Mascoma: The biggest mis-spending of public funds for cellulosic biofuels ever?

Photo: Oak Ridge National Laboratory working on synthetic biology for the form of cellulosic ethanol production which Mascoma pursued

Photo: Oak Ridge National Laboratory working on synthetic biology for the form of cellulosic ethanol production which Mascoma pursued

Biofuelwatch investigation into Mascoma Corporation, who took at least $100 million and possibly over $155 million in public subsidies, mostly for building commercial cellulosic ethanol refineries which they never started to build.

Executive Summary:

This is an investigation of Mascoma Corporation, a start-up biofuels company which may have misspent more public funds intended for building advanced biofuels refineries than any other company in North America.

Mascoma took at least $100m and possibly over $155m in public funding intended for building integrated biorefineries.  Their biggest donor was the US Department of Energy (DoE), including the DoE funded BioenergyScience Center.  They also received $14.8 million from New York State, at least $20 million from the State of Michigan, around $1 million from the State of Minnesota, and over C$1m in total from Alberta Province and the National Research Council of Canada.

The $14.8 million from New York State was for a cellulosic ethanol plant that Mascoma did build, but which has never sold any ethanol.  The plant has since been closed down and sold to a biotech company that intends to use it for a different purpose.

The vast majority of the grants received by Mascoma were intended for commercial-scale cellulosic ethanol refineries which were never built at all.  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 investigation shows that:

  • Links between Mascoma and their academic ‘partners’, namely Dartmouth College, went well beyond ordinary collaboration: Mascoma was co-founded by leading synthetic biologists at Dartmouth College and co-founder Lee Lynd used his simultaneous positions in the company and at Dartmouth College to attract millions of dollars of public funds, which were paid to Mascoma but transferred to Dartmouth’s synthetic biology laboratory. Financial agreements between the company and Dartmouth College extended to Mascoma obtaining a licence not just for Dartmouth’s existing intellectual property rights, but ones which the university might obtain in future.  Dartmouth College, in exchange, obtained an equity interest as a co-founder of Mascoma;
  • Mascoma’s co-founder Lee Lynd continues to occupy a position on the management team of the BioenergyScience Center (BESC), set up and funded by the DoE, which would have put him in a prime position to attract funding via the BESC itself and, likely, for persuading the DoE to make the much larger grants for Mascoma’s proposed biofuel refineries available;
  • Mascoma’s failure to build any commercial cellulosic refineries cannot be explained by economic problems. According to the figures published by Mascoma, they had sufficient finance to build at least one if not two of their proposed commercial plants;
  • Mascoma’s business model relied on a proposed cellulosic ethanol technology called Consolidated Bioprocessing (CBP). Mascoma co-founder and director Lee Lynd acknowledged in a scientific review he co-authored in 2011 that there were major hurdles to be overcome and that years of fundamental research into CBP were still needed.  This strongly indicates that Lee Lynd at least was well aware that the technology was not commercially viable at the time;
  • There is a serious lack of transparency on the part of the grant-giving authorities, especially the DoE. This makes it impossible to ascertain whether Mascoma broke any terms of the grant agreements, or whether those terms were worded so weakly that they could not be used to force Mascoma to either build the proposed plants or repay the money.  It is clear however that there was a serious lack of due diligence on the part of all of the public authorities that gave grants to Mascoma, with the possible exception of New York State.

Biofuelwatch believes that a full investigation, with disclosure of all relevant public documents, is vital to understand how such large sums of money could have been misspent on biofuels plants that were never built, and what the implications for the DoE’s overall funding programme for industrial biorefineries are.  Biofuelwatch believes that such funds should instead be spent on measures proven to reduce greenhouse gas emissions, such as sustainable solar energy or home insulation.

 

Introduction:

 

There have been several high-profile failures of US cellulosic biofuel refineries  which were built partly with public funds and which have failed and been shut down.  In one case (Cello Energy), a court awarded punitive damages for defrauding investors against a company which had built a cellulosic biofuel plant.  And another company (KiOR) is currently being sued for fraud.  Other cellulosic biofuel companies (e.g. Range Fuels) have been bankrupted without being sued for fraud.

 

Mascoma has never faced fraud or bankruptcy proceedings, yet this company’s story appears in many ways far more remarkable and concerning than that of Cello Energy, KiOR or Range Fuels.

 

Firstly, Mascoma spent more public funds than any of these companies: Overall, They spent least $100m and possibly over $155m of public funds.  And secondly, the other companies used public funds to build commercial-scale cellulosic biofuel refineries, but failed to achieved the promised yields and volumes of biofuels.  Mascoma, on the other hand spent government money earmarked for commercial cellulosic biofuel refineries, which they never even started to build.

