It’s been a while since we’ve covered the agrofuel scene, that wondrous playground of billionaires, Al Gore, and UC Berkeley millionaire patent-mongering profs.
There’s a whole lot to report, but we’ll start with one of the sweetest scams ever, in which a clever Canadian figured out how to make millions off Uncle Sugar simply by shipping trains full of agrodiesel south across the border, then bringing them right back to Canada without ever unloading a drop.
Then we’ll look at the latest news from BP and the university it owns right here in Berkeley.
In a second part we’ll give you a brief update on one of Berkeley’s agrofuel startups that isn’t and the fate of another partnership spearheaded by the same prof who launched the startup.
Canadian newsies investigate
The Canadian scam, which appears to have been perfectly legal, was first reported 3 December by John Nicol and Dave Seglins, a pair of intrepid journalists for the Canadian Broadcasting Corporation.
In their first story, the reporters cited reports that the tasnkers made their down-and-back trips between 15 and 28 June 2010, earning CN Rail a potential $23.6 million [Canadian] in charges.
From their report:
“In 25 years, I’d never done anything like it,” one railway worker told CBC News on the condition he not be named for fear he might be fired. “The clerk told me it was some kind of money grab. We just did what we were told.”
According to internal CN records, Train 503 shipped the biodiesel to Port Huron, Mich., from Sarnia, Ont.; Train 504 brought them back. The number of cars on the train would remain mostly the same, but cars were added and removed, between 68 and 89 cars at a time. As soon as the paperwork and car shuffling was completed, the trains made the return trip.
“This unit train will move at least once daily to Port Huron starting on Tuesday, June 18,” said an email written by Teresa Edwards, CN’s manager of transportation for Port Huron/Sarnia.
It will “clear customs and return to Sarnia. If we can get in more flips back and forth we will attempt to do so. Each move per car across the border is revenue generated for Sarnia/Port Huron.
“It will be the same cars flipping back and forth and the product will stay on the car.”
Damned fishy, right?
Why the hell would a company send a total of 1,984 tank cars full of fuel into the U.S., then bring them back without ever unloading them?
The reporters were back with a second story on the 20th, and it’s just as sordid as you might imagine.
It turns out the shipments were part of a deal by a Toronto-based company, which made several million dollars importing and exporting the fuel to exploit a loophole in a U.S. green energy program.
Bioversel Trading hired CN Rail to import tanker loads of biodiesel to the U.S. to generate RINs, which are valuable in the U.S. because of a “greening” policy regulating the petroleum industry. The EPA’s “Renewable Fuel Standard” mandate that oil companies bring a certain amount of renewable fuel to market, quotas they can achieve through blending biofuel with fossil fuel or by purchasing RINs as offsets.
Because RINs can be generated through import, the 12 trainloads that crossed into Michigan would have contained enough biodiesel to create close to 12 million RINs. In the summer of 2010, biodiesel RINs were selling for 50 cents each, but the price soon fluctuated to more than $1 per credit.
Once “imported” to a company capable of generating RINs, ownership of the biodiesel was transferred to Bioversel’s American partner company, Verdeo, and then exported back to Canada. RINs must be “retired” once the fuel is exported from the U.S., but Bioversel says Verdeo retired ethanol RINs, worth pennies, instead of the more valuable biodiesel RINs. Bioversel claims this was all perfectly legal.
However, one of the companies Bioversel approached to be the ‘importer of record’—Northern Biodiesel Inc. of Ontario, N.Y. — discovered that the same fuel was going back and forth across the border and the same gallons were being used to repeatedly generate new RINs under their company’s name. The company called the EPA and also sent a letter that would become an open letter to the biodiesel industry, accusing Bioversel of “trying to perpetrate a fraud against NBI and the Renewable Fuel Standard program.”
And what was the result? Were the whistleblowers rewarded for their virtuous reporting of their inadvertent involvement in a potential ripoff of American taxpayers?
The CBC reports:
Northern Biodiesel insisted the RINs issued were not valid because it had never received any bills of lading or chemical analysis reports from Verdeo, and thus Northern Biodiesel never reported/certified them with the EPA. However, millions of these RINs were sold in its name.
As a result, Northern Biodiesel RINs became tainted within the industry and [company owner Bob] Bechtold said that put him out of business.
“That was about the dumbest thing we ever did,” said Bechtold about the letter and coming forward to the EPA. “We thought we were saving the industry, doing good to protect the industry, but it ended up being the kiss of death for us, because we are no longer able to participate in the field.”
Why are we not surprised?
BP turning sour on cellulosic?
One of the most prominent names in Berkeley campus politics has been BP, once known as the Anglo Iranian Oil Company.
The oil giant’s $500 million Energy Biosciences Institute [EBI] effort to create next generation fuels at th Helios lab at UC Berkeley was the largest corporate funding ever on an American college campus, and the subject of some intense faculty politics after the school’s administration accepted the cash without the requisite consultation with the academic senate [which eventually voted an ex post facto approval].
The research, conducted in a purpose-built taxpayer-funded lab complex in downtown Berkeley, with the corporation occupying most of the space for its own proprietary research and the rest of the complex protected from prying eyes by campus security.
While the research has been going on for the past five years, one thing that hasn’t happened is the development of the technology for production of cost-effective internal combustion fuels from plant cellulose, the widely truumpeted goal of most of the research.
