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Iron Range invests to secure its place in advancing biochemical economy
Photo: The Segetis’ pilot plant in Golden Valley is generating information that will be used to design manufacturing systems for the new Hoyt Lakes development. Submitted photo
Traditional segments of the region’s forest products industry (paper and lumber) declined drastically as a result of the 2008 national slump in new home construction and never fully recovered. But today, experts are drawing hope from biotechnology firms that use wood fiber to make a wide range of products – from bio-chemicals to fuels and bio-plastics.
• One of the first companies that made such investments in Northern Minnesota was Lonza Inc., a Swiss pharmaceutical supplier that extracts the chemical arabinogalactan, often called LAG, from tamarack trees. It is used in dietary supplements, shampoos, lotions and cosmetics. They opened a plant in Cohasset during 2011 and currently employ 15 people.
• Last year, Minnesota’s largest paper mill, Sappi Fine Paper in Cloquet, completed a $170 million conversion that switched from paper pulp production to using pulp for clothing, known as chemical cellulose.
• The third and most recent vanguard to make a significant investment into Minnesota’s new timber-based biochemical industry is Segetis, Inc. Founded in 2006, the renewable biochemical company uses levulinic acid to produce chemical building blocks, which find their application in flexible plastics, personal care products and industrial cleaners.
The 30-employee company runs its pilot plant in Golden Valley and is currently obtaining levulinic acid from corn sugars. Yet another source that Segetis is hoping to tap is cellulosic sugars, the kind that’s found in trees.
The state of Minnesota has about five million cords of “sustainable harvest” timber available per year, according to the Minnesota Department of Natural Resources’ 2010 Forest Resource Assessment, but only 2.3 million have been harvested in recent years. This underutilization means there is an ample supply of trees that were once heavily used by the paper mills – like aspen, birch and pine – but also underutilized species such as tamarack and red pine.
Those trees are found in the northern parts of Minnesota, so it comes as no surprise that Segetis plans to build its first commercial-scale facility right in the midst of the state’s wood basket, at the Laskin Energy Park in Hoyt Lakes.
Project costs are estimated at $105.1 million, with the bulk, $73.8 million, invested by Segetis. ALLETE Inc., which generates electricity at the park, will supply $3 million for infrastructure improvements, including a utility building, steam boilers and storage for industrial gasses. (Minnesota power, a division of ALLETE, is one of the establishing partners of the Laskin Energy Park.) The remaining sum is covered by public funding through a $21.2 million loan from the Iron Range Resources and Rehabilitation Board (IRRRB) and a $7.1 million contribution by the Minnesota Department of Employment and Economic Development (DEED).
The biggest chunk of the IRRRB loan, $20 million, administered out of the Douglas J Johnson Trust Fund, will be used to erect the facility while the remaining $1.2 million dollars were given to the city of Hoyt Lakes to purchase an existing structure, owned by Nott Corp. Nancy Aronson Norr, Minnesota Power director of regional development, states that the sale of the building was recently finalized and can now be used by Segetis as a staging area for its start-up location.
The renewable biochemical firm plans to fully convert from corn sugars to woody biomass sugars by 2018, using 90,000 cords of wood per year, with an expansion potential to 400,000 cords per year. It anticipates producing 25 million pounds of levulinic acid, nine million pounds of formic acid and 7.5 million pounds of bio-char annually.
Construction of the new facility is expected to start in the spring of 2015 with completion anticipated in two years. Construction employment will be about 245. Once the initial operation is running, 50 new jobs will be created: 10 warehouse and support staff jobs at $33,000-$45,000 yearly; 30 plant operator jobs at $55,000 -$65,000 yearly and 10 management positions at $ 80,000 - $130,000 yearly. Once the conversion to wood is finalized, 20 additional jobs at $55,000-$65,000 could be needed.
Minnesota’s forest industry is on the cusp of entering a new era of manufacturing. The advantages are clear: Not only is the timber resource readily available, but wood-based biochemical products have an estimated opportunity market of $50 billion.
The Iron Range hopes to get a chunk of that money.
“Segetis will provide an economic stimulus and badly needed jobs, and I could not be more pleased for the East Range area,” said ALLETE Chairman, President and CEO Al Hodnik.
His forecast is verified by an independent study from the University of Minnesota Extension Center for Community Vitality, which analyzed 14 potential bio-based industrial product facilities in Minnesota. They predict the Segetis project will have an annual economic impact of $55 million, supporting 545 jobs through indirect supply chains.
The IRRRB, which has followed Segetis’ advancements since 2006, has a special interest to diversify the Iron Range’s economic profile and views the firm as a perfect fit.
“Segetis is on the leading edge of the biochemical economy and will add value to our timber and forest products economy,” said IRRRB Commissioner Tony Sertich in an April 2014 press release. “This innovative company’s presence in our region will help position the Iron Range as a national leader in the biochemical economy.”
Other companies and community partners will help to strengthen Northeast Minnesota’s appeal for biochemical investments. UPM, owner of Blandin Paper in Grand Rapids, is exploring the biochemical market, and Itasca Community College is launching a newly designed biochemical engineering program to educate the soon-needed workforce.
As for Segetis’ new plant, the goals are clear.
“We’re excited to be an anchor tenant in the new bio-economy of the Iron Range,” says Andrew Skinner, vice president of operations.Previous BusinessNorth Exclusives Articles:
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