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Old mill eyes market in bio jet fuel

FROM the outside, the rustic red-brick mill on a bend in Maine's Penobscot River resembles any other struggling American pulp and paper mill.

But along with its usual business of pulp-making, the century-old mill is doing something unprecedented: developing technology to produce bio-butanol, a jet fuel, from parts of trees that would otherwise go to waste, one of the world's first to do so.

Production is still two years away, but the reinvention of Maine's Old Town Fuel & Fiber mill is already drawing interest as a potential model for a new wave of biofuel companies that could slash dependence on oil, create jobs and reduce the emissions that lead to global warming.

Loggers, a fading way of life in rugged northern United States and Canada, see the mill as a lifeline for their crippled industry. Environmentalists see it as a test of the Obama administration's push for a big expansion in bio-fuels.

And chemical and oil companies are waiting to see if the mill can do what none has done before by extracting sugars from wood chips into a bio-fuel that many regard as more efficient than corn-based ethanol as a possible substitute for gasoline.

"There has been a lot of interested parties in what we are doing here," said Old Town's president, Dick Arnold. "There have been several oil companies that have been interested in our extract and production of bio-fuels. There has been a number of chemical companies that have expressed the same desire."

Like its once-mighty peers, Old Maine's mill has suffered in recent years from declining pulp prices and loss of market share to Chinese and Latin American rivals. Georgia-Pacific Llc, the maker of Quilted Northern bathroom tissue, shut in May 2006, laying off all 400 workers. A group of investors known as Red Shield bought it a few months later.

Red Shield won a US$30 million grant from the US Department of Energy to work with the nearby University of Maine on a pilot ethanol production plant, but they ran out of cash and filed for bankruptcy last year, shutting the plant again.

Enter Lynn Tilton, a New York venture capitalist who owns one of the nation's largest helicopter makers. Tilton's Patriarch Partners bought the mill in November, invested about US$40 million and shifted its focus to cellulosic bio-butanol.

Tilton can use bio-butanol in her own helicopter and aircraft businesses but is eyeing a potentially huge market after Congress decreed that the United States must use 21 billion gallons of "advanced" biofuels such as cellulosic ethanols, bio-butanol and "green gasoline" a year by 2022.

Whether the technology takes off comes down to cost -- and to corn. For much of the last decade, federal officials have touted the potential of corn ethanol as the best substitute for gasoline, but critics question that assumption, noting it corrodes pipelines and raises food prices.

Bio-butanol, a relative of ethanol, is less corrosive and easier to mix with gasoline. Unlike ethanol, it can be transported by pipeline. And its energy content is about 30 percent higher than ethanol's. If regulations allow, it could be pumped into a fuel tank with no changes to a car engine.

Butanol is also sometimes used as a petrochemical in brake fluids, paint thinners and plastics. Its supporters include chemicals maker DuPont Co and oil giant BP Plc, which have formed a joint venture to make bio-butanol.

"It's really comparable to gasoline," said Mark Bunger, a biofuels analyst at Lux Research, a Boston consulting firm specializing in emerging technologies. "The issue has been that ethanol is easier to make, it's just not easier to use. Butanol doesn't have those same restrictions.

Bio-butanol will be derived from wood that would have gone to waste in pulp production, or have been left on the forest floor as unusable by loggers.


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