Fortune - A Biofuel Dream Gone Bad 5-15min

All told, the company spent more than $600 million. In its brief time in operation, it generated $2.3 million in revenue; when it filed for bankruptcy it listed assets of $58.3 million. ... The next generation of biofuels, made from plants and biowaste (so-called cellulosic materials), which have lower carbon emissions than oil, were a particular passion. Khosla invested hundreds of millions of dollars in about a dozen biofuel and biochemical companies. ... His ambitions were audacious. Khosla declared “a war on oil.” As he wrote in 2006, “I believe we can replace most of our gasoline needs in 25 years with biomass.” He dismissed incumbent energy companies in a 2007 interview as not investing heavily in biofuels because they weren’t “used to innovation and the rate of innovation we are likely to see in this business.” ... Unlike most failed startups, KiOR hasn’t just shut its doors and disappeared into oblivion. Today recriminations, investigations, and litigation continue to surround it. The Securities and Exchange Commission has been examining whether the company made false statements, including on a critical point: the yield of its biofuel (the amount that can be made per ton of wood chips). Two KiOR executives and Khosla himself are also facing a class action suit alleging that company executives misled investors about production volumes and yield. ... The state of Mississippi is also suing Khosla and key KiOR executives on similar grounds, claiming they hoodwinked the state to obtain a $75 million loan.

Bloomberg - The Fake Factory That Pumped Out Real Money 5-15min

Biodiesel scams are puny compared with Medicare and Social Security fraud. For sheer moxie, though, it’s hard to beat Phil Rivkin. ... He started Green Diesel in October 2005, two months after President George W. Bush signed legislation creating the Renewable Fuel Standard program. The law directed the EPA to oversee a regulatory regime designed to foster production of alternative transportation fuels, including corn-based ethanol, as well as biodiesel derived from vegetable oils, animal fats, and used cooking grease. ... The statute was a boon to renewable fuel makers—and an irritant to gasoline and diesel refiners—because it required refiners to blend at least 4 billion gallons of ethanol (for gasoline) and biodiesel (for diesel fuel) into their products in 2006, with the amount rising to 7.5 billion gallons by 2012. The program now calls for 36 billion gallons in 2022, with varieties of ethanol representing the bulk of the requirement. Each year, the EPA sets obligations for individual refiners. Most years, ExxonMobil is on the hook to blend the largest amounts of renewables. ... Making biodiesel is simple enough that high school students do it in chemistry class. In a process called transesterification, producers use a chemical catalyst such as methanol to separate methyl esters—the scientific name for biodiesel—from glycerin in such feedstocks as poultry fat. ... Per EPA rules, each gallon of ethanol or biodiesel produced is assigned a 38-digit number—a renewable identification number, or RIN—that travels with the product as it moves from producer to refiner to end user. Ethanol RINs generally remain fixed to their respective gallons throughout the process. But the EPA allows biodiesel makers to strip RINs off their product and sell them separately as tradable credits. Refiners who fall short of blending the statutory minimum of biodiesel into their refined products must buy RINs to make up the difference or pay penalties. ... It isn’t hard to see how Rivkin was able to snooker Fortune 100 companies. To them, Green Diesel—or some equally innocuous broker that had bought RINs from it—was merely an entry on a computer offering to make a problem go away. The refiners needed RINs, Rivkin was selling, and the price was trifling.