David Shepardson / Detroit News Washington Bureau
DETROIT -- General Motors Corp. announced today that it's taken a stake in a biofuels research firm that aims to widely market $1-a-gallon renewable fuel as soon as 2011.

GM chairman and CEO Rick Wagoner, announcing the deal today at the North American International Auto Show in Detroit, didn't say how large an investment that automaker has made in the Warrenville, Ill.-based start-up firm, Coskata Inc.

But Wagoner said the deal was essential, adding "We must radically ramp up the production of ethanol."


Coskata aims to produce 100 million gallons a year of ethanol made by bacteria from matter such as grass and woodchips.

"This is big. It's a game-changer," said David Cole, chairman of the Ann Arbor-based Center for Automotive Research, after the announcement.

It's the automaker's biggest bet yet in pushing to get broader use and availability of biofuels -- principally by using five strains of bacteria to produce ethanol from materials like woodchips and trash.

The bargain price of the fuel, compared to today's $3-a-gallon gasoline, could finally convince Americans to actively seek ethanol as an alternative to imported oil, GM officials said.

Biofuels from bacteria
Coskata, named after a beach and wildlife refuge on Nantucket, is using patented microorganisms developed at two Oklahoma universities to create cellulosic ethanol from biomass like wood chips, shredded tires, and municipal waste. Eventually, it even hopes to take auto factory waste and parts of junked cars and turn them into ethanol.

Coskata will complete production on a refining facility connected to an existing chemical plant that will produce 40,000 gallons of cellulosic ethanol from woodchips this year. GM will use the fuel at its proving ground. The fuel will be produced at a multi-million facility to be built next to an existing facility , largely funded by GM.

That 40,000 gallons is a drop in the bucket -- less gasoline a station could sell in a weekend -- but will help Coskata in the race to produce cellulosic ethanol in large amounts.

Global efforts afoot
Since 2004, a Canadian company, SunOpta Inc., has been producing a small amount of cellulosic ethanol for sale largely for research purposes. In late 2006, SunOpta and GreenField Ethanol Inc. said they were forming a joint venture to build a 10-million gallon cellulosic ethanol plant.

Abengoa is building a 5-million gallon facility in Spain using a competing method of producing cellulosic ethanol through enzymes, and China also has a facility in the works.

For GM -- which has been pushing to get E85 ethanol to pumps in all corners of the United States and has helped get 300 E85 pumps open in the last 18 months -- this deal represents its biggest push yet to promote an alternative to gasoline.

GM's director of environment and energy, Mary Beth Stanek, said in an interview at Coskata's labs earlier this month that GM intends to announce several more strategic biomass arrangements in the coming months.

She brushed off concerns that GM's announcement was overly optimistic or could go the way of other advanced technology efforts like the EV1, GM's electric car program.

"I really think we're at 95 percent certainty that this is a reality," Stanek said, declining to say how much it was investing in Coskata. "This is not a high-risk strategy. It is a very forward moving thing that can be done There's always bumps in the road but this one I see as a high likelihood."

Coskata will be in a race to build the nation's first large-scale cellulosic ethanol plant, since privately held Broomfield, Colo.-based Range Fuels started construction last November it intended to build a 100-million gallon refinery. It hopes to produce 20 million gallons in 2008 and received a $75 million Energy Department grant last year.

Some of Coskata's venture-capital investors also own stakes in Range Fuels including Khosla Ventures.

GM has committed to doubling North American flex-fuel vehicle production to 800,000 by 2010 and to make half of its vehicles flex-fuel-capable by 2012. In the 2007 model year, GM produced 14 E85 capable models totaling 760,000 vehicles and adding new vehicle models this year that are E85 capable.

Bruce Dale, a professor of chemical engineering at Michigan State University and expert on ethanol, thinks Coskata's process shows promise. "Especially for wood chips, this could be a very good way to go," Dale said.

Alternatives needed to corn-based fuel
The United States is using about 5 billion gallons of ethanol annually, nearly all through corn-based production. But corn ethanol has significant problems and there isn't enough to meet the congressionally mandated increases in the decade to come.

Since ethanol has about 25 percent less energy content than gasoline, cars get about 25 percent fewer miles per gallon on ethanol -- meaning the price has to be significantly cheaper than gasoline to be competitive.

