Red Rock Biofuels receives $70M from feds

FORT COLLINS – Red Rock Biofuels LLC has landed a $70 million federal grant to produce 12 million gallons annually of fuel made from wood biomass, according to the U.S. Department of Energy.

Fort Collins-based Red Rock Biofuels will receive the entire amount after meeting certain milestones, though the energy department did not disclose those targets.

The grant will fund a $200 million project that includes building a refinery in Lakeview, Ore., to produce jet fuel, diesel and naphtha from wood scraps from timber operations, said Terry Kulesa, CEO of Red Rock Biofuels.

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The company plans to refine 140,000 tons annually of wood, including branches, bark, needles and sawdust in southern Oregon, Kulesa said.

“It’s stuff they would leave in the forest typically that they pick up for us,” he said. “Then we use that.”

Fort Collins- based IR1 Group LLC, an energy consulting firm formed by former employees of Pacific Ethanol Inc. (Nasdaq: PEIX), formed Red Rock Biofuels in September of 2011. Red Rock Biofuels has 10 employees, six of which work at the company’s Fort Collins headquarters.

Red Rock Biofuels was one of three companies that will receive a total of $210 million from the departments of Energy, Navy and Agriculture for biorefinery design, construction, commissioning and performance testing. Illinois-based Emerald Biofuels and California-based Fulcrum BioEnergy also received $70 million grants.

The effort is aimed at expanding military fuel sources, improving reliability of the nation’s fuel supply and guarding against supply disruption.

Altogether, the companies will produce more than 100 million gallons of military-grade fuel annually beginning in 2016 and 2017 “at a price competitive with their petroleum counterparts,” according to the energy department. The alternative fuels can be blended at a 50:50 ratio with traditional fossil fuels

“Advanced biomass-based transportation fuels have the potential to provide a reliable and cost-effective alternative to traditional fuel sources,” said Deputy Energy Secretary Daniel Poneman in a statement.

U.S. Sen. Mark Udall, D-Colorado, in 2012 defended the program that funded the project through the 2013 National Defense Authorization Act. Red Rock Biofuels also received a $4.1 million grant from the federal government last year.

“Colorado has always been at the forefront of energy innovation, and I am proud Red Rock Biofuels will play a critical role in this important effort,” Udall said in a statement issued last week. “As a member of the Senate Armed Services Committee, I will keep fighting to ensure our nation does everything it can to be more energy self-reliant and energy secure.”