Startup Row - Alternative Fuels Aspirants

I love startups. They're invariably headed by anti-organization men and women—constitutional rebels whose public and private faces are one and the same. Such folks are almost always good interviews because there's no one from the PR department looking over their shoulders and that's because there's generally no PR department. Just a guy with his dreams and determination, and, often as not, a vision of not just where his firm should be going but where the nation and the world should be headed.

So here are some of the folks I've been talking to of late.

Chattanooga Corporation

Marty Karpenski is the president, an energy industry veteran with his eye on oil shale. A highly perceptive eye, I'm assuming.

Oil shale is definitely heating up, and in more ways than one. The scamsters and fly-by-night investment firms bombard me daily with emails about the next oil boom, and the Bush Administration has recently sold new leases in the oil shale beds owned by the Federal government in the central Rockies—and that's most of them, because the Feds own about 80% of all such resource in the U.S. There's also a lively traffic in private lands containing oil shale, and there's quite a bit of that too, some of which people have been sitting on for decades against the day when the next oil shale boom would come along—and they come along roughly every twenty years.

Oil shale is discussed elsewhere in our Primers section. It's a huge resource with perhaps as much as a trillion barrels recoverable. It looks to be pretty comparable to the Canadian tar sands, which are getting lots and lots of publicity, but the economics of recovery are more dubious.

That's where Chattanooga comes in. They're one of about a half dozen companies touting new technologies for cooking oil shale to get the oil out, a process called retorting but which is actually just a species of pyrolysis—i.e. liquefaction with no combustion. Traditional methods use well over 100 gallons of water for every barrel of oil produced, but Chattanooga claims they only need enough to keep the dust down. They also claim that their process will work with fairly coarsely granulated shale, which keeps down the energy requirement for processing.

Karpenski told us that production costs are about $20 per barrel and that when capital costs are factored in you're a little north of $30 per barrel. That's competitive with light crude and no doubt about it.

We're talking with other oil shale startups under nondisclosure, so we can't say much about competing approaches except to say that there are several in contention. Unlike many of the segments of the alternative fuel such as biodiesel and butanol, for instance, a preponderance of the folks in oil shale startups have at least some Big Oil experience. Over the past forty years, Exxon-Mobil, Shell, and Chevron Texaco have all played in this space, and Shell maintains a very active program today. In other words, the guys in oil shale today understand the larger petroleum industry, and more importantly, the logistics of large scale fuel production.

Nevertheless, it is still fashionable to snicker at oil shale. Anyone with a mind to dismiss current efforts can simply point to the past and to the many failed attempts to develop the resource. Today, however, we've seen oil prices floating above $50 a barrel for well over a year with recurrent price spikes past $70 a barrel. We've also seen a lot of learned commentary on the difficulty in boosting the production of conventional light crude. So that makes the case for oil shale suddenly a lot stronger than it's ever been.

Still there is a strong environmental opposition to oil shale on the grounds that it is an extension of business as usual and will result in lots more carbon dioxide in the global atmosphere. And it will.

Of course there are other ways to address carbon emissions than utilizing carbon neutral biofuels, which exist only in concept, or moving to hydrogen, which appears to be an unrealistic and unrealizable strategy at present. Increasing fuel efficiency by say 30%, which is doable with current engine technology, would go a long way toward addressing the carbon problem with potent countermeasures and would arguably be easier to implement in the mid term than a move toward any really massive production of biofuels.

The fact is that oil shale is a huge and highly concentrated resource and is probably more cost effective to produce than any biofuel. Still don't expect it to slake the nation's thirst for liquid fuels. Most authorities think that continuous production of 3 million barrels a day is about the most we'll get out of the shale beds. We currently consume about 22 million per diem.

Combustion Electromagnetics Incorporated and Sanderson Engine Development

These companies are partners who are staffed by refugee academics from MIT and Harvard University and lifers from the Big Three auto makers. They've both been covered fairly extensively in the automotive technical press, but they're under the radar with respect to folks within the alternative energy space.

