Session to take up oil-production project

JACKSON – Legislation will be considered today that would allow a Texas-based company to convert Mississippi-produced timber into renewable crude oil that can be refined into gasoline to fuel standard vehicles.
“We may look back and say this did more to change and do good for Mississippi than any other” economic development project, Gov. Haley Barbour said during a news conference Thursday. “And I don’t say that lightly.”
Barbour is asking the Legislature to approve a $50 million bond issue today during a special session he called to consider incentives for KiOR.
The Houston company has committed to building five facilities in Mississippi to convert wood chips into crude oil. The first and smallest plant is scheduled to be built on the Tennessee-Tombigbee Waterway in Columbus.
Additional plants will be built in Newton County in east-central Mississippi and in the Bude area in southwest Mississippi.
All three locations have one thing in common – an abundance of timber. The company also has committed to build two more plants in the state out of the next five it constructs.
Fred Cannon, president and chief executive officer of KiOR, told the Senate Finance Committee on Thursday that Mississippi was selected for the site of the plants because “you have the natural resources and the people resources.”
He said Mississippi is fifth nationally in the amount of available timber and also is located in the Southeast, where the bulk of the oil refineries are located that will convert the biofuel to gasoline, diesel fuel or other motor fuels.
Before the company can take advantage of the state incentives, it must secure a contract with an oil refinery to convert the biofuel into motor fuel and to transport it for commercial use.
Cannon said the company is in the final stage of negotiations with major oil companies.
The state incentives would include a $75 million loan for the construction of the three plants. No incentives are planned for the additional two plants.
The Mississippi Development Authority already has $30 million available from a revolving loan fund. Barbour is asking the Legislature to approve a bond issue to provide the additional $45 million.
He also is asking the Legislature to approve $4 million in bonds for work force training, and $1 million for a grant to the Sustainable Energy Research Center at Mississippi State University.
The proposed incentive package also will include a sales tax exemption for KiOR during the construction of the plants.
“I think this is a great and innovative idea, and I am in full support of it,” said Rep. Greg Ward, D-Ripley, chair of the House Agriculture Committee. “It not only creates direct jobs, but also benefits the local economy tremendously by replacing jobs that have been lost in the timber industry.”
KiOR has committed to creating 1,000 direct and indirect jobs within five years and also has committed to spending $85 million in payroll and in the purchase of Mississippi timber.
Many paper mills in the state have closed in recent years, leaving a void that can be filled by KiOR, officials said.
The technology that KiOR is using to produce the crude also can be duplicated with other natural products, ranging for corn stalks to grass. The plants built after the first three could use some other products.
Cannon said the technology allows KiOR to convert biofuel to a form of crude oil in a matter of seconds instead of the millions of years it takes to do it naturally.
The technology to convert bio products to fuel has been around for decades, but has been improved in recent years with a converter that dramatically speeds up the process.
It also is much more eco-friendly, Cannon said, explaining that the emission “has about 25 percent of the greenhouse gas effect as traditional gasoline.”
The plan is to open the Columbus plant by the end of next year. The plants are expected to produce at least 1,500-3,000 barrels of oil per day and use 100-120 truckloads of timber daily.
KiOR already is producing about 15 barrels per day of the renewable crude oil in Houston as a pilot project, and has been looking to commercially produce the product. Barbour said he was approached by one of KiOR’s investors last fall.
Initial talks called for KiOR to open one plant without state incentives. But Mississippi Development Authority Executive Director Gray Swoope said state officials decided to broach the idea of incentives to locate multiple plants in the state because of the impact they could have in rural areas.

Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@djournal.com.

Bobby Harrison/NEMS Daily Journal