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Serving Northern St. Louis County, Minnesota

New jobs on the Range?

“Green” bio-chem plant looks promising, but keep hopes realistic

Posted 4/24/14

The announcement of the possibility of new jobs on the East Range from a proposed expansion of a Golden Valley-based biochemical company is encouraging news for the region. The proposal by Segetis …

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New jobs on the Range?

“Green” bio-chem plant looks promising, but keep hopes realistic

Posted

The announcement of the possibility of new jobs on the East Range from a proposed expansion of a Golden Valley-based biochemical company is encouraging news for the region. The proposal by Segetis Inc., a company that converts corn sugar into industrial chemicals currently derived from petroleum, not only holds out the possibility of as many as 50 new direct jobs, it could also boost the region’s timber economy as the company gradually shifts its feeder base from corn to woody biomass.

From an environmental perspective, the company is on the right track. Producing industrial chemicals from petroleum has a number of downsides. By shifting to renewable source material, the company is able to produce these widely-used chemicals with a lower carbon footprint and with fewer toxic side-effects and less waste.

It all sounds very promising, but Iron Rangers have learned over the years that promises made are not always promises kept. The region has certainly suffered its share of disappointments and investments gone wrong. We certainly hope that’s not the case here, but it’s worth noting that the company is young and is operating in a market niche that is still in its relative infancy. That means growth potential could be high, but it also means failure is a real possibility.

The Iron Range Resources and Rehabilitation Board has taken big risks before, with a decidedly mixed record.

We are encouraged that the $20 million loan the IRRRB approved for Segetis will be delivered in distinct phases, and that the early money, at least, is well-collateralized.

IRRRB funds will be limited to 40 percent of the actual project costs and the company will need to reach certain milestones to advance to each additional phase of funding.

It’s also encouraging that the company has committed to funding the bulk of the estimated $105 million project with private funds. The company has attracted the interest of a number of investors, who clearly see a promising market for the chemicals that Segetis will produce at the plant.

While the company, founded in 2006, is still young, it’s certainly beyond the high-risk start-up phase and it has a decent track record so far as it has worked to bring its various products up to commercial-scale production.

Do we think everything will continue to go as touted in this week’s press releases?

Probably not. As anyone who has followed economic development in our region, it’s a rare project that manages to stay within initial timelines, or meet the touted employment numbers, at least initially. Making the switch from the use of corn-based source chemicals to ones produced from woody biomass will be technically challenging, and could well take longer than initial projections.

Even so, this week’s announcement is good news for the East Range. If the plant is eventually built in Hoyt Lakes, the company will undoubtedly find a very capable and dedicated workforce in our area, ready to roll-up sleeves and do whatever it takes to make the company a success.