Gevo, Syntroleum Vie for Military Biofuel Supply Deals

Andrew Herndon, Bloomberg
October 22, 2012 | 12 Comments

Gevo Inc., Syntroleum Corp. and Solazyme Inc. may be among a "small set" of biofuel producers vying for supply contracts from the U.S. Defense Department, the world's largest consumer of fossil fuels, analysts said.

The agency is preparing to announce about five initial grants to companies making fuels from renewable materials to power jet fighters, battleships and other vehicles. The decision, which according to application documents is due “on or about” today, may come Oct. 22, Laura Ortiz, the program’s agreements negotiator, said in an Oct. 17 interview.

The military bought about 130 million barrels of jet fuel, diesel and other petroleum products in fiscal 2011, and is seeking to replace as much as half with renewable biofuels. Winning one of the small initial grants will land recipients on the short list for large, long-term fuel-supply contracts, according to Pavel Molchanov, an analyst with Raymond James & Associates Inc. in Houston.

“The addressable market for the Navy and Air Force each will be in the hundreds of millions of gallons,” Molchanov said in an interview.

Gevo, Syntroleum and Solazyme may be on the inside track because they’re already conducting research with the military or have delivered biofuels for testing, he said. Cobalt Technologies Inc. and Sustainable Oils Inc. also meet that criteria and there may be other potential recipients “that perhaps we’re not currently anticipating.”

First Grants

Recipients of the first grants under the Advanced Drop-In Biofuel Production Project will receive about $6 million in March. In the program’s second phase nine months later, as many as three companies will share as much as $180 million to help fund commercial production facilities.

The goal is to identify and support companies “capable of producing drop-in replacement biofuels,” which can be used without requiring changes to existing engines or infrastructure and are “suitable for military use,” according to the official request for proposals. The military plans to “establish one or more complete domestic value chains” to ensure a steady supply of fuel.

Gevo, which produces isobutanol from corn, won an 11,000- gallon (42,000-liter) Air Force supply contract last year and has submitted a proposal for the biofuel grant program, Lew Phelps, a spokesman for the Englewood, Colorado-based company, said in an e-mail.

The Navy used in a July demonstration 450,000 gallons of renewable jet and marine diesel fuel that Syntroleum produced from recycled cooking oil and algae oil made by Solazyme. Syntroleum Senior Vice President of Business Development Jeffrey Bigger wouldn’t say whether the Tulsa, Oklahoma-based company applied to thebiofuel grant program

Supply Contracts

The company is already in commercial production and is more interested in a long-term military supply contract than in the smaller grants to build a plant, Bigger said. “The most important element to our business is contracts.”

Solazyme, based in South San Francisco, California, collaborated with Honeywell International Inc.’s UOP unit on two military contracts in 2010. A spokeswoman wouldn’t say whether it applied for the biofuel grant program.

The program requires applicants to demonstrate viable supply chains and scalable technologies. “It’s a relatively small set of folks who would meet those qualifications,” said James Rekoske, UOP’s vice president of renewable energy.

Sustainable Oils supplied about 500,000 gallons of its jet fuel to the military last year and Cobalt has a cooperative research and development agreement with the Navy. Sustainable Oils declined to comment and Andy Meyer, Cobalt’s senior vice president of business development, wouldn’t say whether his company applied to the grant program.

Best Partner

Other companies developing renewable jet fuel include ZeaChem Inc., Virent Energy Systems Inc. and Applied Research Associates Inc., which developed renewable jet fuel technology with a Chevron Corp. venture and is licensing the process to Aemetis Inc. Cupertino, California-based Aemetis submitted an application for the grant program, Chief Executive Officer Eric McAfee said yesterday.

“The best offtake partner you could have is the U.S. military,” ZeaChem Chief Executive Officer Jim Imbler said by telephone. He wouldn’t say whether the Lakewood, Colorado-based company is participating in the biofuel grant program. ZeaChem and Gevo both received Department of Agriculture grants last year to develop processes for converting wood into jet fuel.

“The military has a pretty strong appetite,” he said. “It’s a potential partner that can take all the product you make.”

Lead image: Naval ship via Shutterstock

12 Comments

Michael Thomas
January 22, 2013

Unfortunately today's petroleum is heavily politized.

Oil market's can become unstable within hours.

Renewable energy technologies need to be developed but big
petroleum is shutting it down or the US DOE is funding
wrong technology, Solyndra solar.

Change will happen and it will be interesting to see what the future energy landscape will be.