Corn-based ethanol also uses a significant amount of water and crop land to cultivate and emits more greenhouse gases from cellulosic ethanol. With the increasing demand, the price of corn has doubled, making feed for beef and pig farmers much more expensive and increasing the price of many foods, since corn syrup is used to sweeten many grocery items.

Corn-based ethanol also gets a $0.51 a gallon subsidy from Congress, which has also imposed a $0.54 a gallon tariff on imported ethanol, keeping cheaper Brazilian ethanol made from sugar cane out of the United States.

But the energy bill passed by Congress and signed into law last month, requires the United States to use 36 billion gallons of ethanol annually by 2022, including 21 billion gallons of cellulosic ethanol and the Energy Department awarded $385 million in grants last year to help jump-start research efforts into cellulosic ethanol.

Despite that requirement, little cellulosic ethanol has been produced.

Coskata Inc. is a privately held, venture-capital funded firm that moved into its 25,000-square foot lab in Warrenville with 37 employees tucked into space beside a day care.

One executive at Coskata joked that labs -- complete with hoods and gloves to work with the organisms -- are reminiscent of the 1971 sci-fi movie The Andromeda Strain. The difference is the sealed plastic hoods are for the protection of the bacteria -- not the humans -- since if exposed to oxygen, the bacteria die.

Coskata was founded in July 2006 and spent a year in borrowed space at nearby Argonne National Laboratory. It began talking with GM last spring and plans to raise more capital this year by adding more investors.

The research firm has obtained the rights to 16 patents for micro-organisms and spent months researching ways to improve the productivity of the bacteria.

"I think their microbes work quite well," Stanek said. "I don't mean to sound funny but the bugs have been worked out. These are gluttonous organisms. They just gorge and produce so much ethanol."

Most cellulosic researchers fall into one of two camps. One uses enzymes to break down biomass into sugars, which can be made into ethanol -- an alcohol -- through fermentation, similar to how beer or wine is produced. The other way is to use microorganisms to break down the sugar in a method called thermal-cracking or gasification that has been around since the early part of the century.

Coskata uses a thermal process to break down organic material and gasify it. The synthesis gas then goes into a scrubber to remove particulate matter and dust, before entering a bioreactor, where five strains of bacteria produce ethanol by breaking down the gas in a plastic tube with a membrane.

That produces twice as much ethanol over traditional distillation, said Bill Roe, Coskata's CEO and president in an interview earlier this month at the company's Warrenville labs, saying the company's micro-organisms continue to improve and produce more ethanol.

That process takes less than one gallon of water to produce a gallon of ethanol. On a tour of the research facility, reporters saw ethanol drip out of a spout.

Fuel from wood, grass and garbage
If woodchips were the fuel source, Coskata would need about 3,000 to 4,000 tons daily in order to produce its target amount of ethanol.

"The big challenge was could we make the organisms as efficient so that they really are a better catalyst than anything we can make synthetically," Roe said, who said they expect to produce ethanol for between $0.75 and $1.25 per gallon.

He said materials for producing cellulosic ethanol are everywhere: from petroleum coke, a byproduct of gasoline refining that simply burned simply to get rid of it. "It's almost free." Roe pointed to construction debris, since it has so much wood, especially "hurricane beltways and tornado beltways" as another good feed-source for cellulosic ethanol.

In the long run, mid-size plants could be built around the country -- specializing in using materials more common in the area. In Michigan's Upper Peninsula, facilities would likely use wood, given the large number of forests. In Kansas, a plant could use switch grass and other grasses that grow on the high Plains.

Roe said he thinks using enzymes is a good idea in the long run as well, but said it will take longer to get to market. "It's probably still another five or 10 years out from commercialization," he said in an interview. "There are still as I call it, 'Eurekas' that have yet to be uncovered."

The problem is that in a tree or a blade of grass there is a lot of material that is not "cellulosic" -- "that's not ever going to turn into sugar," Roe said.

Beth Lowery, GM vice president for environment, energy and safety policy, called ethanol the best solution in the short term. "We believe ethanol used as a fuel, not just as a gasoline additive, is the best near-term alternative to the surging global demand for oil because ethanol is renewable and it significantly reduces CO2 emissions compared to gasoline. Best of all, it is available today."

GM and other automakers also face a new mandate in the energy bill passed last month that hikes industry wide fuel efficiency standards by 40 percent to 35 miles per gallon by 2020 -- a move companies have said will cost them billions of dollars.