Sunday, November 20, 2011

US military part of $510 million biofuel push via 1950 Truman loophole allowing Obama to continue transferring US tax dollars to 'green' cronies

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Obama still transferring US taxpayer money to crony green ventures, now via 1950 'Defense Production Act.' Oil companies Shell, BP and Exxon are among investors. Amyris was in Al Gore's portfolio as of 2008.

11/21/11, "Analysis: U.S. government a tenuous beachhead for biofuel firms," Reuters

"The U.S. military has jemerged as a key ally for fledgling producers of non-food-based biofuels, who find themselves threatened by looming budget cuts and growing political hostility to renewable energy funding.

A U.S. Navy plan to cut its fossil fuel use in half by 2020 is only part of the story.

Efforts to throw biofuels a lifeline now run across three U.S. government agencies, as the defense, energy and agriculture departments pitch in on a $510 million package.

The money is being corralled under a law dating back to the Korean War that gives a leg up to sectors deemed necessary for defense. This support is cherished for being more predictable than the private sector, or even other parts of government.

The problem is that money alone will not be enough to see many biofuels firms through to commercialization, which is especially frustrating for those whose business models work fine, in theory, with petroleum at around $100 a barrel.

"We're in for a tough time. We shouldn't kid ourselves," said Lee Edwards, chief executive of Virent, which makes fuel from various feedstocks including sweet sorghum and plant biomass.

Edwards spoke at a conference in San Francisco, which has become a biofuels hub due to the Bay Area's flush venture capital community and the early forays of regional players

On top of tax credits expiring next month, biofuels companies fear what will come out of a congressional "super committee" charged with slashing the deficit. If it fails to reach agreement, sharp cuts to defense spending could follow.

Barring an unforeseen breakthrough, the U.S. congressional "super committee" is expected to concede failure on Monday in its bid to reach a deal to cut the federal deficit by at least $1.2 trillion, senior congressional aides said on Sunday.

"What this committee comes up with will very much influence how this industry goes forward," Harry Baumes, head of energy policy and new uses for the Department of Agriculture's chief economist, told the Advanced Biofuels Markets conference.

BUDGET SQUEEZE

Shares of biofuel companies have plunged since the U.S. budget battle began this summer,

  • with Solazyme down by half and others faring even worse.

Backers of military support view the Defense Production Act (DPA) as a way of dodging some of the cuts to come.

Joelle Simonpietri, an early proponent of the DPA effort, said it was no accident that the two keenest potential biofuels customers are the Navy and commercial airlines, since

  • both spend huge amounts of money on jet fuel.

"It's not just green washing," said Simonpietri, who was until recently the deputy head of the Defense Department's U.S. Pacific Command innovation and experimentation energy office.

"There are actual strategic reasons why, because if you're a commercial airline and your fuel budget went from 30 percent of operations to 70 percent in one year, and three of your brethren just went bankrupt, you tend to look at your fuel costs very closely."

Some airlines made babysteps into the space this month when United Airlines flew the first U.S. biofuel commercial flight from Houston to Chicago on a mix of 40 percent Solazyme algae-based fuel, and Alaska Airlines announced several flights on

  • a mix with 20 percent cooking oil-derived fuel.

The potential for airlines to burn biofuels clearly dwarfs what's needed for defense. But the Pentagon is a reliable buyer that is in for the long haul since fuel security is strategic.

"The airline market is huge, but can you bank on a 10-year deal with an airline? Will they be still around then?" said an experienced biofuels entrepreneur, who had just returned from a Washington D.C. trip to make his case for the industry.

FROM TRUMAN TO OBAMA

That is where the DPA Title III Program comes in. Signed by President Harry Truman in 1950, it played a vital role in building up U.S. supplies of certain metals for the military.

President Barack Obama recently authorized the $510 million for biofuels, and the military is now collecting feedback before holding an "industry day" in the months ahead in order to attract private-sector funding to qualifying projects.

"To justify the funding for the DPA, we actually have to be able to show the business case," Simonpietri said.

Solazyme is about to produce fuel from a plant in Peoria, Illinois, and venture capitalist and Solazyme director Dan Miller said Navy demand drives that. "It's the anti-Solyndra," he said of the biofuels push. "It's the one that worked."

The failure of solar firm Solyndra did cast a pall over renewable energy politics by giving ammunition to critics in Congress. But the military's heavy involvement should help shelter biofuels from the fallout.

"The DOD (Department of Defense) is a buffer against anything the rest of the government does," George Boyajian, vice president of business development at Primus Green Energy, a maker of gasoline from wood pellets, said in an interview.