Chris Somerville, the multimillionaire bioentrepreneur who heads the Energy Biosciences Institute [EBI], admitted as much in an interview published earlier this month on the EBI website:
[I]t is probably premature to build a biorefinery for production of lignocellulosic fuels. Academic work in the field has not yet converged to an optimal process. As I said, we think that such an optimized process will be continuous. When we get to a situation where academic studies have converged on the most efficient process and predict economic feasibility without subsidies, then it will be appropriate to start building biorefineries. Some companies appear to have started building lignocellulosic fuel biorefineries because they have adequate confidence in their own technologies, they want to capture possible business advantages of being early movers, and (because of) pressure from the government to get on with it in order to preserve the subsidies that are currently available for advanced biofuels. I cannot evaluate the merit of these possible motivations. However, based on technical progress in the field, I remain very optimistic that we will eventually have a very large industry based on lignocellulose feedstocks.
Somerville has a habit of omitting inconvenient truths, as we learned early on when covering the birth of the EBI for the late Berkeley Daily Planet.
Back when he was selling campus colleagues and the community on the BP grant, he repeatedly claimed that the crops used for the new miracle fuels would be grown only on marginal land east of the Mississippi.
That was at best a gross distortion. First, the “marginal lands” were those which had been taken out of production under the federal Conservation Reserve Program, which was created to end farming on lands susceptible to catastrophic erosion. Lobbyists for Big Agra and Big Oil managed to get a law passed that removed the protection if the land is used for growing fuel crops — thus gutting a program created to head off a return of the Dust Bowl years of the 1930s.
The land also provides critical habitat for threatened and endangered wildlife species.
But that wasn’t the worst of Somerville’s distortions. Even before the EBI was signed, the EBI was sending scouting teams to Africa and Asia in search of potential crops and places to grow them [though we guess that the two continents are technically “east of the Mississippi”].
The EBI has already planted some crops, and right here in Berkeley.
During the dedication ceremonies for the lab building in Berkeley earlier this month, a garden was dedicated in honor of the university’s departing chancellor, Robert “Grinnin’ Bob” Birgeneau, as the university’s PR department announced:
EBI Director Chris Somerville took the opportunity to dedicate a small garden on the south side of the building as the Robert J. and Mary Catherine Birgeneau Energy Garden, which will showcase potential biofuel feedstocks — miscanthus, switchgrass, prairie cordgrass, sugarcane, energy cane, agave and poplar are planned — in honor of Chancellor Birgeneau’s firm support of EBI and science research and education in general.
This honor is for “planting so many seeds for research, teaching and public service efforts on the campus,” said Graham Fleming, vice chancellor for research. “We hope that this spot will be a place for experimentation and reflection and for understanding nature’s role in addressing the world’s energy and climate challenges.”
A company founded by Somerville just happens to own the world’s premiere collection of miscanthus, the primary “feedstock” at the center of the EBI’s research. It’s partnered with a little outfit named Monsanto to develop fuels from the plant.
In the words of that Disney song, “It’s a small world after all. . .”
BP kills a cellulosic plant, goes ethanolic
EBI’s failure to deliver the hoped-for technology for turning plant fiber into fuel has had at least one major impact.
From Kevin Bullis of MIT Technology Review:
When BP backed out of building a $350 million, 36-million-gallon-per-year plant in Highlands County, Florida, last week, the cellulosic biofuels industry, which tries to make fuel from grass and wood chips, lost one of its most promising projects. The cancellation raises the question, if BP can’t bring cellulosic ethanol to market, can anyone?
BP had already started developing a 20,000-acre farm to grow special crops for the plant, such as a type of sugarcane that produces larger amounts of biomass and less sugar than the kind used to make sugar and ethanol in Brazil. As recently as last year, the CEO of BP Biofuels touted the project as evidence that “the technology is coming through” and a new “global commodity is starting to emerge.”
But the cellulosic industry is struggling, despite years of promises and an ambitious federal renewable fuels standard, which took effect in 2010, that mandates a market for cellulosic ethanol that was to have reached 500 million gallons per year by now and a billion by next year. The first commercial plant hasn’t been built, and the U.S. Environmental Protection Agency has had to repeatedly waive the cellulosic ethanol requirement. At first, biofuels companies blamed the lack of commercial facilities on their inability to finance large plants. When a few big players like BP stepped in to say they’d finance plants, it looked like that problem was about to be swept away.
Now that BP has backed out, prospects look considerably dimmer. BP says it will still fund research to develop cellulosic ethanol, but it’s decided the $350 million it would need to fund the plant would be more profitably spent elsewhere.
Five days after the MIT Technology Review reported on BP’s cancellation of the Florida project, Bloomberg’s Stephan Nielsen reported that the company once known as Anglo-Iranian Oil had taken precisely the same amount of money earmarked for the Florida plant and was investing it in old-fashioned non-cellulosic ethanol:
BP Plc (BP/), the second-biggest European oil company, will spend $350 million to double the capacity of its Tropical ethanol project in Brazil as other producers hold off on investments.
The company will develop 35,000 hectares (86,487 acres) of plantations and a new mill capable of crushing 2.5 million tons of sugar cane a year into sugar and ethanol at the site in Edeia, Mario Lindenhayn, chief executive officer of London-based BP’s Brazil biofuel unit, said today in a phone interview.
“BP is in it for the long-run,” Lindenhayn said. “Our decisions are long-term.”
Brazil is the largest producer of ethanol after the U.S., according to the Energy Information Administration.