Algae Fuel "Investment" Baloney

Algae farm (claytonbodiecornell.greenoptions.com)

OK, in light of the "occupiers of Wall Street" complaining of - well, almost everything except labor unions and fire ant bites, here's a little addition to what they should be be concerned about - a government program to provide "venture capital" to a program that apparently has failed to find any real venture capitalists dumb enough to risk their own money in it. An example of "corporate welfare" if ever there was one.

Here,with a little highlighting from me, the "Algal Biomass Organization" offers up praise for an "investment" of $510 million from the USDA, DOE, and Navy (what does it matter whose budget the money comes from? It is all taxpayer money, extracted from the pockets of people who work for a living) into "biofuels" at "ABO Responds to USDA/DOE/Navy Biofuels Investment Promise" from Algae Industry Magazine:

The Algal Biomass Organization has voiced its opinion of the US government’s recently announced $510 million biofuels investment commitment over the next three years. Following is their statement: Late last month, three federal departments came together to launch an ambitious effort to commercialize next generation biofuels. The USDA, DOE and Navy announced an historic commitment to directly invest up to $510 million to retrofit and/or build facilities capable of producing drop-in replacement fuels. Funds from the private sector will be matched one-to-one, bringing the total potential available capital to more than $1 billion.

This announcement is a significant boon to our industry and comes at a time where several of our member companies are moving from lab to pilot, and from pilot to commercial production of algae-based drop-in fuels.

We’ve always praised the US military for its leadership in procuring and testing biofuels—their support has shown that domestic, sustainable fuels can perform at the highest levels of use. But until now, direct investment in companies or projects was not an option.

These three departments have rightly determined that it’s not going to be enough to just be a customer. They understand that the capital costs of facility construction are too high, and not the right model for venture capital, and the technologies still so new as to preclude traditional bank financing.

Let’s be clear – this is not a feel-good publicity stunt. This is an investment in the long-term national security and economic health of our country. As Navy Secretary Ray Mabus said: “America’s long-term national security depends on a commercially viable domestic biofuels market that will benefit taxpayers while simultaneously giving Sailors and Marines tactical and strategic advantages.”

What was most inspiring to me, however, was one aspect of the partnership that went under reported—where the funds were sourced. It turns out that no new authorizations are required (no surprise, given the current climate surrounding our national debt) because the funds have been pulled from elsewhere in the budget.

That means, for the first time in what seems like a long time, that advanced biofuels took precedence for limited funds. From the Obama administration to the departments of the Navy, Agriculture and Energy, the importance of accelerating commercialization of advanced biofuels is now a national priority.

It’s now up to our industry to take advantage of this opportunity and show what we can do.

Sincerely,
Mary Rosenthal

Let's take a look at the highlighted portions.

First, "three federal departments came together to launch an ambitious effort to commercialize next generation biofuels . . ." Uh, pumping federal taxpayer money into a project so iffy that its ". . . capital costs of facility construction are too high, and not the right model for venture capital, and the technologies still so new as to preclude traditional bank financing" means that taxpayers are at risk $510 million on something no rational commercial enterprise would fund (but for, apparently, the government decision to pony up money).

How does the government justify this? The Wall Street Journal editorial of 10 October 2011 has it just right, in describing the "Solyndra economy" mindset of this administration:

And there you have America's Solyndra economy, as the White House understands it: Washington allocates capital, and taxpayers pick up the tab if those choices go bust. Through this political lens, the August bankruptcy of the Fremont, Calif. company was a necessary casualty in the greater campaign to steer the U.S. economy toward Mr. Obama's noble goals. Private competition that winnows out losers is so yesterday.

Politics and a disdain of free markets triumphs economic sense. After all, throwing a big lump of government money at this project hardly seems capable of being described as an effort to "commercialize" anything. We might as well say we provide federal funding to "commercialize the next generation of grade schools." Ms. Rosenthal, I don't think that word means what you think it means.

Secondly, take a look at

What was most inspiring to me, however, was one aspect of the partnership that went under reported—where the funds were sourced. It turns out that no new authorizations are required (no surprise, given the current climate surrounding our national debt) because the funds have been pulled from elsewhere in the budget.

