SM: Are you the only algae-based bio fuel company in the US?
GK: No, a lot have popped up. There are four or five I think are in the same ball park as we are in terms of scale, and then there are a lot of little companies with a couple of stock tanks or small ponds.
SM: Can you give us some insight into the larger ones? What size are they and how does their technology compare to yours?
GK: One of the leaders is Sapphire Energy in San Diego. They just secured $100 million in funding. Some came from Bill Gates, some came from investment firms. They do transgenic work. They are the best at working with altered organisms, and they are a very smart bunch. They are producing a fuel that is very similar to gasoline. Solix out of Colorado is making some fairly significant breakthroughs. PetroSun is doing some large open pond operations in Mexico and south Texas near the Gulf.
SM: How do the technologies compare?
GK: In this industry there are a lot of approaches and there are going to be multiple winners. Just as there are several successful oil companies, I expect to see the same thing in our industry. I expect that over the next several years we will begin to see some consolidation. Different companies have answers to different pieces of the puzzle. I certainly think we have one piece of the puzzle, but we do not have the entire equation.
SM: You are going to produce crops for refineries?
GK: Exactly. We will simply be a feedstock supplier.
SM: What is the scale factor in this business from your perspective?
GK: I think the biggest issue is that land be available close to where the person wants to refine. Out where we operate, between El Paso and San Antonio, there are 600 miles of open country that gets lots of sunlight with available water. Does that become the production zone for bio fuels? Perhaps.
SM: Are there enough refineries in that area to absorb the production?
GK: That is the ultimate question. Either they are existing or a transportation system has to be put in place. There are a lot of questions regardless of whether you are doing oil from algae or oil from soybeans, grape seed or palm. The bulk of palm oil is produced in the Pacific Rim and is being shipped to refineries via boats.
SM: Is that cost efficient?
GK: I don’t think so. The economics of it are to some degree, because that is where palm oil is coming from, and here in the States that is the largest component of the bio fuel that we buy. But when everything is said and done, I don’t think that is going to work indefinitely.
SM: Extrapolating from a macroeconomic view, would you say that there is going to be a significant amount of investment in oil refineries within the US?
GK: I think there was a huge investment over the last three years in bio fuel refineries. A lot of those investments went bad because nobody expected the markets to do what they did. Those plants are now sitting idle. People who put their money into the plants lost money, and they now have a bad taste in their mouths from the bio fuel industry.