Scaleup

by David Schwartz
AlgaeIndustryMagazine.com

Sapphire Energy began in 2007 with a debate between three friends: entrepreneur and bioengineer Jason Pyle; Kristina Burow, a chemist turned venture capitalist; and Nathaniel David, a biologist and serial company builder. Their issue under debate: “Why is the biofuel industry spending so much time and energy to manufacture ethanol — a fundamentally inferior fuel?” By the end of this debate, the seeds had been planted for a revolutionary biofuel company, with the goal to be the world’s leading producer of renewable petrochemical products.

Funding the pursuit of this goal has been a legendary accomplishment in itself. Sapphire was able, as VP of Corporate Affairs Tim Zenk puts it, “to produce a droplet of gasoline” from algae to show their possibilities to investors, thereby launching a cascade of funds which has allowed them, at latest count, upwards of $200 million of running room to get their algae biofuel approach up to scale. Their backers range from Bill Gates’ venture capital wing, Cascade Investments, to the U.S. Department of Energy.

With headquarters and research labs in San Diego, CA, the company plans to build a 300-acre full size open pond algae farm demonstration project in Luna County, New Mexico, near Columbus and Deming. The company also has a research and development complex in Las Cruces, New Mexico.

Tim Zenk had worked on projects with some of the Sapphire investors previously, as executive vice president for Edelman, an international communications firm, where he built and led numerous campaigns, organized public-private partnerships, and counseled energy, biotech and technology leaders. “They somehow liked what I was doing and asked me to join Sapphire full time, so I did. And it just happened to be something I was very passionate about — energy security and climate change — things I care deeply about because I think that we have opportunities and problems that we better deal with quickly.” And so Tim moved the family from Seattle to San Diego, the headquarters for Sapphire.

AIM sat down with Tim at a recent Southwest Biofuels meeting in Albuquerque, NM, to talk about Sapphire’s progress.

Q: Sapphire has been fortunate to capture the support of some powerful development partners to realize the vision of algae biofuels. How’s that going?
A: We’ve made a lot of progress at Sapphire moving the science forward. We’ve invested more than any other private or public entity ever in the business of turning algae into an industrial crop and something that can be considered a true drop-in replacement fuel.

Q: Sapphire describes the product as “green crude.” What exactly does that mean?
A: Green crude is a technology that exhibits many of the same molecules that are in crudes that come from the ground. Because of the oils that can be extracted from our algaes, it allows you to refine that in a typical refinery, with the addition of hydrogen. It’s not a vegetable oil, necessarily, although there are some properties of that. The molecules of the oil that come out of the algae have many of the same properties that you find in a typical barrel of crude oil, although much purer.

Q: Are you working with specific strains?
A: It’s not strain specific at all. There will be multiple strains, always. They are going to be based on geography, climate, what’s available naturally, and what can be manipulated.

Q: Is there genetic modification of your stains?
A: We are not developing genetically modified organisms. It is all through selective breeding. We look at 8000 strains every single day at Sapphire, through high throughput biology. We have about 14 different traits we are building our organisms to live in.

Q: What milestone is Sapphire in right now?
A: We are just entering the pre-commercial demonstration phase.

Q: Within the year, what level of production do you see?
A: Not much at all. We’ll be very focused on breaking ground at the end of the year on a facility down in Columbus, New Mexico. That will be a 300-acre full size open pond algae farm with extraction and production. We’ll do everything but refining. Refining will be done by a partner, Dynamic Fuels, in Louisiana.

Q: Your funding is dedicated to creating liquid fuel, primarily. What about co-products and related markets?
A: You might see yourself very quickly becoming a co-products company, because of the large amounts of biomass that’s left over from the process. There’s a strong push to figure out a business model behind co-products, but the way we look at it is they can’t impact our lifecycle analysis, because we’re an energy company.