He said Primus would not rely on subsidies, but needed Agriculture Department support to ensure feedstock supply.

  • A Primus test plant will start up in mid-2012 in Pennsylvania.

DOLLED UP

For others who had counted on subsidies to smooth the path to market, new lines of business outside the fuel space present easy, if small, early wins. Solazyme had some initial success selling algae-based skin care through Sephora stores and TV channel QVC, on which 8,000 units sold out in eight minutes.

"This is the leading edge of how I build a company that's going to be successful in all these other markets," said Solazyme CEO Jonathan Wolfson, who sees the fuels, nutrition and cosmetics as a combined $1.5 trillion opportunity.

Codexis is developing chemical agents for shampoo and toothpaste, while Amyris is making cosmetics with a partner.

Partnerships are seen as important, with biofuels support also coming from major oil companies. Royal Dutch Shell Plc invested in Codexis, Chevron Corp provided early backing for LS9 and Solazyme, and BP Plc and Exxon Mobil Corp

  • have also made large biofuels investments.

Batting away the skepticism of environmental circles, Codexis CEO Alan Shaw says his industry must work with Big Oil to crack the massive, but low-profit-margin, market for fuels.

"Say what you like about oil companies," Shaw said, "this is their business, and they want to stay in business.""

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Al Gore promoted Amyris biofuel in 2008 and was also an investor in it:

4/1/2008, "Gore Admits Financial 'Stake' In Advancing Global Warming Hysteria," NewsBusters, Sheppard

"On March 1, while speaking at the TED Conference in Monterey, California, the Nobel Laureate admitted to having "a stake" in a number of green "investments" that he recommended attendees put money in rather than "sub-prime carbon assets" like "tar sands" and "shale oil."

This occurred as pictures of such products appeared on the screen with names of the companies involved (video available here, relevant section begins at minute 15:00, h/t NBer Sick-and-Tired):

There are a lot of great investments you can make. If you are investing in tar sands, or shale oil, then you have a portfolio that is crammed with sub-prime carbon assets. And it is based on an old model. Junkies find veins in their toes when the ones in their arms and their legs collapse. Developing tar sands and coal shale is the equivalent. Here are just a few of the investments I personally think make sense. I have a stake in these so I’ll have a disclaimer there. But geo-thermal concentrating solar, advanced photovoltaics, efficiency, and conservation.

As Gore spoke these words, pictures of electric cars, windmills and solar panels appeared in multiple slides on the screen with company names at the bottom such as Amyris (biofuels), Altra (biofuels), Bloom Energy (solid oxide fuel cells), Mascoma (cellulosic biofuels), GreatPoint Energy (catalytic gasification), Miasole (solar cells), Ausra (utility scale solar panels), GEM (battery operated cars), Smart (electric cars), and AltaRock Energy (geothermal power)....

And, as he tours the world demanding nations stop burning fossil fuels, he will financially benefit if they follow his advice and move to technologies that he has already invested in."...

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9/8/2010, Richard Branson is an investor in Solazyme.

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US taxpayer dollars being transferred to new 'biofuels' ventures will likely be lost. Despite publicity renewables have never taken off and always required enormous tax dollars to stay afloat:

4/27/11, "Venture Capital Is Finding Its Way Back To Waste-to-Renewable Energy," InstitutionalInvestor.com, Gupta

"Significantly, most of the venture investments – except for Harvest Power, founded in 2008 – are in older companies. And almost all of them are moving forward in partnership with big energy corporations. Analysts note that most of them will probably never be of any size or substance to go public, especially after the experiences of their European counterparts. In fact, says one fund manager, “I think the VC model is broken as it relates to cleantech. No one is showing returns. This is not sustainable because the long term will never arrive.”

Renewable energy start-ups and their backers were able to garner high valuations, in part because of the global interest in energy conversion solutions and in part because they projected high growth. But the growth in renewables, which is heavily dependent on government subsidies and expenditures, has never materialized despite the promising outlook from proponents who argue that the industry is growing as projected."...

The above article also included this:

"Private-equity fund Silver Lake Partners says it will team up with George Soros’ fund to create Silver Lake Kraftwerk, a new fund that will focus on providing growth capital to business innovators in the energy and resource sectors."...

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2/27/11, "Obama's green subsidies attract do-gooder bandits," Carney, Washington Examiner

"In any other industry, these conflicts of interest and naked subsidy-suckling would draw a firestorm of media attention about cronyism and corporate welfare. But green bandits like Zoi, Soros, Roehrig, and O'Hanlon, instead are praised as entrepreneurs who are also trying to save the planet. It just shows what you can get away with in this town if you cloak yourself in green.


via Lucianne

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