Date: Aug 14, 2016 Author: Scott Goss Source: delawareonline (
click here to go to the source)
Acetone is not commonly thought of as an important or economically valuable chemical. Most people probably know it only for its usefulness in removing nail polish.
But the solvent has played a vital role in world affairs, contributing to both a British victory in World War I and the creation of Israel some three decades later.
Now the rather smelly, colorless liquid is poised to become the cornerstone of a Delaware startup that is seeking to revolutionize the biochemical industry and even possibly -- maybe someday -- upend the global fuel market.
"That might sound like some unbelievable boast," said Bryan Tracy, the CEO of White Dog Labs near New Castle.
"But the truth is we have already proven that our technology works," he said. "There are no theoretical hurdles anymore. The only thing that can stop us now are markets and the price of oil."
While making biofuels is Tracy's ultimate goal, White Dog Labs currently is focused on proving its technology through the production of acetone and isopropyl alcohol, better known as rubbing alcohol.
"Both chemicals are made today almost exclusively using petrochemicals," Tracy said. "Our process is not only more efficient and less harmful to the environment, but we can come out of the gate with end products that are very cost-competitive, even with today's oil prices at record low levels."
The company recently moved its lab-scale production of those chemicals from its research and development center in the Corporate Commons business park off Airport Road to a 40,000-square-foot pilot and demonstration facility off U.S. 13, where chemical engineers are working to cost-effectively grow the process to increasingly larger production capacities.
In the meantime, a wholly owned subsidiary called NuMake is working to raise the money needed to build a $140 million plant somewhere in the Midwest that Tracy says will prove the technology's validity on a commercial scale by 2020.
"Our main challenge right now is not will the technology work or is it appropriate," Tracy said. "It's a question of moving it to a first-of-its-kind production facility and who wants to take the risk of funding that plant."
A transformative technology
Founded in 2012, White Dog Labs -- named for a slang term for moonshine -- is neither a chemical nor a biofuel company. Instead, Tracy insists, the privately-held enterprise is a biotech company with an innovative method for producing chemicals using plant matter rather than the distillation of fossil fuels, such as petroleum and natural gas.
For more than a century, chemists have been producing "biochemicals" through fermentation processes that use bacteria to convert the sugar in plant matter into a variety of substances in the same way yeast turns barley and hops into beer. In recent decades, that process has given rise to biofuels, such as cellulostic ethanol -- a corn-based additive to gasoline that reduces vehicle emissions and improves efficiency.
STORY: Business community eyes Coastal Zone Act change
Biofuels have yet to fully replace gasoline for a variety of reasons, mostly having to do with the $100 billion global industry's struggle to remain cost-competitive with the petrochemical market. In the U.S., for example, the ethanol industry is backed by massive government subsidies intended to help the nation meet more restrictive fuel-efficiency standards.
Randy Phillips, director of fermentation technologyBuy Photo
(Photo: JENNIFER CORBETT/THE NEWS JOURNAL)
White Dog Labs claims its technology, called MixoFerm, increases production of ethanol and other chemicals from 50 to 100 percent using the same amount of sugar while also reducing the release of carbon dioxide, a greenhouse gas and the main byproduct of the fermentation process used to make most biochemicals.
In an article on the science behind White Dogs Labs' technology, the online trade publication Biofuels Digest referred to MixoFerm as possibly "the most transformative development in fermentation yields since Noah debuted winemaking technology in the Book of Genesis."
The Delaware BioScience Association, a trade group dedicated to promoting the state's life science industry, presented Tracy with its 2016 Innovation Award in April.
"It's a company with huge potential not just for Delaware, but for the entire biochemical industry," said Bob Dayton, who heads Delaware Bio.
The bigger acknowledgments of White Dog Labs's promise have come in the form of sizable grants from the federal government.
"There are no theoretical hurdles anymore. The only thing that can stop us now are markets and the price of oil."
Bryan Tracy, CEO of White Dog Labs
The company and its predecessor Elcriton have landed more than $1.3 million in financial backing from the National Science Foundation. White Dog also recently was named one of six projects vying for $10 million in total funding from the U.S. Department of Energy.
White Dog Labs plans to use the DOE funding to extend its technology to so-called second-generation biochemicals made from other sources of plant matter, including waste material and a wider variety of crops that do not threaten food supplies or biodiversity.
At the same time, White Dog Labs is looking to partner with an established company interested in translating its technology to biofuel.
"The holy grail is ethanol and the liquid fuel market in terms of market size," Tracy said. "But that's a pretty heavy lift and you have to have good entrance into the market."
