KiOR: The Inside Story Of A Company Gone Wrong

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Jim Lane

Not long ago, KiOR quietly re-named itself Inaeris Technologies and launched a modest website which discussed the technology and management in little detail, but focused to an extraordinary extent on a declaration of values.

Empowerment, honesty, fairness, “lessons learned from our collective experience” and so on. Warm, kindly Hallmark Card sentiments, universally popular, admired and vague.

Not the bold, We-Are-Black-Swans, detailed descriptions of yields, costs, downstream partners, brand-name board members and timelines to commercial scale that had been the style of the Old KiOR.

Old KiOR was exciting, dramatic, and fast, and the headlines it produced between 2008 and 2011 were candy for a renewables-hungry world.

A Breakthrough in Catalytic Pyrolysis to make cost-competitive, drop-in renewable fuels. A “Magic Catalyst”. The backing of a celebrity investor in Vinod Khosla. An impending venture with Chevron and Weyerhaeuser. A star-studded board featuring former Secretary of State Condoleezza Rice. A massive loan from Mississippi. A celebrated IPO. Reports of high yields. Construction at full-scale. 13 million gallons to start, multiple projects on the way.

Real Fuels Today

A slide presented by KiOR in 2013, prior to the bankruptcy filing.

And then the shortfalls started. KiOR fell further and further behind on its production goals throughout 2013, and ran out of cash and tumbled into bankruptcy in 2014. Ultimately, the state of Mississippi filed a lawsuit alleging that the KiOR technology hadn’t been ready for scale, its management knew that fact, that the company had faked technical data, and overstated commercial progress to lenders to secure financial support.

Scandal erupts

oconnor-051816

Paul O’Connor

That there was a turbulent KiOR story to be uncovered was of little doubt. In late 2014, The Digest published a string of correspondence from co-founder Paul O’Connor to the KiOR board, alleging a wide range of scientific mis-steps and warnings unheeded on the technology’s viability.

In part, O’Connor wrote:

“It is obvious for all of us today that KiOR is going through some difficult times, and may even not survive as a company. The reason for this, in my opinion, is not because of the failure of the technology itself, but because of several wrong choices made during the development and commercialization of the technology. Over the years there have been several warning signals (internal & external), one of which as I mentioned in the foregoing has been my own technology audit report in March/April of 2011. Notwithstanding these warnings KiOR’s MT continued on their set course. In mean time everyone else hoped for the best.

“The real proof-of-the-pudding however would be a successful start-up and operation of Columbus in 2013…[but] it became clear however that the product yields were in fact much lower than projected [**], while the on-stream times were also way too low [**]….My observation was that the low yields and on-stream times at Columbus were reasonably in line with the results and experience in the DEMO plant in Houston. This means that the main problems at Columbus are already discernible in the DEMO operations and are therefore structural and not “just” operational issues.

“I am of the opinion that KiOR’s [management team] professionally has not performed in evolving the KiOR technology to a commercial success; furthermore the MT in my opinion has not provided the board of directors of KiOR with the adequate, right and relevant information to do their job. I therefore am of the opinion that the MT needs to resign and to be replaced in order to improve the chances of success of KiOR and/or any other potential new ventures based on KiOR technology in the future.

The complete O’Connor resignation letter is here.

And a friend wrote to The Digest during this period, stating:

There might be more to the Kior bankruptcy…..seems the equity player/majority shareholder was stripping the cash, there might have been some issues shall I say with Mississippi development authority and if I were a betting man I’d say that both sides are examining the validity of the reps and warranties in their agreements.

In Fall 2014, I received a note from Paul O’Connor, proposing a presentation for ABLC 2015 entitled “Biomass conversion: On learning from past mistakes” (= Is there life after KiOR?)”.

Was I interested? O’Connor wanted to know. You bet I was. We discussed it by email and subsequently in person on Key Biscayne in February 2015. But lawyers intervened and the presentation never materialized.

By then, O’Connor was traveling with Alex Major, best known for his “Can We Still Fly Jets & Save the Planet?” presentation given at a number of industry conferences. Major had a plan to acquire the on-site assets at Columbus and produce jet fuel and green power. In mid-February, Major wrote:

The KiOR legal case is a complete bag of worms that if John Grisham got a hold of it would make a fabulous legal thriller and an interesting movie!! Regardless of whether Paul is going to speak or not, I would like to attend the ABLC. Hopefully we will have a chance to chat over a tea or a glass of wine at some point so that we can discuss the KiOR lawsuit.

And then, the Freak Show

For others, the freak flags were flying.

In a Motion filed in the United States Bankruptcy Court for the District of Delaware on February 12th, Robert C. Dalton, CTO for ESTEC Technology Works objected to a motion by Mississippi Development Authority to convert KiOR’s Chapter 11 re-organization to a Chapter 7 dissolution. ESTEC had made an offer for KiOR’s assets.