Are you kidding me? The Defense and Navy "budget" process is designed to put money on things that need money. Ship repair, aircraft repair, fuel, ammunition replacement, personnel costs and so forth, Stripping money from such allocations means something suffers. Yep, because "advanced biofuels took precedence for limited funds", something else, planned for as priority, suffered. Was it Seaman Johnny's advancement in rate? Did ships not get under way because they needed repair? Oh, those things are lower precedence, I suppose.

Further, as I have tried to say before, the issue here is not a shortage of domestic fuel that would help with "energy independence" but rather with an extreme "green" agenda that is distorting our economy and wasting taxpayer dollars (see Baloney at the Navy Top: "We use too much fossil fuel"). I am not opposed to the development of a biofuel that is self-funded and self-sustaining. I am opposed to this forced "create a market" by expending tax dollars approach.

If you think this is the wave of future, I invite you to invest your own hard-earned money into companies that produce this product, like Sapphire Energy (no, I don't own any stock, nor do I guarantee any financial results, and all private investments are subject to risk, just like investments in any other company and all the other disclaimers you can imagine) (UPDATE: Oh, wait, it's privately held.)(UPDATE2: Oh, wait, Sapphire Energy got a $50 million loan guarantee from the USDA as set out here to "to build an algae-based diesel biofuels plant in Columbus, New Mexico." - Hmmm.)

My previous rants against this "investment" can be found here, here, here and here.

Baloney at the Navy Top: "We use too much fossil fuel"

I wish people would get it straight, despite what the Secretary of the Navy said at the 2011 Current Strategy Forum Focuses on Energy, U.S. National Security,
"We use too much fossil fuel . . .", thus,

. . .Secretary of the Navy Ray Mabus, described energy as the main vulnerability to U.S. national security in his keynote address.

No!   No!   No!

The problem is not that we use too much fossil fuel, the problem is that we have allowed ourselves to become dependent on imported fossil fuel, despite sitting on the world's largest deposits of "fossil fuels."

It is the importation of foreign oil that is a strategic issue, not their use. It's the long lines of commerce that bring oil to our shore that are vulnerable.

Lines that we can control or eliminate.

We import 51% of our oil, with 51% of that from the Western Hemisphere (thanks Canada (23.3%), Venezuela (10.7%)  and Mexico (9.2%)). Only 17% of our oil comes from the Persian Gulf states. What would it take to make it a national strategic priority to replace that 17% with domestic supplies? And then reduce the flow from Venezuela?

The solution is not all that exotic. Instead of looking for "alternative" fuels as our primary energy sources, the emphasis should be on developing our known internal energy resources so that we eliminate the energy "vulnerability" identified by Mr. Mabus as soon as possible.Then we can chase windmills and solar fields and the like.

It seems, however, that developing our own resources seems not to be the politically "in" thing right now, so we continue to squander money on half-baked projects that may actually be doing worse damage to both man and the environment than fossil fuels.For example, we continue to convert corn to ethanol despite knowing that it is both not as "green" as its proponents suggest and is helping to create food shortages that may stir civic strife in countries used to getting cheaper food. That strife I mentioned? Get ready for more humanitarian interventions and civil wars as this goes on.

In the mean time, as set out here, look at these charts based on the Congressional Research Service (which you can view or download here):

When we claim we're "hostages" to foreign energy, we're just being stupid. Politically correct, but stupid.

You want jet fuel (which also powers gas turbine war ships)? Try our vast amounts of oil shale:

How large is this resource? In the Piceance Basin, an area of 1,100 square miles, the oil shale is over 1 million barrels per acre, or roughly 750 billion barrels of recoverable oil. If you extend outward to Wyoming and to Utah, it is 1.3 trillion. This is why you hear shale next to trillions, not billions or millions, of barrels. The Air Force in the 1970s looked at shale, tested it, and found that it was a superior liquid for jet fuel. Roughly 65 percent of the oil shale is liquid, which could go into jet fuel. The J-8 engine can take shale oil as premium jet fuel.

Expensive? How much does it cost to have to defend sea lanes through which our imported oil flows? How many awful governments do we have to prop up to keep the foreign oil flowing. It's not the oil that's to blame, it's the lack of internal development of our known resources. It's not working to get a realistic balance of all the costs involved in our use of energy.

