It seemed for a while like International Recycling Group 's plans to build a massive recycling plant in Erie — announced nearly four years ago — might be stalled at the starting line.
That changes Tuesday with an announcement by the U.S. Department of Energy 's Loan Programs Office that it will provide a loan guarantee of up to $182.6 million to finance construction of the plant.
A portion of the loan will pay for construction of an injection tower at a steel manufacturing facility in northwestern Indiana that has committed to purchase IRG's CleanRed, a product made from recycled plastics that replaces a portion of the coke traditionally used in the steelmaking process.
The recycling plant, which received a total of $9 million in financial support from Erie Insurance and the Erie-based Plastek Group in 2020, will convert about 160,000 tons per year of post-consumer plastic into plastic resin that can be used to mold new plastic products.
A new timetable
The loan guarantee isn't IRG's first sign of progress since Erie Insurance and Plastek announced funding, but it's certainly the biggest.
In March of 2022, the company completed the purchase of 25 acres of the former Hammermill Paper Co. for $1.23 million.
Mitch Hecht, a former steel company executive who is founder and chairman of IRG, had originally hoped to be recycling plastics by 2022.
But the company first had to tackle the job of financing the project.
Although the Department of Energy's loan guarantee is conditioned on meeting certain benchmarks, Hecht said it should make it far easier to raise the remainder of the money needed.
"This is senior debt financing," Hecht said. "This will provide 60% of the total funding package we need. It's an absolute linchpin to attract any additional financing. It will allow us to go out and raise equity from financial institutions and strategic partners to round out the support that is needed."
The loan guarantee also serves as a stamp of approval for others who might consider investing.
"The fact that we have had two years of due diligence conducted by the Department of Energy — this thing has been vetted seven ways to Sunday," Hecht said. "This is going to be to our credit when we look for additional financing. This is a critical milestone."
An expanded plan
Plans originally called for a $100 million investment in a plant that would employ about 50 people. The company's current plan calls for an investment of about $300 million and more than 200 Erie-based employees.
Hecht said IRG decided to expand its focus "when we got into the market and realized our potential customers really wanted to get a finished product" in the form of resin pellets that were ready for the injection molding process.
The merits of recycling plastic
Geographically, Hecht said, the plant will be in a good position to provide resin pellets to a cluster of local plastics companies.
Meanwhile, the Department of Energy said in a blog post that IRG's CleanRed will help reduce greenhouse gas emissions by replacing a portion of the coking coal used in blast furnaces.
By replacing 14% of the coking coal with CleanRed, made from plastics that are currently being sent to landfills, the Indiana steel mill will be able to reduce greenhouse gas emissions by 24%, according to the Department of Energy.
Still, local environmentalists, who worry about the continued use of plastics, have raised specific concerns about the dust and wastewater concerns from the plastic-washing process at the IRG plant.
Hecht said he understands those concerns, but stands behind the safety of the planned facility.
"I think that every environmental group that is serious and that understands waste management, supports mechanized recycling," Hecht said. "We think a lot of folks are dealing with information that isn't complete."
How Energy Department got involved
The conditional financing is offered through a clean energy financing program that provides financing opportunities for innovative projects.
"We are private sector-led and and government-enabled," Jigar Shah, director of the Department of Energy's Loan Programs Office, said in an interview.
"We look for interesting companies that come up with great ideas, pitch them to us and show us a solid business plan. IRG Erie was just such a company," he said.
The LPO, formed in 2005, was created to make sure that innovative ideas that can be commercialized are commercialized in the United States. The ideas have to be commercially viable, Shah said.
"The private sector has to be able to raise money," he said. "They have to get support from hard-charging funds and then they can come to us for a loan to support them."
More often than not, the loans are paid back. Shah said the LPO's default rate is only about 3.1% and that the program actually provides a net return to taxpayers.
Erie's status as a disadvantaged community also played a role in winning the loan guarantee.
According to the Department of Energy, the project supports President Biden's Justice40 initiative that sets a goal that 40% of certain federal investments flow to communities that are marginalized by underinvestment and overburdened by pollution.
What's next?
With a loan guarantee in hand, Hecht said he hopes to have funding completed by the end of this year. That would put IRG on track to break ground in early 2025. Following that timeline, the plant could begin producing plastic pellets by the end of 2026.
More: International Recycling Group finalizes purchase of 25 acres to build new facility in Erie
At that point, the Erie plant would be one of the largest of its kind in the United States.
"Within five to 10 years, it could be the largest in the U.S. and in the world by a wide margin," Hecht said.
Breaking the mold: In-depth look at how Erie-based IRG wants to change plastic recycling's future
Shah thinks it's a good investment.
"I think what is important here is this company is making use of plastic that people are largely burying in landfills today and they are offsetting coal used in steel mills," Shah said. "We really think it's a win-win."
Contact Jim Martin at jmartin@timesnews.com .
This article originally appeared on Erie Times-News: Government loan promise gives Erie's International Recycling Group $182 million boost
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