Biofuel developer Lignol Energy (TSX-V:LEC) on Friday said the U.S. Department of Energy (DOE) had cancelled funding it had committed to the company to build a pilot-scale biorefinery.
In 2008, the company was selected to receive up to US$30 million from the DOE to build a demonstration-scale cellulosic ethanol plant in partnership with oilsands giant Suncor Energy (TSX:SU).
The plant was intended to be one-tenth the size of a commercial facility and would be located in Colorado near a Suncor refinery.
But when the Great Recession hit, Lignol was forced to abandon the project due to a general market “malaise.”
Lignol then came up with a new plan using the DOE funding to build a full-blown commercial-scale plant that could turn a profit
But the resulting project concept was significantly different than what the DOE had originally agreed to fund, Lignol said.
Last week, Lignol and the DOE agreed the project no longer qualified for funding.
The DOE has invested US$2.5 million in the new concept so far, but Lignol CFO said the company won’t have to pay any of that back now that the funding has been cut off.
In fact, Turner said Lignol realized it could create better value for shareholders if it pursued the development of a full-blown commercial plant instead of building a much smaller pilot plant.
“The markets are clearly more buoyant today than they were then,” said Turner.
He pointed to the company’s pilot-scale biorefinery in Burnaby, which has been operating for nearly 18 months and generating important data for the company about the feasibility of a commercial-scale plant.
Lignol said Friday that it plans to develop a commercial project without DOE’s assistant.
“In developing a commercial project it is important that we deploy our technology in a way that maximizes value for our shareholders,” commented Ross MacLachlan, Lignol’s president and CEO.
Turner added that the company is in active discussions with potential partners to develop a commercial plant.
Lignol’s shares closed down 8% to $0.17 on Friday.
Joel McKay
Twitter:jmckaybiv