Interest grows in turning algae into motor fuel

The inaugural "algae-oil" conference, sponsored by the Minneapolis law firm of Fredrikson & Byron, last week attracted Midwest scientists, venture capitalists and potential operators who say Minnesota and the Midwest can lead the effort to displace millions of barrels of imported oil annually with green fuel produced at sewage treatment plants, power plants and livestock yards.

For example, the more than 120 paying attendees learned how the Metropolitan Council's looming, expensive pollution problem on the Mississippi River below St. Paul may evolve into an economical, environmental upgrade that also could yield several million bucks worth of "green" diesel fuel annually.

"We were ahead of the curve when we started this research a couple years ago," said Jason Willet, finance director of the Metropolitan Council's Environmental Services. "We think growing energy on wastewater works in the Northland and now there's a lot of interest and money coming to it."

The St. Paul sewage-treatment plant is near capacity and regulators won't allow additional municipalities to come on line until tougher regulations are adapted to cut the amount of phosphorus released into the river. Phosphorus, a byproduct of treating 250 million gallons of sewage daily, results in huge algae blooms downriver at Lake Pepin and elsewhere.

A couple of years ago, bio-systems professor Roger Ruan of the University of Minnesota was pulling five-gallon pails of algae from the wastewater. Today, he's operating a $1 million pilot project at the treatment plant that indicates the St. Paul plant could yield more than 600,000 gallons of algae oil annually, including some strains that markedly reduce the phosphorus and nitrogen contained in a toxic concentrated solution that is spun out of sewage sludge. The sludge is distributed as fertilizer or dried and burned to generate heat and electricity at the plant.

As it turns out, the toxic solution, called centrate, is a good breeding ground for oily algae.

"We want to get rid of this stuff by providing a wastewater starter technology for the algae [oil]," Willet said. "We've found that the algae will absorb as much as 70 percent of the phosphorus and it will take some nitrogen and it absorbs carbon dioxide. ... The value of what the algae would take out is worth [up to] $20 million a year to us in phosphorus and pollution control. We're not sure this works completely yet, but the alternative is very expensive."

Ommen, who operates JetE, believes algae oil may be the future of synthetic fuels to displace a big percentage of transportation fuels that can be refined at numerous locations throughout the country.

Air Force interest

The federal government has awakened to algae's potential. And the U.S. Air Force, wary of our increased reliance on foreign oil, wants up to 50 percent of its jet fuel to be from synthetic sources by 2016.

The petrochemical industry also is interested in buying algae-oil byproducts, said Mike Ritzenthaler, CEO of Pine River Petrochemicals.

National interest in algae oil is heating up.

Sapphire Energy of San Diego has raised more than $100 million from private investors, as have other algae-oil operators. Boeing aircraft is one of the big names behind the association. Xcel Energy, Great River Energy and other producers also are underwriting algae-based research that incorporates carbon dioxide, an emission from burning coal and oil that most scientists say contributes to global warming.

"Algae offers a great solution to several problems, " said Todd Taylor, a Fredrikson lawyer who is in the vanguard of linking scientists, plant operators, financiers and the capital markets. "These fuels are nearly identical to their petroleum-based counterparts, yet they are made from renewable feedstocks, have low life-cycle carbon emissions and no sulfur. Private enterprise is pulling the government along on this one. Exxon Mobil, historically the most hostile oil company to renewables, has invested $600 million into algae research. And the more these [pollution regulations cost] us hard-working taxpayers, the more there will be a push to get something done."

Tyler Krutzfeldt, a venture capitalist with Mont Vista Capital, predicted more advancement for the algae industry once Congress passes a cap-and-trade system, which is expected to stimulate investments in cleaner energy systems.

Ruan said he can produce a gallon of algae fuel for around $10 per day. That cost is expected to come down as commercial-scale ventures come on line.

Critics of the oil industry say that's about the cost of a gallon of fuel today, once defense and pollution costs and tax breaks are included -- costs that are not paid at the pump.