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BP drops plans for U.S. cellulosic ethanol plant
October 25, 2012 / 6:35 PM / in 5 years

BP drops plans for U.S. cellulosic ethanol plant

WASHINGTON, Oct 25 (Reuters) - BP Plc on Thursday canceled plans to build a plant in Florida to turn tough grasses such as sorghum and cane into cellulosic biofuel, the second oil major this year to back out of plans to produce “next generation” ethanol from non-food crops.

Once seen as a promising solution for the debate over the merits of using corn and other crops to make fuel, cellulosic biofuel has become a political football as companies struggle to produce commercial quantities, despite a government mandate.

The U.S. Congress originally mandated that by 2012, 500 million gallons of cellulosic ethanol be blended into fuel by refineries. But because very little of the fuel is produced, the Environmental Protection Agency lowered the mandate to 8.65 million gallons for 2012.

The U.S. oil industry’s lobby group has sued the government over the mandate, and Republicans in Congress have said the law should be changed.

BP said it now plans to focus on research and development as well as licensing its biofuels technology, instead of building the 36-million-gallon plant, the value of which was not disclosed.

“Given the large and growing portfolio of investment opportunities available to BP globally, we believe it is in the best interest of our shareholders to redeploy the considerable capital required to build this facility into other more attractive projects,” Geoff Morrell, the company’s vice-president of communications, said in a statement.

In April, Royal Dutch Shell Plc and privately held Iogen Corp scrapped plans for a commercial-scale plant in Canada to make ethanol from straw and plant waste.

Privately held Poet, one of the largest U.S. ethanol makers, broke ground on a $250 million cellulosic plant earlier this year and hopes to start producing commercial fuel after completing the plant in 2013.

The project has received financing from Royal DSM, a Dutch life-sciences company.

BP said it will continue to run a biofuels research center in California and a demonstration plant in Louisiana.

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