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In Microbe, Vast Power For Biofuel
Organism's Ability To Turn Plant Fibers To Ethanol Captures Investors' Attention

By Steven Mufson
Washington Post Staff Writer
Thursday, October 18, 2007

QUABBIN RESERVOIR, Mass. Ten years ago, an assistant from a microbiology laboratory took a hike near the shore of the vast Quabbin Reservoir, which supplies water to Boston. At one point, he crouched alongside a brook in the shade of towering hemlock trees, dug up some moist dirt, put it in a jar and took it back to the lab.

Today, some investors are betting that the jar of dirt could help change the biofuels industry.

Inside the jar, microbiology professor Susan B. Leschine found curious lollipop-shaped microbes with an uncommon ability to break down leaves and plant fibers into ethanol. For 30 years, Leschine has been researching this sort of thing and writing about it for publications such as the International Journal of Systematic and Evolutionary Microbiology.

Some venture capitalists in the area have convinced Leschine that her tiny microbe could be very big business. Now Leschine, who teaches at the University of Massachusetts at Amherst, is also chief scientist at SunEthanol, a start-up firm with about a dozen employees.

The firm has attracted an equity investment from VeraSun Energy, one of the nation's biggest producers of ethanol derived from corn and used as motor fuel. It is VeraSun's first investment in the next generation of ethanol, known as cellulosic ethanol, made from switch grass, wood chips and other plant fibers. Now SunEthanol is racing to gear up for commercial production of the microbe so it can move from the cloudy test tubes in Leschine's cluttered lab into the giant vats at VeraSun's refineries.

SunEthanol is just one of countless firms searching for ways to make cellulosic ethanol a commercially viable business. At the moment, they have a way to go. Unlike ethanol made from corn, not a drop of cellulosic ethanol is being commercially produced. Half a dozen pilot projects are being built -- with the help of $385 million in Energy Department grants -- but no one claims to have a sure thing.

"We're optimistic, but we're also realistic that this is an early-stage company and it still has many hurdles to cross," said Bill Honnef, VeraSun's vice president for strategic initiatives. "We will look at the program over the next year and figure out how we're doing. At that point, we will decide whether to make further investments."

Congress is working to prime the cellulosic ethanol pump. The Senate version of the energy bill being considered would require the oil industry to use 21 billion gallons annually of "advanced biofuels," including cellulosic ethanol, by 2022. A tax break would allow companies to deduct half the cost of a new plant in the first year of operation. And cellulosic ethanol would draw generous subsidies for oil refiners who mix it into their gasoline.

Still, many technological hurdles remain, and much of the venture capital poured into the cellulosic ethanol industry is going into companies like SunEthanol that are searching for ways to make the manufacturing process more efficient and profitable.

A key part of the challenge is figuring out how to better break down cellulosic material -- such as cornstalks or wood chips -- into ethanol. Many firms are trying to do that in two steps, first breaking down cellulose into sugars and then fermenting sugars to produce ethanol for use in motor fuel.

Many companies are genetically engineering enzymes to do the first task. Those enzymes tend to be expensive. On Monday, Genencor, a division of Danisco, announced that it had developed a new product, Accellerase 1000, that it said contains a combination of enzymes that reduces cellulosic biomass into fermentable sugars.

"Lots and lots and lots of groups and companies are looking for new cellulases," or enzymes that process cellulose, said J. Craig Venter, who raced the federal government in mapping the human genome. Venter's company, Rockville-based Synthetic Genomics, is searching for naturally occurring chemicals that can turn sugar into diesel fuel. "A key part of nature is breaking down plant debris," he said. "So we find all kinds of environments with unique cellulases in them."

Leschine says her microbe has the advantage of performing both the breakdown of plant fibers and the production of ethanol. "Creating one microbe that does what enzymes and fermentation do is regarded as the Holy Grail because of the savings in costs," she said.

