Muni bond-funded waste-to-jet-fuel company on verge of collapse

Fulcrum BioEnergy, a clean-fuels pioneer that raised more than $1 billion to turn household waste into lower-emitting fuels for planes and trucks, is in danger of going under. 

The company, which had issued hundreds of millions of dollars in municipal bonds, recently laid off nearly all of its staff of about 100 and halted most of its operations, according to more than a half-dozen former employees. It signals the apparent demise of a company that garnered funding from a litany of industry giants — including BP, United Airlines, Cathay Pacific and Japan Airlines — and a setback in the push for a clean-fuels breakthrough to lower emissions from the aviation industry. 

Fulcrum employees said they were laid off on May 17 and the company's website stopped working last week. It's unclear which Fulcrum executives are still employed, but several didn't respond to emails and phone messages seeking comment. Nuveen, a primary financial backer of the company, declined to comment.

Fulcrum BioEnergy

The dire turn of events raises questions about the future of Fulcrum's flagship plant in Nevada, located 20 miles outside of Reno, which cost more than $200 million to build and has been plagued by costly technical problems since it began operations in 2022. It also casts doubt on Fulcrum's garbage-to-fuels plants planned for Indiana, Texas and the UK. 

Since the company launched in 2007, Pleasanton, California-based Fulcrum has been heralded as a key player in the broader quest to develop new sources of cleaner transportation fuels. One of the key roadblocks is finding inexpensive feedstocks that can generate vast quantities of fuel with fewer heat-trapping emissions. 

Fulcrum was the first company to take shredded landfill waste, gasify it and then convert it into a liquid fuel. While technically challenging, garbage-to-fuels has long been tantalizing. That's because household waste is abundant and cheap, and it doesn't require additional acres for growing energy crops.

"If you can get municipal waste into [sustainable aviation fuel], it's a water-to-wine type project," said Jim Davies, program director for sustainable flight at IAG SA, the parent company of British Airways, in an interview earlier this year.

Fulcrum, though, has consistently struggled to deliver on its vision. When the New York Times reported in 2008 about companies seeking to turn garbage into fuels, it mentioned that Fulcrum planned to begin operating its Nevada plant by 2010. A couple of years later, as Fulcrum briefly flirted with a public stock offering, it reported that its plant would begin operating by 2013. And when United invested $30 million in the company in 2015, Fulcrum said its plant would begin operating in 2017.

The Nevada plant, however, didn't begin initial operations until 2022. But the plant's startup was plagued by the unexpected creation of nitric acid, which ate through the facility's equipment, causing millions of dollars of damage and months of delay, according to an internal company report. It also created a plume of nitrogen oxide emissions whenever it started, according to the former employees. The company appears to have reported the emissions once to Nevada environmental regulators, in May 2022, according to state filings.

In February 2023, Fulcrum announced it had made its first shipment of cleaner fuels, and it posted a video showing a train pulling away from its plant. "Last week we shipped the world's first railcar of syncrude made from landfill waste," the company declared in a LinkedIn post.

But production of fuel had been so limited that the railcar was nearly empty, containing just 350 gallons of fuel, according to four people familiar with the shipment, as well as the delivery's bill of lading.

The Nevada plant suffered more technical setbacks. After ramping up production again late last year, a thick cement-like material began building up throughout the plant's gasification system. In some places, it was more than 10 feet thick, according to the former employees. This caused the plant to shut down again. Eventually, industrial blasters were called in to use explosives to help eradicate the material. 

Meanwhile, Fulcrum's business was struggling. In October, UMB Bank reported that Fulcrum had defaulted on $289 million in municipal bonds it used to help finance the construction of the Nevada plant. Fulcrum then hit the brakes on plans to sell $500 million of tax-exempt bonds through the Indiana Finance Authority to build a larger trash-to-fuels facility in Gary.

The company hasn't filed for bankruptcy as of the end of last week, and it's unclear if there's any remaining possibility that additional financing could be raised.

When employees were informed of the layoffs in mid-May, several said the efforts to prepare the Nevada plant for another restart were nearly complete. It's unclear what will happen to that project, or to the company's planned trash-to-fuels plant in the UK, dubbed NorthPoint, for which Fulcrum received a $20 million grant last year from the UK Department of Transport.

All of this spells trouble for the airline industry's climate goals. Most carriers have vowed to use 10% sustainable aviation fuel by 2030. But these cleaner fuels are in such short supply, meeting that target would require a 122-fold increase in SAF supply in the US. Fulcrum's Nevada plant was supposed to produce 11 million gallons of fuel per year, while its other plants were slated to be about three times larger.

When asked in an interview earlier this year about the implications of Fulcrum potentially not succeeding, Susan van Dyk, a biofuels consultant and researcher at the University of British Columbia, said that it's particularly important for the first company in a new technology area to have at least some success.

"You want to see the first plant of its kind succeeding," she said. "Otherwise, it makes you pessimistic about the technology developing. That would be very disappointing."