Sweetwater Energy proposes $52.8 million plant for Iron Range

A New York biochemical firm wants to build a $52.8 million plant in Mountain Iron, Minn., that would convert Minnesota timber into chemical sugars used in plastics and biofuels.

The Iron Range Resources and Rehabilitation Board (IRRRB) will vote Friday on whether to issue an $18 million loan to Sweetwater Energy of Rochester, N.Y., for the plant. Company officials hope in 2017 to begin operating half the plant, employing 35 workers to start.

The vote must be unanimous. If approved, the money would hike the state's total commitment to Sweetwater to about $26 million.

If conditions are met, the 21st Century Mineral Fund expects to lend Sweetwater $6 million. The Minnesota Department of Employment and Economic Development Investment Fund expects to lend $1 million. The Minnesota Agricultural and Economic Development Board also expects to lend $1 million.

Before it can receive any state funds, though, Sweetwater must secure the remaining $26.8 million needed for the $52.8 million building and equipment project. The company also needs to secure money for inventory and operating expenses.

The safeguards are required because of the size of the IRRRB loan, IRRRB Commissioner Mark Phillips told the Star Tribune on Wednesday.

"We will not put any money in until we know construction is well underway and the plant is [viable]. We will be very cautious and careful about how we consummate this deal, as would anybody," Phillips said.

"But this is a good fit for northeastern Minnesota, which had a lot of pulp and paper and plant board material [businesses]. We have the infrastructure for supplying woody biomass," Phillips said. "We have the loggers and the trucking to play in this industry."

He acknowledged that Sweetwater "is a big expenditure for the state, but if the state wants to play in this bio industry segment, these are the kinds of deals we have to consider. It's an emerging industry, and the world is turning away from carbon-based chemicals to more plant-based and biodegradable-based products."

Sweetwater started as a venture company that spun out of the Rochester Institute of Technology a few years ago. It currently has 30 employees in two small demonstration plants, one in Rochester and one in central Pennsylvania.

CEO Arunas Chesonis said three factors were key in selecting Minnesota for expansion. "The Minnesota financing package is the tiebreaking factor," he said. Also key were access to quality wood in the Northeastern part of the state and the helpfulness of Minnesota's economic-development personnel.

"Right from the start they've been welcoming and energetic, and we're looking forward to offering solid employment in the region and expanding there as we grow," Chesonis said.

The first production goal calls for 29,000 tons of cellulosic sugars and 22,000 tons of clean lignin fiber each year. Three other phases are planned that would expand capacity in 2019 and 2020.

If completed, Sweetwater's project would join other biochemical companies that have set up shop in Northern Minnesota, a region heavily immersed in iron ore mining and some tourism.

Biochemical companies that offer the region some diversity include Lonza, which extracts nutritional chemicals from Tamarack trees in Cohasset, Minn.

Sappi restructured a good chunk of its paper pulp plant in Cloquet a few years ago and now converts Minnesota wood pulp into cellulose fibers used in making rayon fabric.

Last year, IRRRB approved, but has not yet issued, a $21 million loan to Segetis, a Golden Valley-based biochemical company that wants to build a $105 million factory in Hoyt Lakes to convert plant materials into solvents.