For the microbe, the plant fibers are food while ethanol and carbon dioxide are waste products. "These are tiny little cells we can't even see. They don't have mouths. How do they do it?" she said with a sense of wonder.

Whether SunEthanol will succeed remains unclear, but it is a good example of the hopes and hurdles for companies in the cellulosic biofuel business. Many of those firms rely on the research, and serendipity, of scientists like Leschine.

For years, Leschine scoured soil samples from around the world in search of the perfect microbe, one that would excel at breaking down what nature casts on the ground in damp places like the reservoir. When friends or colleagues traveled, she would ask them to bring back soil in jars or old plastic film canisters.

Yet the best microbe may have been here all along, lurking near some ferns and an old stone dam just 20 minutes from her university lab. She has dubbed it the Q microbe for the Quabbin Reservoir.

Apart from its lollipop appearance, it didn't stand out at first. But the more she tested it, the more unusual it seemed. Most microbes have about 20 machine-like proteins for absorbing sugars; the Q microbe has more than 100 for various nutrients, half of them for sugars, she says. The Q microbe also works in moderate temperatures, making it useful for manufacturing.

Leschine's interest predates the current fervor over biofuels. Since her graduate school days, she has been interested in the role of microbes in the carbon cycle. On the shelves of her office sit beanbags in the shapes of microbes. In a corner stands a bag of dirty cornstalks.

"The last thing in the world I wanted to do was start a company," Leschine said as she stood next door to her lab, where an assistant heated mixtures in test tubes. "It seemed like more of a distraction."

Then she talked to someone teaching business at the university, and he and a group of venture capitalists persuaded her to commercialize it. She came to feel that it was her obligation because she had received Energy Department research grants.

Next came lengthy negotiations with the university, which owned the intellectual property rights for work done in its labs. SunEthanol negotiated an exclusive licensing agreement with the university, which owns the patent.

The Q microbe's future hinges on the SunEthanol founders' skill at navigating talks like this to raise more money and persuade ethanol makers to use the Q microbe instead of a competing bug or enzyme. A small business is like Leschine's test tube samples, and scaling it up is no science. SunEthanol's chief executive Jef Sharp knows that from experience. He started a successful clothing firm. Later, he started X-S Capacity, which he called a sort of eBay for excess manufacturing capacity. It flopped. More recently, he launched Tech Cavalry, which provides computer support for individuals and businesses. This time, he says, "the wind is at our backs."

SunEthanol has received help from the Energy Department in mapping the genetic code of the Q microbe. The firm also hopes to receive an Energy Department grant through a program to help small businesses. "It could be lifeblood for us," said Jonathan Gorham, SunEthanol's marketing director.

SunEthanol's founders fear that the regulations are written in a way that will restrict federal funding to enzyme development, not microbe development. They have lobbied the Energy Department and members of Congress to make sure their work will be considered.

Next SunEthanol must figure out how to go from working with a liter or two of Q microbes in the lab to churning out millions of gallons of the microbe. VeraSun, for example, has fermentation vats that are more than 100,000 gallons each. SunEthanol must also test temperature and acidity conditions for the Q microbe, which will be expected to break down plant material very different from what it consumes near Quabbin's shore.

VeraSun's Honnef hopes that cellulosic ethanol plants can be built next door to the company's corn ethanol distilleries. Those distilleries use kernels and leave the rest, known as corn stover. The corn stover is largely waste material now but shows cellulosic possibilities.

"The conversion of cellulosic material to ethanol has been proven out in a lab," Honnef said. "The challenge is that it can't be done today on a commercial basis on a large scale."

Leschine is hopeful. "What we've demonstrated is that if you go out and look in nature, you can find a microbe that does what you want to do," she said. "The advantage of working with a natural microbe is that . . . you don't have to do all the complicated genetic engineering."

But she knows that she doesn't know much about engineering or big industry. She notes the dirty cornstalks in her office. They are there, she said, "to remind me that this is a daunting task."

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