BlueFire: cellulosic delay to be less than 6 months

NEW YORK (Reuters) - BlueFire Ethanol Inc’s delay in beginning construction of a cellulosic ethanol plant in Lancaster, California, should last less than six months, the company’s president and CEO said on Friday.

“It’s not as though it’s going to be six months,” Arnold Klann, the company’s top executive, said by telephone. “Obviously it’s going to depend on when we can finish the negotiations (with potential financing partners) and get capital raised.”

BlueFire said in a letter to shareholders late last month that it was delaying construction of the plant until further notice. The company is one of a handful that hopes to make a new alternative motor fuel from feedstocks like agricultural waste, wood scraps and fast growing grasses,

Rising construction costs, the credit crunch and difficulties in getting permits from the state of California led to the delay, the letter said.

On Friday the company’s top executive said construction, which had been scheduled to start in December, will start soon.

Any delays in second-generation ethanol come as a blow to the industry, which is hoping to blossom amid criticism that traditional ethanol made from corn has led to higher food prices. Corn ethanol has also been blamed for helping to contribute to a dead zone in the Gulf of Mexico as excess fertilizer runs down the Mississippi River from fields in the nation’s heartland.

Klann said in the face of rising construction costs that BlueFire had decided to delay building the plant until it had raised the full cost of it. He estimated that the company had raised about 20 percent of the roughly $100 million cost of the 3.7-million-gallons-per-year plant.

The company hopes that steel costs will fall in the first quarter of the year as the recession slows the construction industry.

“We’ve already seen costs come down,” said Klann.

Reporting by Timothy Gardner; Editing by Christian Wiessner