BlueFire Ethanol delays Lancaster project plans

By Anna Austin | January 03, 2009
Web exclusive posted Dec. 29, 2008, at 12:45 p.m. CST

California-based BlueFire Ethanol Inc. has delayed the groundbreaking of its 3.2 MMgy cellulosic ethanol plant in Lancaster, Calif. BlueFire Ethanol's Chief Executive Officer Arnold Klann recently advised investors of the delay in the company's 2008 annual shareholder letter.

The Lancaster facility will convert wood wastes, urban trash, rice and wheat straws, as well as other agricultural residue into ethanol. The final permits for the plant were granted July 23 by the Los Angeles County Department of Regional Planning. Earlier in the year, the facility was expected to be on line in late 2009.

"The first project, BlueFire Ethanol Lancaster LLC, has been in the licensing phase for nearly 18 months," Klann said. "As previously announced, the Los Angeles County Planning Commission issued a Conditional Use Permit for the Lancaster Project in July. However, a subsequent appeal of the county decision, which BlueFire overcame, combined with the waiting period under the California Environmental Quality Act, pushed the effective date of the now non-appealable permit approval to December 12, 2008."

Klann said due to this permitting delay and recent capital market decline, BlueFire Ethanol won't be able to break ground before the end of 2008. In addition, the project was originally estimated to cost $100 million, however, that has increased as a result of significant increases in material costs on the world market and the complexity of the company's fist commercial deployment.

"In recent weeks, prices for materials have started to decline and we expect, by the end of the first quarter of 2009, items like structural and specialty steel will decline in price by 25 percent to 30 percent, and other materials should follow suit," Klann said.

He added that BlueFire Ethanol's board of directors determined it's prudent to delay Lancaster's groundbreaking until all the necessary funds are in place. "We remain optimistic in being able to raise the additional capital necessary after the new federal administration is in place and the capital markets normalize," he said.

In 2007, BlueFire Ethanol was one of six ethanol companies selected to receive a $40 million grant from the U.S. DOE. The funding is being used to build another 18 MMgy to 19 MMgy facility just outside of Palm Springs, Calif., which will utilize landfill residues from the Riverside and San Bernardino Counties.

BlueFire Mecca LLC is progressing in both permitting and design activities, according to Klann.

"Over the coming months BlueFire will continue to make enhancements to its already robust technology, targeting improvements in sulfuric acid concentration and distillation/dehydration efficiencies," Klann said. "We expect 2009 to be a dynamic year for BlueFire, with plants anticipated to be in construction and many new opportunities pursued."