Environment Forum

Will biofuel from algae look like Big Oil or Big Agriculture?

Hundreds of companies and laboratories are racing to find an economical way to make “green crude” from algae. The biofuel industry is grappling with a series of hurdles, which players readily recognized at a summit this week in San Diego and we cover in this story.

One question asked by one of the sector’s early leaders is will biofuel from algae look like Big Oil or Big Agriculture.

Steve Mayfield, who directs a new center for algae biotechnology at the University of California, San Diego, believes it should be more like agriculture.

“We’re not going to grow it in the lab … We are going to grow it on rice patties,” Mayfield said at the Algae Biomass Summit in San Diego.

Mayfield also helped found Sapphire Energy, a privately held company that has pulled in $100 million from venture capitalists. The company is looking at gene-based techniques to create a strain of algae that can be grown and harvested on a massive scale.

“What we need to do is domesticate algae. We are taking wild type strains and asking them to do what never was asked to do or evolved to do in the wild,” Mayfield said, pointing to how genetic changes have boosted crop yields.

Photo credit: Reuters

Green Portfolio: Pacific Ethanol plummets

Shares in Pacific Ethanol lost almost half their value in morning trading after the biggest West Coast-based producer and marketer of ethanol announced that it had put its production facilities in California, Oregon and Idaho into Chapter 11 bankruptcy.

The company said on May 12 that it would likely need to file for bankruptcy if it was not able to restructure its debt.

A string of energy firms have filed for Chapter 11 recently, suffering from weak U.S. demand that has depressed prices and margins. VeraSun Energy, once the largest publicly listed U.S. ethanol maker, filed for bankruptcy last year.

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Fessing up to water issues – and biofuel

Water scarcity is a growing risk for businesses and investors and companies should offer more transparency regarding their exposure to water shortages and other climate change concerns, according to investor group Ceres.

“There are still big challenges out there… but disclosure is dismal,” said Brooke Barton, manager for corporate accountability at Ceres, a Boston-based public interest coalition, which holds a conference on green investing in San Francisco this week.

Ceres directs a network of more than 75 institutional investors and financial firms from the U.S. and Europe managing over $7 trillion in assets focused on climate issues.

“Our investors see water risk as the first front of the climate crisis… and they are looking for tools to get a handle on the kind of water risks that are imbedded in their portfolios,” Barton said.

Production of biofuels, particularly corn ethanol, which the federal government is encouraging through a variety of incentives, only compounds water scarcity worries, according to a Ceres report commissioned from the Pacific Institute research group which is cited in our story on water and biofuel this week.

Corn ethanol production, from growing irrigated crops to pumping biofuel into a car, can consume 20 times as much water for every mile traveled compared to gasoline, according to the Ceres report.

(Reporting by Carey Gillam; Reuters picture by Kevin Sanders)

What a difference a year makes – Valero embraces corn ethanol

At last year’s American Petroleum Institute conference, Bill Klesse, CEO of leading U.S. oil refiner Valero, slammed federal policymakers who push subsidies and mandates for production of ethanol, saying that using corn to make it would make food so expensive it would cause more misery than global warming.

“All of these programs are just a huge transfer of wealth from our industry (oil) to the Midwest farms,” Klesse said in March 2008 speech.

A year later, Klesse has decided to join rather than fight. If the money is going to the Midwest corn farms, why not cash in, right? Valero two weeks ago was chosen by a bankruptcy court as the winning bidder for two more VeraSun ethanol-producing plants.  The sale of seven former VeraSun plants closed on Wednesday and two more are expected to close soon.

A year and two weeks ago, Klesse said the federal government should stop favoring ethanol with subsidies. Now, Klesse and Valero are securing a supply of ethanol that it needs to mix with its gasoline.

“We expect increases in the Renewable Fuels Standard to continue,” Klesse said two weeks ago when Valero’s bid for VeraSun’s plants was awarded.

The plants, in Iowa, Minnesota, South Dakota, Nebraska, and Indiana together will have a combined capacity that is 7.5 percent of the current operating U.S. ethanol capacity.

On Thursday, a Valero spokesman said the company needs to go full throttle on producing ethanol to mix with its gasoline. See the Reuters story.