 

Also remarkable is the fact that Mascoma succeeded in funnelling millions of dollars’ worth of public funds into Dartmouth’s synthetic biology work.  Dartmouth College’s synthetic biology team, chaired by Mascoma’s co-founder, Lee Lynd, was a major beneficiary of the company’s actions.

 

Instead of facing fraud, or even bankruptcy proceedings, Mascoma has simply changed its name to Enchi Corporation, after selling off most of its assets, as well as its name, to a Canadian biotech company called Lallemand.

 

The Mascoma story provides a fascinating glimpse into the cosy relations and complex personal links between the US Department of Energy, synthetic biology academics and start-up companies.  It reveals an astounding lack of due diligence carried out by public grant-giving bodies in the US and, to a lesser extent, Canada, and a remarkable lack of transparency or accountability over the fate of public funds.

 

Mascoma’s Technology: Consolidated Bioprocessing, the Holy Grail for Cellulosic Ethanol Production?

 

Conventional ethanol is made either from sugars that are derived from sugar cane or beet, or from the starch in grains such as corn.  Ethanol production from sugar cane or beet is most straightforward: Those sugars can be easily fermented to ethanol using ordinary baker’s yeast.  Making ethanol from corn or other grains is slightly more complicated: energy and at least two different enzymes are needed to break up the starch into sugars, which can then be fermented.  Making cellulosic ethanol, on the other hand, is far more difficult.

 

This is due to the fact that the cell walls of plants contain different types of sugars which are embedded in complex and very recalcitrant structures.  Cellulosic ethanol production involves three different steps:

 

1)       Pre-treating biomass so that the molecules which contain different sugars can be easily accessed.  This might involve milling biomass into small particles, exposing it to heat and high pressure which is then suddenly reduced, and/or treating it with sulphuric acid;

 

2)       Hydrolysis: This involves breaking up the different types of molecules which contain long chains of sugars;

 

3)       Fermentation: efficient cellulosic ethanol production requires all or most of the sugars in the biomass to be fermented.  However, no microorganism has been found that can efficiently ferment the whole range of such sugars Engineering such an organism is one focus of synthetic biology.

 

The second stage, i.e. hydrolysis, is particularly challenging.  It can be done using acids which are cheap, but there are serious problems with this approach: Sugar yields are relatively low, expensive materials are needed to prevent corrosion caused by the acids, and the process results in byproducts which then hamper ethanol fermentation.

 

The more popular alternative is to use enzymes (produced by microorganisms which are cultured elsewhere),instead of acids.   This has several advantages: Sugar yields are higher, corrosion is not a problem, and no byproducts which could inhibit fermentation are formed.  Yet this approach has its own problems: It requires many different expensive enzymes, which tend to be produced by a variety of genetically engineered microbes.  The process takes days rather than seconds or minutes (as for acid hydrolysis).  The enzyme mixture can be easily contaminated by unwanted microbes which disrupt the whole process.  And – most problematically – sugars which are released during hydrolysis can  stop some of the enzymes from working effectively.

 

Much recent research into cellulosic ethanol has focussed on how to stop enzymes being inhibited by the sugars which the hydrolysis process is meant to release.  Researchers and companies have been trying to avoid this problem by finding ways of combining hydrolysis and fermentation in one single step.  If this could be done then there would never be enough ‘free’ sugar to stop enzymes from working well, because those sugars would immediately be fermented to ethanol.  Such ‘single stage’ processing overcomes one major problem but creates another: It requires a temperature that is less than optimal for both hydrolysis and fermentation and thus reduces the efficiency of the whole process.

 

This is where Mascoma’s proposed technology, called Consolidated Bioprocessing (CBP), comes in.  It involves creating a GE super-microbe or, more likely, a community of (GE) microbes which produce the enzymes that free up all of the different sugars in biomass and, at the same time, ferment all of them to ethanol, all simultaneously and in one single vessel.  The DoE has called it a “a game-changing, one-step strategy”.  Developing and operating an effective CBP system would mean overcoming virtually all of the challenges of cellulosic ethanol production, including that of high production costs, because there would no longer be a need to buy expensive enzymes.

 

Yet such a breakthrough remains a long way off.  This was concluded in a scientific review published in 2007,

And it was even admitted in a scientific review published in 2011 that was sponsored by Mascoma and co-authored by their co-founder Lee Lynd.  The language and conclusions of that review were fundamentally different from the confident promises made by Mascoma.

 

Thus, at the same time as Mascoma had been persuading public authorities to grant them large subsidies for commercialising CBP technology, Mascoma’s researchers were admitting that major fundamental research was needed before CBP could become a proven technology.

 

 

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