Combustion Electromagnetics claims to have developed a lean burn engine that can operate at 30 to 1 air fuel ratios, and at double the fuel efficiency of your typical spark ignition engine. It's all achieved, or so they say, through a form of plasma ignition which is supposed to eliminate the main problem associated with competing systems, namely the ability to maintain normal spark plug life with conventional spark plugs.

The guys at Sanderson Engine Development have a complementary technology for converting linear to rotary motion and vice versa which dispenses with the crankshaft and reduces friction by eliminating side loads on the cylinders from the moving pistons. Unfortunately, they don't disclose much of how its accomplished.

Combustion Electromagnetics has gotten a lot of favorable press from the automotive gearhead trades and has published a multitude of peer reviewed engineering papers. They look to be pretty serious. Sanderson is less well known and has disclosed much less of what they're doing but has signed contracts with a number of pump manufacturers, which constitute the last refuge for making a living for engine design innovators, who, as it happens, all aspire to signing a deal with Toyota and retiring to the Balearics.

I talk to a lot of mechanical engineers with new designs, but few are as far along as either of these companies. As I've said elsewhere in this publication, it is exceedingly difficult to displace established forms of automotive power plant and a change in a single subsystem, precisely what either company is attempting, makes a lot more sense than coming in with an engine that is top to bottom different. The auto makers ain't gonna throw out all their tooling, but something like an ignition system might conceivably be successful, especially if it is normally sourced from an outside vendor anyway.

I've made no mystery of my belief that new designs of reciprocating engines are a lot more likely than hydrogen fuel cells to dominate the next generation of personal transport vehicles, especially if they can achieve equal fuel economy with only a modest increase in manufacturing cost. I think these are folks to watch.

Kreido

Not precisely a startup, they've been around since 1995. The CEO, Joel Balbien, is an impassioned green fuels advocate who happens to come out of the oil industry and has pretty extensive experience with oil shale projects.

Balbien's claim is that his company's process can substantially reduce the size and environmental footprint of biodiesel facilities, eliminate the water wash phase of production, and speed up total processing time to under ten minutes. He also claims a thirty to forty percent reduction in total production costs per gallon of capacity.

Kreido has recently gotten some fairly big contracts for the rights to use their process, so one might assume they're on to something. Their problem at present is securing the really big contracts, most of which go to Lurgi, the giant German chemical process and plant engineering company.

Kreido is one of several process innovators active in the biodiesel arena, and most of the innovations have to do with replacing the centrifuge used to mix the seed oil and alcohol with some other mechanism. All kinds of techniques are out there, including ultrasound and microwaves, and all kinds of claims are being made for them, but most of the business still goes to vendors of traditional facilities. It's kind of like ethanol where everybody talks about cellulosic techniques but no one actually builds plants for utilizing them.

So what's our take? Again, definitely a company to watch, with solid financing, experienced staff, and an excellent grasp of the industry.

We happen to think, however, that processing techniques are not the weak link in the biodiesel industry today. Biodiesel production is basically a mixing process, none of the high temperature, high pressure chemical reactions with which one must contend when producing bio-synfuels or ethanol, so the process is already pretty cheap. No, the feedstock is the real issue with biodiesel. With most oilseeds you're lucky to get a couple of thousand pounds of oil per acre. Compare that with corn or sugar where yields in excess of ten tons are easy, or with biomass gasification, enzymatic hydrolysis of cellulose, or anaerobic digestion agricultural waste where you're looking at over twenty tons per acre, best case. Seemingly, the only way the biodiesel guys will ever get reasonable yields of useful oils is to rely ever more heavily on palm oil, go for invasive species like the Chinese tallow tree, or somehow manage to devise and effective means of cultivating algae on a large scale. Of course, genetic engineering may eventually yield some extremely robust ultra-high yield oily plant, but that's hardly a certainty. At any rate, it's subject we'll be returning to frequently in the future.