News Story

State Gave Biofuel Company Millions for Unbuilt Plant

Taxpayers absorb losses, Ivy League professors reap windfall

A renewable energy company founded by a pair of Ivy League professors took millions in state and federal dollars to deliver a biofuel plant in the Upper Peninsula that was never built. The company’s intellectual property rights were then sold for an undisclosed sum to a private Canadian company.

Back in 2008, New Hampshire’s Mascoma Corporation was pegged by then-Gov. Jennifer Granholm as the type of company that was going to reinvent Michigan’s economy. President Barack Obama even mentioned the company by name in a 2008 speech.

But instead, the company burned through its government subsidies before its intellectual property was sold to private companies.

Mascoma Corporation raised $96 million in private financing and was awarded as much as $120 million in state and federal funding to produce a biofuel plant that would take wood and turn it into fuel. After years of delays, the plant planned for Kinross Township in Chippewa County in the Upper Peninsula was never built. The state of Michigan said just $6.4 million of the $20 million it gave the company was recovered. The U.S. Department of Energy would only say that not all of the money it gave Mascoma was lost. When asked for specifics of the federal grants, the department said it wouldn’t release that information until it was requested in a Freedom of Information Act request.

“It really is outrageous,” said Rachel Smolker, co-director of Biofuelwatch, a watchdog organization that covers bioenergy. “The whole thing kind of stinks.”

University professors Lee Lynd and Charles Wyman, who co-founded Mascoma in 2005, didn’t respond to emails seeking comment. Lynd is a professor at Dartmouth College and Wyman is a professor at the University of California-Riverside. Wyman formerly worked at Dartmouth.

Mascoma Corporation was founded in summer 2005 at a time when gas prices were just starting what would be an unprecedented meteoric rise. For the first time in U.S. history, gas prices averaged more than $2 a gallon in that year.

In 2008, it was approved for millions in government grants and subsidies to build a biodiesel plant in the Upper Peninsula. Media stories in 2008 and 2009 trumpeted the plant as a beginning to diversify Michigan's jobs while curing the country's addiction to oil.

According to an investigation of Mascoma by Biofuelwatch, Mascoma’s government grants were awarded to build a commercial-scale cellulosic ethanol refinery.

“Mascoma announced and then abandoned a series of such plants in Tennessee, Minnesota, Michigan and Alberta, but nonetheless spent grant funding that had been earmarked for them,” Biofuelwatch’s 2016 report stated.

Biofuelwatch claimed that Dartmouth Professor Lee Lynd used his contacts at the college as well as his position with the BioEnergy Science Center to make it easier to land federal grants for Mascoma. Lynd currently is listed on the management team of the BioEnergy Science Center, which is funded by the U.S. Department of Energy, which also gave money to Mascoma.

Biofuelwatch also claimed that the state of Michigan didn’t do its due diligence in researching the company before awarding its $20 million subsidy.

Almuth Ernsting, co-director of Biofuelwatch, pointed to the timeline of the start of Mascoma’s biomass-to-ethanol pilot plant in Rome, New York, and when Michigan awarded $20 million to Mascoma to start the Michigan plant.

Mascoma opened its pilot plant in New York in June 2008. Just three months later, the state of Michigan had already approved its $20 million grant.

“The purpose of a demonstration (pilot) plant, as the name says, is to demonstrate that a technology works (though laboratory-stage and pilot plant-scale demonstrations often precede even that stage),” Ernsting said in an email. “Granting public funds for commercially scaling up the use a technology that has not actually been demonstrated seems highly dubious.”

Emily Guerrant, spokeswoman for the Michigan Economic Development Corporation, said the $20 million grant was used to “promote the development, acceleration and sustainability of energy excellence sectors in Michigan.”

“This wasn’t a traditional business development grant and wasn’t meant to be a job-creating initiative,” Guerrant said in an email. “Rather, the program was intended to be an innovative approach to growing companies that engaged in renewable energy technologies and implications. Specifically, Mascoma was developing cellulosic fuel production facility that used non-food biomass to convert woodchips into fuel.”

The plant was pitched to the media as a jobs producer by Granholm, however.

In fact, Granholm touted Mascoma’s ability to be a job-creator in a 2008 email she sent to John Podesta, a top aide to President-elect Barack Obama, in her pitch to be selected for cabinet position of secretary of energy.

“This company and their partners will create jobs in Michigan as they develop the next generation of cellulosic ethanol that will reduce our dependence on foreign oil and make fuel more affordable for our families,” Granholm said in a news article she attached to her email to Podesta.

Lynd did give an interview in 2014 with the Valley News, a local New Hampshire newspaper, after he had sold off his company's intellectual property.

“Businesses are a journey and they take unexpected turns,” Lynd was quoted in the article. “Was this the end point that was in my mind at the beginning? No. Mascoma’s business is somewhat different now than what had been in my mind at the beginning. … Something of value was created.”

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.