BIOFUELS:

Alt-fuel hopefuls make plays for oil companies' cash

HOUSTON -- As corn ethanol's star dims and crude oil prices soar, entrepreneurs are dangling the prospect of alternative fuels in hopes of getting attention -- and funding -- from major petroleum companies.

Among the ideas being floated at an energy industry conference here this week: a process for converting biomass directly into crude that can be tailored to refiners' needs and using the country's new shale gas bounty to bring back blends of gasoline and methanol.

And Joule Unlimited of Cambridge, Mass., introduced potential investors here to a process they say can convert sunlight directly into diesel fuel through specially cultured microorganisms.

While the process has yet to be shown it can work at a large scale, Joule founder Noubar Afeyan said the process can net diesel at the cost of $50 per barrel -- or $20 per barrel if his firm qualifies for government subsidies that he says his company does not need.

"We're not counting on subsidies lasting," Afeyan said.

Joule has been keeping its activities quiet for the past four years. The company has been pilot testing its technology at facilities in Leander, Texas, just outside Austin. Photographs shown during Joule's presentation at the annual CERA Week energy conference show what appears to be solar panels covered in moss and linked by tubes to storage tanks.

Without going into detail, Afeyan said the process involves specially engineered microbes, "cultured in a special purpose designed reactor system," that are converted by photosynthesis into a liquid fuel for diesel engines.

"It's a just-in-time conversion of carbon dioxide into a hydrocarbon molecule," he said. By the middle of this year, Joule is hoping to have expanded its pilot to 10 acres. The company estimates that an efficient system could produce 15,000 gallons of diesel per acre per year.

But Harrison Dillon of Solazyme maintained his idea is better.

Dillon's eight-year-old company has collected $160 million in venture capital and $60 million in government support to develop a innovative "dark fermentation" process. The company claims it can feed biomass to algae through its fermentation system and convert it directly into crude oil. The process, it says, skips millions of years it would otherwise have taken heat and pressure to do the same.

"It's a bit like ethanol. ... Only instead of ethanol you get oil," Dillon said. Big energy players are taking Solazyme seriously; it counts Chevron Corp. and the Navy as among its investors.

Oil companies search for alternatives

Large U.S. oil and gas companies started their interest in non-corn-based biofuels a few years ago, the last time agricultural commodities and crude prices began to spike.

But many experiments fizzled quickly. ConocoPhillips, for example, launched a program with Tyson Foods Inc. back in 2008 that attempted to use animal fat to generate an "ultra-low sulfur diesel fuel," the oil major explained in a prospectus. Testing was shut down by the end of that year as energy prices collapsed.

But large oil concerns are still interested in the potential for non-food-based biofuels to be blended with traditional fuels, in hopes of protecting themselves from uncertain market conditions.

Aside from the investment in Solazyme's "renewable crude oil," Chevron is conducting experiments with algae, oilseeds, jatropha and also forest residues.

And Exxon Mobil Corp. could spend $600 million through a partnership with Synthetic Genomics to determine whether algae can be grown on poor farm land using brackish water. The goal is to develop a large source of biofuel feedstock. Both companies say they are preparing to move their experiments out of greenhouses.

"The next major milestone in the program, expected in mid-2011, is the opening of an outdoor test facility," Exxon Mobil representatives said in a release. "If successful, bio-oils from photosynthetic algae could be used to manufacture a full range of fuels including gasoline, diesel fuel and jet fuel that meet the same specifications as today's products."

Nazeer Bhore, senior technology adviser at Exxon Mobil, maintains that liquid fuels remain the best bet to power transportation. Compressed natural gas, while costing about the same as gasoline on a per-unit basis, brings a vehicle's range down by 33 percent and cuts the trunk space in half, he said.

Bhore seemed even more disdainful of electric vehicles in talks with energy company executives here.

To get an electric vehicle to compete with a gasoline-powered vehicle, Bhore's team guessed that oil would have to cost $200 a barrel, car batteries would have to be 75 percent cheaper than they are now, and U.S. drivers would have to fall in love with much smaller cars that can only travel relatively short distances per trip.

Competitors to Joule and Solazyme are lining up to showcase their winning ideas to Bhore and others.

Micheal Rocke says his firm, CoolPlanet Biofuels, can mass produce a special "third generation cellulosic" fuel that costs $1 per gallon to produce. Meanwhile GeoSynFuels aims to make fuel using sugars extracted from paper and wood pulp waste. There is enough pulp waste worldwide to generate 30 billion to 50 billion gallons of this fuel per year GeoSynFuels CEO Todd Harvey said.

Though tiny today, all these alternative-fuel producers say they are aiming high.

"Why settle for just 2 percent of the market?" Joule's Afeyan said.

Want to read more stories like this?

E&E is the leading source for comprehensive, daily coverage of environmental and energy politics and policy.

Click here to start a free trial to E&E -- the best way to track policy and markets.