Natural gas - another fossil fuel - we have more than we ever thought. Some of this "new" gas is due to the development of horizontal fracking and horizontal drilling. Is there some reason why U.S. Navy trucks and cars don't run on natural gas?

Don't think it's safe to do horizontal fracking? Imagine if we put as much money into making it safer as we waste trying to convert switchgrass to ethanol. That may all work in some future, but the other supplies are here now and ready.

Coal -The EIA says:

The United States is home to the largest recoverable reserves of coal in the world. In fact, we have enough coal to last more than 200 years, based on current consumption levels. Coal is produced in 25 States spread across three coal-producing regions, but approximately 72% of current production originates in just five States: Wyoming, West Virginia, Kentucky, Pennsylvania, and Montana.

Right now we export coal in addition to our internal use. But we can convert coal to oil. South Africa does. China does. At one time, Barrack Obama thought we should, too:

For decades, scientists have known how to convert coal into a liquid that can be refined into gasoline or diesel fuel. But everyone thought the process was too expensive to be practical.
The lone exception was South Africa, a one-time pariah state that had huge reserves of coal and, thanks to anti-apartheid sanctions, limited access to foreign oil. Sasol Ltd., a partly state-owned company, built several coal-to-liquids plants, including the ones at Secunda, and became the world's leading purveyor of coal-to-liquids technology.
Now, oil prices are above $70 a barrel, and Sasol has emerged as the key player at the center of the world's latest alternative-energy boom.
China is building a coal-to-oil plant costing several billion dollars in Inner Mongolia and may add as many as 27 facilities -- including some with Sasol's help -- over the next several years, according to a recent tally by Credit Suisse.
In the U.S., the Defense Department is studying coal-to-oil technology as a way to reduce the American military's dependence on Middle Eastern crude oil. And the National Coal Council, an industry association, is pushing for government incentives to help generate some 2.6 million barrels of liquid fuel a day from coal by 2025. That would satisfy some 10 percent of America's expected oil demand that year. The plan would require 475 million tons of coal a year, which represents more than 40 percent of current annual U.S. production. Industry officials believe America's coal reserves are big enough to allow for the extra production.
Coal-to-liquids "is not going to replace oil," says Lean Strauss, a Sasol executive who directs the company's overseas energy business. "But it's an important substitute. It is one of the solutions to energy security."
In June, two senators from coal-producing states, Barack Obama of Illinois and Jim Bunning of Kentucky, introduced a bill to offer loan guarantees and tax incentives for U.S. coal-to-liquid plants.

It amazes me that the what used to be "can do" leadership in this country has become a bunch of "true believers" in what is provable nonsense.

I expect better from those who are concerned with our national security and especially from those tasked with maritime security, who should be arguing for reducing our energy sealines of communication through developing all of our resources, and not just those in favor with one administration or another.

It's not fossil fuel, but why are we not developing and encouraging the use of nuclear power?
Because Harry Reid says "no" to a viable storage location for spent fuel in his state?

You want to get people working? Get them working on this - developing our fossil fuels, nuclear power and, yes, alternatives.

Once weaned from imported oil, we can use our internal supplies as we develop the "alternative energy" sources.

While being less vulnerable in the process.

Or I guess we could rig sails and fly kites. Or build triremes. All the while sitting on huge energy reserves.

UPDATE: I probably should have caught this before, but here's hint at Secretary Mabus's agenda in which it is revealed he wants to use Navy money to drive the move to "renewable fuels":

The Navy’s goal is to shift half its energy usage from fossil fuels to renewable sources by 2020. Critics have cast doubts on these plans, and have questioned the Navy’s assumptions about the future cost of biofuels. Other experts have pointed out that the military, which accounts for less than 2 percent of all U.S. fossil fuel demand, cannot on its own drive the renewable energy market until the United States adopts a national strategy that would generate greater economies of scale.

Mabus disagrees. “I think the military can lead on that,” he told reporters April 27. “The  Navy can be a market … I’m absolutely convinced we can do it.”

Count me as one of those critics . . .