Signing of UC-BP Biofuel Pact Is Imminent, Say Lab, UCB

By Richard Brenneman
Tuesday October 30, 2007

The half-billion-dollar biofuel contract between a British oil company and UC Berkeley, Lawrence Berkeley National Lab (LBNL), and the University of Illinois should be signed “within the next couple of weeks.” 

The signing will come within weeks of another BP signing—this one of an agreement to pay the largest fine ever levied by federal regulators for price-fixing and criminal fraud. 

The $373 million includes $166 million in criminal fines and penalties stemming from a March 23, 2005, Texas refinery explosion that killed 15 workers and injured more than170 others. 

The other fines stem from a February 2005 propane price-fixing conspiracy and damages caused by oil leaks from the Alaskan pipeline. 

The U.S. Department of Justice and BP announced the settlement Thursday, the same day a federal grand jury in Chicago indicted each of four BP employees on one count of conspiracy, 12 counts of market cornering and price manipulation and 16 counts of wire fraud. 


Final form  

LBNL spokesperson Ron Kolb and university spokesperson Robert Sanders confirmed that signing is imminent. 

“We’re hoping for the week of Nov. 5,” said Sanders. “It’s almost in the final form for review by BP and the (UC system) Office of the President.” 

The resulting Energy Biosciences Institute will research alternative fuels from crops, waste and coal, and pursue genetic modification of crops and microbes to create biologic refineries for transportation fuels. 

Research will also focus on reducing atmospheric carbon. 

Tad Patzek, an engineering professor who came to the university from the oil industry, said he wasn’t surprised the deal is near completion, but he worries about the consequences. 

“The university is getting itself into corporate relationships of the sort and extent of which it has never done before,” he said. 

“There will be a steep learning curve, and there will be some collateral damage,” said the Polish-born researcher. 

“The greatest impacts may be felt on the type of faculty the university hires, the types of subjects we teach, the graduate students we have and the kinds of research that will not be done,” he said. 

A small but active group of students and faculty have protested the BP research pact, but the concept received the formal endorsement of the majority of the university’s faculty senate and the blessing of its president, journalism professor William J. Drummond (who did not return calls). 

Protesters have raised concerns about the institute’s plans to engage in genetic modification of plants and microbes to produce transportation fuels, and about the potential threats of energy crops to farmlands in the Third World now used for food supplies. 

Another concern raised by Patzek and other scientists is the diversion of funding away from other possible energy sources, including solar. 


Second lab 

If the pact is signed as now scheduled, BP’s ties with the university will be solidified less than a month after the UC Office of the President and the Department of Energy signed a lease for another biofuel lab—this one funded by the Department of Energy. 

The director of the new Joint BioEnergy Institute lab in Emeryville—researcher Jay Keasling—initially served as a member of the executive committee of the BP project and was singled out along with EBI director-designate Chris Somerville by Chancellor Robert Birgeneau for his role in drafting the EBI proposal. 

Both scientists are founders and part owners of private labs researching biofuels. 

One university source said the school and the oil company had reached an agreement weeks ago, but that the contract was held up by government lawyers concerned about the implications of using public labs and scientists on a contract with a major private industrial firm.  

If the signing occurs as scheduled, the campus will have welcomed two controversial chemical giants within days of each other. A reception at the Haas School of Business today (Tuesday) will mark the formal welcoming of Dow Chemical to the Berkeley campus. 

Besides being a favorite target of pickets and marches protesting the company’s manufacture of napalm during the Vietnam War, Dow is being targeted today for its refusal to pay damages stemming from the Bhopal chemical disaster in India. 


Troubled past, fines 

British Petroleum, the former corporate name of BP, has an equally checkered past, including its central role in fomenting and financing the 1953 coup that ended Iraq’s only democratically elected government and its alleged backing of death squads in Latin America. 

The price-fixing charges stem from a series of ploys by officers of BP Products North America to corner the market on the main propane line supplying the nation’s Northeast and Midwest. 

According to the consent order signed by corporate officers, BP’s traders cornered the propane markets of two of the nation’s most populous regions in February 2004, selling the fuel at inflated prices. 

That effort, in turn, built on a bid to corner the market 10 months earlier.  

Though the firm managed to gain possession of all the available fuel the following year, its financial gains from the market cornering were thwarted by unseasonably warm weather and a pipeline break, ultimately costing the company $10 million. 

In admitting to the scheme, BP agreed to pay $100 million in criminal penalties, a $25 million fine to the U.S. Postal Inspection Consumer Fraud Fund, restitution to other companies of $53 million and civil penalties of $125 million to the Commodities Future Trading Commission. 

The criminal charges against the four BP traders were deferred as a result of the company’s agreement to pay the massive fines. 

The Alaskan pipeline leak cost the company $12 million in criminal fines and payments of $4 million each to the National Fish and Wildlife Federation and the State of Alaska in exchange for an agreement to forestall criminal prosecution.