US bio-based chemicals at a tipping point

This is a contributed post from Stephen J. Gatto, Chairman and Chief Executive Officer of Myriant Corporation.

Commercially and technologically there can be little doubt the bio-based chemicals industry is at its tipping point. According to BIO, the world’s largest biotechnology trade association, there are approximately 2,000 companies today in the United States that either manufacture or distribute nearly 20,000 bio-based products, including bio-based chemicals and “green products” for consumer and industrial applications. But politically, policy-wise, if House and Senate efforts aimed at displacing the “whole barrel of oil” aren’t forged soon, we may find ourselves at a Congressional juncture perhaps more accurately described as yet another tripping point.

The need for a national energy policy inclusive of bio-based chemicals and products could not be clearer or more urgent. The world population is on the rise and is expected to top out at 9.5 billion by 2050, up from about 6.5 billion today; a population using and depleting oil resources. This isn’t sustainable or affordable, particularly considering the systemic shift in oil prices over the last several years. The bio-products industry today is one of the most immediate steps we can take to develop a more sustainable way of living. At the same time, our ability to harness our national, home-grown strength in agriculture and our leadership in industrial innovation has the potential to drive substantial economic development in the United States by spurring job growth and potentially ameliorating trade deficits in this sector.

What We Need is Downright Simple, and the Upside is Immense

Congressional gridlock isn’t new. What is new is that the United States is no longer the country that could safely afford to wait it out. In the past, our substantial monetary, labor, intellectual, manufacturing, technological, and dominant global market advantages could quickly and reliably make up for time lost to policy wrangling. But not any longer. Consistent policy is necessary now.

Ironically, many necessary policies are in place today but their very existence is in jeopardy, put on the proverbial chopping block by partisan-centric debates about budget cuts and deficit reduction. Rather, the discussion ought to focus on programs that are working now and ways to make them better. For example, a renewed Farm Bill Energy Title inclusive of bio-based chemicals is a good start. To not include mandatory funding for these vital programs–which account for less than 1% of all Farm Bill funding–is akin to no funding at all. Over the last five years, key Energy Title programs within the Farm Bill, including BCAP and bio-refinery assistance programs, are vitally needed to further strengthen the bio-products industry in the United States.

Along with the Farm Bill, credits and enhancements that reward U.S. investments in bio-based manufacturing should be encouraged. S.1764, “Make It in America Tax Credit Act of 2011,” as an example, serves to extend and modify advanced energy investment project credits and would also enable qualifying bio-based products and other alternatives to petrochemicals to be eligible to receive investment tax credits.

Similarly, extension of the New Market Tax Credits program, which serves solely to incentivize investments that create jobs and provide services in economically disadvantaged areas, also has the dual benefit of significantly reducing a project’s capital needs by up to 20%, typically in the form of low-interest debt. This program, in combination with those that enable access to low-cost working capital, for example through Ex-Im Bank, are for now the best incentives for U.S. companies keep bio-based manufacturing projects here in the United States versus opting to build in places like China and Malaysia. The pattern of “innovate here but build there” should not be enabled to proliferate, particularly when rural America so desperately needs a clear pathway for economic development.

As a marker, a 2010 study, also conducted by BIO, projected that the renewable chemical industry has created or prevented the loss of 40,000 jobs. In the United States, bio-refineries that process sustainable biomass can generate $88.5 billion in economic activity according to USDA projections. According to an Iowa State study, the bio-based industry can generate a minimum of 100,000 jobs annually. With the Country’s unique leadership position in agriculture and innovation, and given that the U.S. represents one of the largest chemicals and plastics industries in the world, we are well poised as a nation to capture a disproportionate share of this burgeoning market were it only for consistent policy.

Finally, and while certainly not popular, federal loan guarantees and grants in support of new refinery construction, as well as plant retrofits, are necessary signals to private investors that the U.S. government will continue to support commercialization of biomass-based products. Continuation of the public-private partnership model is crucial for ensuring that we take full advantage of the great opportunities presented by this industry.

This isn’t a call for a change in the great American system. It’s a call for more of that great American unity, common sense, and urgency that have always been in great abundance when we have done great things. It’s a call for bi-partisan cooperation, now more than ever, to ensure we innovate here, build it here and harness the great potential borne from the high-growth, bio-based chemicals market.

One won’t hear a lot of boo-hoos on Capitol Hill on behalf of bio-based products innovators waiting for an end to the policy logjam. But if a protracted period of politically-motivated analysis/paralysis over energy policy that facilitates displacement of the “whole barrel” is allowed to stunt or terminate our growth potential and our unique global opportunity right now for leadership, all of America loses. And that would be a crying shame.

Mr. Gatto founded Myriant’s predecessor company in 2004 and formed Myriant in 2009. He has been involved in the biotechnology industry for over 19 years, founding a successful biofuels company and serving on numerous Presidential, Congressional and US DOE/USDA committees.

At BC International (now BP through its acquisition of Verenium), Mr. Gatto, in cooperation with Dr. Lonnie Ingram and the University of Florida, spearheaded the development of novel technology for the commercial production of ethanol from cellulose (patent number 5,000,000). Successful pilot operations led to licensing of the technology to two multinational companies.

In 2000 and 2002, Mr. Gatto was appointed by both the Clinton and Bush Administrations to the Biomass Research & Development Technical Advisory Committee. He was also appointed to a Biofuels Ad-hoc Committee chaired by Senator Dianne Feinstein and assisted in the drafting of key aspects of the Energy Policy Act of 2005.

Currently, Mr. Gatto is on the board of directors for BIO, the world’s largest biotechnology organization, serving on the Industrial and Environmental (I&E) section governing board.

He earned an A.S. in Information Services and a B.S. in Marketing, both from Southern New Hampshire University.

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