Cliff Claven
November 2, 2012

@Fred: I hear you reciting the peak oil propaganda narrative. Where are your facts. Global crude oil production was predicted to peak in 1998, in 2000, in 2005, in 2008, but in 2011 it set a new record high and is still going up. Reserves are going up much faster than consumption and are currently above 1.6T barrels. Pre-salt oil in the GOM and off the coast of Brazil is high-quality light sweet crude, and the volumes are mind-blowing. Tight oil from shale is also high-quality light sweet crude. Oil has never been easy. The first wells were drilled by four men bouncing a rod up and down and took weeks to reach 70 feet in depth. But the high EROI of oil has allowed it to fund capital investment in technology that continues to makes oil accessible and keeps the EROI high. Now deep water drilling is opening up access to millions of square miles of the Earth that we could never reach before. And it turns out methane gas plumes and methane hydrates are distributed over large portions of the sea floor begging for the technology to harvest them. Petroleum production has always been a function of capital investment, and there is an accordion effect because of lags between investment and production and the prices that drive the process. That accordion cycle is the major force that drives periodic oil crises. The oil 'crisis' of 2008 hit the same inflation-adjusted peak price for oil as the crisis of 1979 and the crisis of 1934 and the crisis of 1919, when we were first predicted to be running out of oil. Facts done. Now for speculation. While humans have not created significant amounts of petroleum, on what basis do you claim that Earth has not? Did the forces that have been creating gas and oil for the life of the Earth suddenly halt when we started drilling? It is much more likely that some gas and oil are being generated but at an unknown pace. Perhaps with enough efficiency, we can live within its means. Read and digest the facts. Don't be a lemming.

Fred Linn
November 2, 2012

---------" Are you just on the bandwagon or have you done your own research on the global oil supply?"----------

Twenty years ago, no one in their right mind considered the Alberta Tar Sands worthwhile. They were too remote, and too difficult, expensive and environmentally damaging. They still are----but as oil gets harder and harder to get to, get out, move around and refine----it gets more expensive. In more ways than just money.

In the 150 years of "producing" petroleum, no one, anywhere, has ever produced even one single drop of petroleum. All we've ever done is use up what is already there, at ever increasingly faster and faster rates. Easy oil is gone.

Oil in the long run will only become more and more expensive, harder to get, and more and more damaging.

Cliff Claven
October 31, 2012

@Fred: first, what's your evidence that oil is running out right now? Are you just on the bandwagon or have you done your own research on the global oil supply? Hint: look at global reserves since 2006, and look at the history of oil since 1859. Second, do you realize that if petroleum runs out, all intensively-farmed agriculture that is dependent upon fossil fuel for its ammonia-based fertilizer also runs out? That includes biomass for biofuels. We'll be back to picking up twigs for campfires because we won't be getting the six-fold improved artificial yields we currently get with artificial fertilizer and herbicides and pesticides all derived from petroleum. The worst thing we can do today, whether we are imminently running out of oil or not, is to take high EROI petroleum and turn it into low EROI ethanol and biodiesel and lower EROI hydtrotreated fuels. We need to use it as efficiently as possible, and that means using petroleum for fuel and biomass for food, and not confusing the two.

Fred Linn
October 31, 2012

Well then Cliff----your whole world is going to come crashing down when the petroleum runs out.

It is happening now.

ANONYMOUS
October 30, 2012

Sorry, but could not get past the non- USN vessel in the picture. Still it is our best interest to research alternative fuels for our military for planning reasons if nothing else. Just don't hand out signed blank checks.

Cliff Claven
October 25, 2012

I mentioned "power density" not "energy density." The argument is not about the quality of the fuel per gallon, It's about how much energy can be harvested per acre per year. The power density of MSW or forest harvest waste or natural biomass is lower than corn ethanol, and corn ethanol is 16 times lower than solar panels, and solar panels are 50 times lower than the average oil well. It's literally the difference between getting our energy by collecting twigs for firewood or by filling up at the gas station.

Coenraad Pretorius
October 24, 2012

Cliff,
You can't power a society off its waste, as should be obvious when you think it through. Nonetheless, a society as wasteful as our own produces enough waste to generate quite a bit of fuel. Converting waste to fuel would add value to the feedstock, unlike what happens when one converts food to fuel.

Considering where we are starting from, achieving energy neutrality is an achievement. But we can do much better than that. And since you are adding value, it should be affordable.