Like in any industry, we endeavor to have zero waste, and we will. But we know what business we’re in, and we’re very focused on energy and liquid fuels. So the study right now is to figure out what are the best co-products to produce, and it will probably be others that take our material and do something with it. There are plenty of large companies in that business that can be created, but it won’t likely be Sapphire doing it in the early days. Small companies like ours need to be very focused on what they’re trying to accomplish, and that’s big enough.

Q: What kind of labor force will Sapphire be developing?
A: A lot of our work will be done by traditional farm-type workers at the ground level. And then there will be a lot of technologists, lab techs and people to operate the facility. There will be a lot of construction jobs. The direct and indirect job creation for that project over the next three years will be about 750 new jobs in the state of New Mexico.

Q: Will you be developing an extensive training program?
A: We’ll work with the community college and university system to do that. We won’t develop our own, we’ll work with the experts.

Q: To get a new industry off the ground a certain amount of shared information has to happen, yet pioneering companies must also protect their intellectual properties. How does that balance play out at Sapphire?
A: Our company has a strong belief that a rising tide lifts all boats. We care if the cellulosic people succeed, and the biodiesel people succeed, and obviously we care a lot about the algae people succeeding also. So, from that perspective, it’s sort of coopetition. We want to cooperate on policy, we want to cooperate making sure there is a playing field that allows everybody to compete and, really, who we are competing with is big oil and gas. They are the folks who would rather us probably not succeed.

Q: Certainly big oil companies are investing in the biofuel future. Do you see the industry as a whole moving in this direction, even cherry picking compatible biofuel companies to buy out?
A: Not until it’s too late. That’s my prediction.

Q: So you don’t see a Sapphire acquisition by, say, Shell Oil three years from now?
A: No I don’t. At least not a move that would be seen as a true acquisition. It might be a distribution deal.

Q: What most excites you about working with Sapphire?
A: The fact that we don’t overstate what we say we can do and that when we say we’ve done something, we’ve actually done it.

Q: What do you think are the most important factors that will be driving the development of this industry, or limiting its success?
A: There has to be a price on carbon. We have to have cap and trade. We need to have a federal policy on how much carbon costs and that’s a key issue in the overall success of an industry like ours.

Q: Is that inevitable?
A: I don’t think it’s inevitable. I thought there was a lot of momentum behind it, but then we got sidetracked with health care this year. I think they’ve got to get right back to it. I think there’s going to be a lot of animosity after the mid-term election and it may be a while before we get back to it in this Congress.

Q: What’s going to drive Congress to make it happen?
A: It’s geopolitical, and it’s jobs. We have huge interest in this country in making sure that the energy sources that we use, other than the ones that are free from the sun, are produced domestically and are available to keep our economy going. The investment made by this country to protect our interests abroad are extremely high and it all centers on energy. So, just from a geopolitical standpoint, we have a significant interest in a secure and sustainable supply of energy on the planet.

Q: You are also heading up the task force appointed by New Mexico Governor Bill Richardson, a former Energy Secretary in the Clinton Cabinet, who has visions of New Mexico’s leadership in renewable energy. What is your goal for this task force?
A: Our goal here, as industry, representatives of governments, and non-government organizations, is to build a plan that allows the state of New Mexico to lead the way in the nation’s transition from fossil fuels. The renewable energy we are discussing is specifically focused on fuels. New Mexico has some of the most important resources out there – an abundance of non-arable land, an abundance of non-potable brackish waters, and it has a lot of sunlight. All energy comes from the sun, and you need a lot of it to make energy, especially when you’re making energy-dense fuels like gasoline, diesel and jet fuel.

Q: And the obstacles?
A: The obstacles are the will for the state to believe that it really can be the Saudi Arabia of the United States. And, at least as it relates to algae, we have a tremendous opportunity here in the state of New Mexico because of those assets that we bring. The other obstacles would be simply the investments required for the advancements in the science. —A.I.M.

Photos courtesy of Zebra Partners

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