LBNL Biofuel Partner Warns of Bankruptcy

By Richard Brenneman
Saturday April 04, 2009 - 10:14:00 AM

Pacific Ethanol, a partner with Lawrence Berkeley National Laboratory (LBNL) in developing a pilot plant to turn plant fiber into fuel, may be heading for bankruptcy court. 

Warnings of the possible Chapter 11 filing were included in federal financial filings. 

The firm, chaired by former California Secretary of State William L. Jones, is deep in debt and unable to meet its loan obligations, according to filings with the federal Security and Exchange Commission. 

The Sacramento-based firm has partnered with LBNL’s Emeryville-based Joint Bioenergy Institute to develop a cellulosic ethanol plant in Broadman, Ore., with the help of a $24.3 million grant from the Department of Energy, the agency which founded JBEI with an initial $135 million grant. 

The ethanol firm reported operating losses of $193 million for 2008, and a net loss of $147 million, a ten-fold increase from the losses reported a year earlier. 

The firm’s stock has plunged, and it had delayed filing its report for the fourth quarter of 2008 until Thursday, April 2. 

Unable to meet loan obligations due March 31 to a variety of lenders, Pacific Ethanol received extensions only after Jones and CEO Neil M. Koehler made unsecured loans to the company of $2 million. 

The quarterly report wasn’t filed until the loan extensions had been signed. 

Among the companies owed are Wachovia Capital Financial Corporation, Amarillo National Bank, and the New York branches of WestLB AG, Cooperative Centrale Raiffeisen-Boerenleenbank BA, Rabobank Nederland, and Banco Santander Central Hispano S.A. 

The company had been unable to meet the federal deadline for filing its annual and fourth quarter reports, telling the SEC, “The Company was unable to file. . .in a timely manner without unreasonable effort or expense because management needs additional time to complete its procedures associated with the Annual Report.” 

The annual report was finally filed March 31. 

JBEI, headed by UC Berkeley bioengineer Jay Keasling, is seeking to develop patented microbes that will transform plant fibers into fuel, but the Oregon plant would use existing technology patented by BioGasohol ApS, a Danish company. 

Pacific Ethanol has been hit by a succession of crises, and has closed two 60-million-gallon-a-year plants in Stockton, Calif., and Burley, Idaho, as well as a 40-million-gallon plant in Madera. The company continues to operate a non-cellulosic refinery in Oregon and holds a minority interest in a still-operating plant in Colorado. 

Keasling and Pacific Ethanol have both protested pending state regulations that would force biofuel manufacturers to calculate the impacts of their fuels on land use. 

Critics, who refer to ethanol and similar products as agrofuels, have charged that growing plants to fuel cars, trucks, trains and plants will increase pressures on farmlands and drive prices up, creating a cascade of negative impacts in Third World countries where fuel crops will be grown.  

Biofuel boosters contend the calculations sought by the California Air Resources Board would yield a false picture of impacts, overshadowing the benefits the fuels might bring. 

JBEI is one of two plants-into-fuels projects now underway in Berkeley. Even larger is the $500 million Energy Biosciences Institute, funded by BP (formerly British Petroleum) and operating under the joint auspices of LBNL, UC Berkeley and the University of Illinois, Urbana-Champaign.