Your comparison of corn ethanol's energy density to that of waste products is hardly fair. The ethanol is the final product. Producing a drop-in replacement for fossil fuels, as the military is pursuing, would yield fuels with better energy density than ethanol. The energy density of the feedstock is hardly an issue, since we already transport it to centralized landfills.

The way I see it, we need to start with waste to fuel. There is plenty material to work with. Once we get to decent fuel production, such as more than 50% of landfill wastes converted to fuels, we would have a good understanding of feasible technologies, as well as what a good feedstock look like. We would then be in a good position to look at energy crops.

It already seems obvious that the only feasible candidate that would grow at a decent rate without competing with food crops would be an ocean based micro- or macro-algal system. But that's off in the future several decades hence.

Cliff Claven
October 24, 2012

@Coenraad-P: I agree with the distinction you make for waste-to-fuel. It has the opportunity for a reasonable EROI. It's fatal problem is ultimate volume/capacity. Any waste stream only contains a small fraction of the energy that went into creating that waste stream (i.e., what is needed to run the organism that created the waste). There is energy in cow dung, but not nearly enough to power a cow. There is not enough energy in all the waste of the US economy to power the US economy, or even a small fraction of it. Waste-to-fuel is good for extracting enough energy at waste concentration sites like landfills to run the landfill operations. Corn ethanol is terrible in the power density department, and agro or natural biomass waste makes corn ethanol look good.

Coenraad Pretorius
October 24, 2012

Sorry Cliff,
But I have to disagree: you seem to be treating all biofuels as crop-based, which indeed is where the worst abuses occur. Corn ethanol, I'm looking at you. Ditto for soy biodiesel, or any food-based, or even crop-based biofuel.

But if you read the fine print above, this is a different proposal. "...Syntroleum produced from recycled cooking oil and algae oil made by Solazyme." Recycled cooking oil is a waste product, that contains a lot of energy, and is a fine feedstock for making fuel. Many drivers of diesel-powered vehicles are already doing that.

Solazyme, OTOH, is a scam: they basically use algae to ferment sugars into lipids. Not sustainable, and about as wasteful a food to fuel scheme as you'll find.

The point is this: there is a HUGE opportunity for biofuels based on waste materials. 55% of all the materials entering landfills are renewable. If you add the waste plastics and other non-renewables, you have more than 80% of potential fuel-making feedstock. This is the place where the effort should be concentrated.

Looks like the military-industrial complex may end up saving biofuels from the folly of Congress. Go figure!

Alex Zaitsev
October 24, 2012

Agree with Cliff. Not only bio, but also synthetic fuels are economical fiction. Nobody ever managed to reduce CAPEX to less than $30k/bpd and there are 2 simple reasons: the mass yield of syntoil is about 40%; the process takes three steps: to syngas, FT-synthesys and hydrocracking of heavy waxes and this requires some steel tonnage. Without a new principle - either to reduce number of transformations, or to increase the mass yield - attempts to commercialize synthetic fuels are doomed.

Cliff Claven
October 23, 2012

This is the Administration abusing the Air Force and the 1950's era Defense Production Act to throw away another $210M on the thermodynamic sink hole of biofuels. The DoD leadership know they are facing a $400B cut with sequestration and are yet complicit in this scam by contracting with a half-dozen companies with not one profitable quarter among them who are still willing to make scientifically refutable promises for another installment of cash. It is a fundamental misunderstanding of modern intensive agriculture and thermodynamics to think of biofuels as an energy source. They are in fact massive parasites of fossil fuel energy that return only a small fraction of the energy input to create them--particularly hydrotreated biofuels. If biofuels were an energy source, we would see ethanol used to make more ethanol and biodiesel used to make more biodiesel. Instead we use huge amounts of fossil fuel natural gas and petroleum to make the ammonia fertilizer, herbicides, pesticides, farm equipment fuel, bio-refinery process energy, and hydrogen gas to hydrotreat the final product into the drop-in fuels the airlines and military require. Petroleum is even the feedstock for the organic chemicals used to synthesize the designer enzymes for the most advanced biofuel processes. In the end, biofuels are a hugely wasteful transformation of fossil fuel energy to generate a false fig leaf of being clean and green. After more than $6B a year in subsidies since 2005, even basic corn ethanol, the most productive US biofuel per acre of cropland, is still 40 cents more a gallon than premium gasoline when corrected for MPG energy content. (see E85 price in "AAA's Daily Fuel Gauge Report." Biofuels is an epic scam by the politically connected against the thermodynamically challenged.