Biofuels maker says airlines worried about survival, not CO2

Nichola Groom, Reuters 11 Mar 08;

LOS ANGELES (Reuters) - U.S. airlines are too worried about survival to address the big impact their planes are having on the environment, the company behind the world's first commercial bio jet fuel plant said on Tuesday.

Solena Group, which is developing a facility in California to make renewable jet fuel from municipal waste, is banking on the European Union's proposal to cap airlines' emissions of greenhouse gases to drive demand for its product.

"The U.S. obviously is still struggling with CO2 issues, so I don't see the airlines making a big effort to buy this," Robert Do, Solena's chief executive, said in an interview. "Airlines are struggling to stay afloat and CO2 issues are not a big interest for them, except for a few leaders in the industry like Virgin."

Last month, a Virgin Atlantic jumbo jet flew from London to Amsterdam powered partly by biofuel. It was the world's first such commercial flight. Virgin founder Richard Branson called the flight "a vital breakthrough," and Solena's Do said Branson had already expressed interest in his product.

"Last week Sir Richard Branson made a statement to our partner, Rentech, that whatever we make they will buy it all," Do said.

Solena collects gases such as methane from decomposing municipal waste and liquefies it for use as jet fuel. Burning the fuel produces carbon emissions but the process of collecting and producing it stops greenhouse gases from the waste from entering the environment.

U.S. airlines trade group the Air Transport Association says on its Web site that it supports the development of alternative fuels, but believes that coal-to-liquid technology is most promising.

Do said coal-to-liquid fuels would decrease the industry's dependence on crude oil but would produce more greenhouse gases than petroleum-based fuel.

To drive demand from U.S. airlines, Do said that Washington, D.C.-based Solena would focus on making its product cheaper than jet fuel made from traditional fossil fuels. Already, he said, the company can produce bio jet fuel for $2 a gallon, while the current price for traditional jet fuel is about $3 a gallon.

Should the price of traditional jet fuel drop, however, Do wants federal subsidies to help make sure his product stays cost competitive.

"With additional tax incentives we will be able to make sure we are sustainable" even if the price of jet fuel drops sharply, he said.

Solena expects to begin construction on its $250 million plant in Gilroy, California in early 2009, but it won't begin producing jet fuel until 2011.

The plant, which is being built on the site of an existing landfill, is expected to produce 1,800 barrels of biofuel a day, 70 percent of which will be jet fuel. By comparison, U.S. airlines buy about 1.3 million barrels of jet fuel a day, while the U.S. Air Force buys 300,000 barrels a day.

"It's a drop in the bucket," Do said. "But obviously we have got to start somewhere."

(Editing by Phil Berlowitz)