STORY: Delle Donne misses U.S. win over China
For now, the plan is for White Dog Labs to license its existing tech to NuMake. The California-based subsidiary is hoping to land a DOE loan to cover about 75 percent of the cost to build an acetone/isopropyl alcohol plant, most likely in South Dakota or Minnesota -- state's close to major corn production. At the same time, NuMake is shopping for venture capital to cover the remaining $35 million.
"The challenge we've seen in this industry is if your entire business model depends on licensing, you might be waiting a very long time," Tracy said. "Our goal is to set up the first plant, prove it out and then license the technology to 20 or 30 plants throughout the world."
Risks of an unstable market
The fulfillment of those expectations will have a lot to do with the price of oil.
The biochemical and bioenergy industries were both dealt major blows over the last two years as their hopes to reach cost-parity with the petroleum market came crashing down with the price of crude oil, which fell from $105 per barrel in June 2014 to about $42 today.
The sudden shift in economics contributed to a pivot for Tracy's former company the Newark-based biotech Elcriton. For six years, the partnership between Tracy and his mentor Terry Papoutsakis, a chemical engineering professor at University of Delaware, had been developing a genetically modified bacteria known as Clostridia that could efficiently produce the biofuel n-butanol.
The method they developed is a more efficient version of a process first discovered by famed chemist Chaim Weizman as an alternative method for producing acetone, a key ingredient of a smokeless propellant for shells and bullets in short supply during World War I. Weizman's fermentation solution saw limited use, but his work with the British military allowed him to promote his idea for a Jewish state. Soon after the formation of Israel in the wake of World War II, Weizman was elected the first president of the new nation.
Lab assistant Lance Bernardo mixes media for fermentationBuy Photo
(Photo: JENNIFER CORBETT/THE NEWS JOURNAL)
As late as 2013, Elcriton planned to license its version of the Weizman process out to White Dog Labs, a separate company Tracy founded with the backing of Musea Ventures, the capital venture firm founded by semiconductor icon and Silicon Valley veteran Sass Somekh and his son Talli.
The plan then was to build a butanol plant in Clinton, Iowa, about 200 miles from the butanol facility DuPont Co. is building as part of a joint venture with BP.
But the sudden change in market conditions meant their butanol technology was no longer economically viable. White Dog Labs soon bought out Elcriton, which technically still exists as another subsidiary.
"The plummeting oil prices forced us back to the lab to develop a new technology," Sass Somekh is quoted as saying in White Dog Labs' marketing material. "MixoFerm technology is so efficient that it can withstand economic scenarios such as the 2009 global recession, the 2012 drought and the 2015 oil price crash."
It remains to be seen, however, whether those assurances are enough to convince investors that White Dog Labs' biochemicals are still viable.
"It's not a criticism, but investors can be short sighted because they want a return right away," Tracy said. "With today's oil prices, we're definitely in a place where we can compete. The real question is what is the price of oil going to be over the 20-year life of the plant."
The future of Delaware chemistry
White Dogs Labs currently employs about 18 people, mostly chemical engineers and biologists trained at UD and Delaware Technical Community College.
But Tracey believes the company could quickly grow five-fold in the coming years, particularly if White Dog Labs is able to find a partner willing to take its technology into biofuels.
"It depends on the momentum we have," he said. "If we find a partner or partners with a tremendous incentive to get it into biofuels, a company that fluctuates between 15 and 20 people could all the sudden become 60 to 100 people."
Bryan Tracy, CEO and chief technology officer of WhiteBuy Photo
(Photo: JENNIFER CORBETT/THE NEWS JOURNAL)
That kind of uptick in growth would run counter to the recent trend in Delaware's once-booming chemical industry. DuPont, long one of the state's largest employers, has been slashing jobs here in advance of its pending merger with The Dow Chemical Co. One of its most recent spinoffs, The Chemours Co. also has been downsizing since becoming a standalone company in 2015. Hercules Inc., another DuPont spinoff that once employed 1,800 in Wilmington, ceased to exist in 2008.
STORY: SevOne begins 'brutal' round of layoffs
Tracy, chairman of the Delaware Sustainable Chemistry Alliance, said he believes the wealth of talent in the area now available from those corporate downsizings could prove to be White Dog Labs' greatest asset.
"We've made a commitment to Delaware because this is the right environment for the really important things and that's human capital," said Tracy, a self-described former military brat who first moved here less than a decade ago.
"Our mission is to become a leading example for the state," he said. "We have spinout technology from the University of Delaware. We've capitalized on the core competencies and competitive advantages of the Delaware region. Now we're focused on attracting the capital we need to grow into one of the state's biggest and most important companies."
Contact business reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel.
