Feds offer $105M loan guarantee for “Project Liberty” biofuel plant

Poet’s so-called “Project Liberty” biofuel plant, which will use corn waste instead of edible corn, is getting some support from the U.S. government. On Thursday, the Department of Energy announced it will offer Poet a $105 million loan guarantee to build out Project Liberty in Iowa, which is supposed to eventually produce up to 25 million gallons of cellulosic ethanol per year.

Through loan guarantees, the government promises to pay back loans if borrowers can’t. In many cases, the government is providing the loans as well, via the Federal Financing Bank.

The financial support could help Poet finally get Project Liberty into commercial-scale production, and the plant has been in the planning stages for years now. Poet initially was hoping to start building the plant in 2009 and operating it in 2011, and back in 2008, the company was aiming for the plant to eventually produce 125 million gallons of biofuel per year.

Project Liberty is the first commercial cellulosic ethanol plant by Poet, which already runs a fleet of corn ethanol plants. We interviewed Poet’s CEO, Jeff Broin, a few years ago about the company’s foray into cellulosic ethanol production; you can read the Q&A here.

A cellulosic ethanol refinery uses plants or other non-food feedstocks to produce biofuels. Poet plans to use enzymatic hydrolysis to convert corn cobs, leaves and husks from local farms into ethanol. There’s no shortage of cellulosic ethanol technology developers, but many of them have run into technical and financial difficulties to build their first large-scale refineries.

The loan guarantee is the second offered by the DOE for a biofuel plant, but it’s poised to be the first to use the financial aid to build a refinery. The DOE previously offered a $241 million loan guarantee to Diamond Green Diesel, a joint venture of Valero Energy (s vlo) and Darling International (s DAR), to build a plant in Louisiana that would use primarily animal fats and used cooking oils to make 137 million gallons of diesel per year.

But Diamond Green Diesel pulled out of the final leg of the loan guarantee negotiation a few months ago and announced in May it would build the plant using money from a Valero subsidiary. Valero Spokesman Bill Day said in an email to us that the application process became “too burdensome and costly.”

The DOE could support more biofuel projects with its loan guarantee program, and back in February, KiOR said it had received a term sheet for a $1 billion loan guarantee. KiOR (s kior) has since held an IPO, however, and brought in at least $150 million.

The U.S. Department of Agriculture has offered more biofuel loan guarantees, including $250 million to Coskata, $80 million to Enerkem and $75 million to INEOS New Planet BioEnergy.