springs, Fla.
It's more than just a big idea. In June, Algenol and Dow Chemical Co., the nation's largest chemical maker, announced plans to build a $50 million pilot plant at Dow's massive complex in Freeport that will test Algenol's technology on a large scale.
The project will put Texas at the center of a unique experiment that could have several important implications.
It could point the way to a more sustainable path for making ethanol, now produced mostly from corn in the U.S. It also could help determine the feasibility of using biofuels not just to power cars, but to produce common chemicals now derived from fossil fuels. And it offers a glimpse of a future in which polluting carbon emissions from industrial plants could be captured and put to good use.
Even if the project is successful, it could still be years before such technology is available. Not only have the recession and low oil prices slowed momentum around biofuels research and lending for new projects, the competition for ideas is intense. Even bets by the biggest energy companies could turn out to fail.
Yet, the fact that Midland, Mich.-based Dow and Exxon Mobil Corp., the biggest U.S. oil company, have recently announced investments in algae has raised the profile of the tiny waterborne plants, known to most as pond scum.
“At the end of the day, the conclusion isn't that different: The two biggest companies both picked algae, and there's a very good reason for that,” Woods said.
Last month, Exxon Mobil said it would put $600 million toward an alliance with La Jolla, Calif.-based biotech company Synthetic Genomics to study and develop next-generation biofuels that aren't derived from food crops. Other oil majors have also invested in biofuels, including Chevron Corp., Royal Dutch Shell and BP.
But their research has mostly focused on extracting the oil from algae, which can be further refined into diesel or jet fuel.
Algenol's process is different. It keeps the algae intact and, with the help of carbon dioxide, accelerates what Woods said is the plant's natural ability to “sweat” ethanol.
“The really disruptive thing about this technology is that it uses carbon dioxide as its carbon source to make ethanol,” said Peter Kipp, a biofuels consultant with Haisley Millar in Houston. “They're directly taking a waste stream and turning it into fuel.”
Dow is interested in Algenol's process because ethanol can replace fossil fuels in the production of ethylene, a basic chemical feedstock for making many types of plastics.
Howard Rappaport, a chemical industry analyst with CMAI in Houston, said while most Gulf Coast chemical producers use abundant natural gas to make ethylene, they are also looking at other options.
“From a plastics point of view, there is a growing appetite for sustainable polymers,” he said
The Dow-Algenol pilot plant in Freeport is being designed to produce 100,000 gallons of ethanol a year at a target cost of $1-$1.25 per gallon, said Woods, who hopes for a groundbreaking early next year.
But the companies are still awaiting word on a $25 million Energy Department grant to help fund the plant, as well as continued research by the National Renewable Energy Laboratory and Georgia Tech.
Woods said the plant will be built regardless, but believes the project would be significantly better with the government's help.
Meanwhile, Woods said he is thinking about expansion plans in South Texas, which he views as a fertile frontier for his business.
“There's a lot of opportunity in Texas to work with Texas companies and reduce their carbon footprint and give us the feedstock we need,” he said.
“It's not just lip service. The companies in Texas are actually trying to do something.”