In part, Dalton wrote:

The Grand Wizard of Magic Catalysts, Robert C. Dalton and his “Magic Kingdom”, ESTEC Technology Works LLC, are in possession of a collection of volumes of secret books that contain spells (formulation of materials and processes) for energy applications, chemical synthesis, environmental applications, food processing and biotechnology as well as now [sic] search for Daltonite, a quasi-mineral, that is in our Solar Systems and most likely is found throughout the Galaxy.

ESTEC Technology Works, LLC will soon be announcing the formation of their new “Solar Systems Exploration Division Incorporated” and ESTEC/Dalton will be searching areas at, near or around Mars, Neptune and Jupiter to locate one or more facilities to search for Daltonite and to develop and launch technology to supply energy, oxygen, habitat and infrastructure for the expansion of the reach of humans and their colonization beyond Earth and Low Earth Orbit”.

Now the story can be told

For two years, the KiOR story been one part circus, one part asset grab, and one part “What the hec
k happened”? But now the smoke is clearing.

Looking towards the future, Inaeris Technologies is the emerging remnant, described by its President Chris Artzer as, in essence, a Series A venture-backed company, at pilot stage, aiming to demonstrate the technology it believes will be robust and which it aims to demonstrate in time. In the case of Inaeris, as Artzer adds, it has the benefit of being at pilot stage but having produced a million gallons of in-spec, drop-in renewable fuels.

What of the past? Since last winter, we have visited with multiple parties intimately familiar with KiOR’s science and commercial progress dating back to its formation, and we have reviewed dozens of documents relating to technology development, yields, and commercial claims from 2007 that tell the true story of KiOR.

The pressing question is, exactly how and why did the yields and costs promised in the IPO, 67 gallons per ton of biomass with an eventual target of 90 and at a cost of $1.80 per gallon, fail to be realized in the first commercial plant at Columbus?

The road to the 67 gallons per ton claim

In 2006, renewables were in the air.

In mid-June, VeraSun Energy went public selling 18.25 million shares at $23 per, raising $425 million. Shares of the already-public Pacific Ethanol (PEIX) doubled by late spring, despite the company not opening its first plant until the end of the year. Hawkeye and Aventine went public at sky-high prices. Congress was planning a vastly expanded Renewable Fuel Standard.

By late June, Khosla Ventures entered into biofuels in a big way, forming a venture called Cilion to operate modular 55 million gallon ethanol plants, aiming to build 8 by 2008, the first three in California.

Several months prior, in the Netherlands, Paul O’Connor had taken note of the trends as well. He had been serving as a Business Development Manager at Albemarle Catalysts after Albemarle bought the catalyst business from AkzoNobel. This, on top of 20 years at Akzo, culminating in work as the worldwide development manager for FCC catalysts.

The key here is the FCC unit a fluidized catalytic cracker. It’s a standard unit at more than 400 oil refineries worldwide; one-third of the world’s crude oil is processed in a FCC reactor.

The use of synthetic zeolites and their modified forms, as FCC and hydrocracking catalysts, has revolutionized the petroleum refining business. The use of zeolite-based FCC catalysts has made possible to achieve substantially higher conversion yields of gasoline and diesel fuel from each barrel of crude oil refined.

As Wikipedia explains:

Fluid catalytic cracking is widely used to convert the high-boiling, high-molecular weight hydrocarbon fractions of petroleum crude oils to more valuable gasoline, olefinic gases, and other products. Oil refineries use fluid catalytic cracking to correct the imbalance between the market demand for gasoline and the excess of heavy, high boiling range products resulting from the distillation of crude oil.

With the popularity of biomass-related ventures in 2006, the question had become, as former KiOR process engineer Lorenz Bauer explained to The Digest, “Could you send [biomass] up real fast with a catalyst into a FCC reactor?” But he adds, “Anyone who thinks it’s simple is kidding.”

There were five basic scientific questions.

1. Could the biomass be sufficiently pretreated, and how, to become FCC-compatible?

2. Could a catalyst be designed to work with biomass and achieve similar results to catalysts working on petroleum hydrocarbons?

3. What would the reactor look like?

4. Would any resulting bio-oil contain too much oxygen to be refined into a fuel using standard refinery equipment?

5. Could all of the above be achieved by a design that was economical?

What was the goal of the process and the catalysts, anyway?

Simply put, the chosen route was catalytic pyrolysis. In this approach, the goal is to crack the biomass molecules arriving at the front end of the reactor (composed of hydrogen, carbon and oxygen) under the right combination of pressure and temperature. To give an everyday example, cooking food is a high-temperature, ambient pressure form of pyrolysis.

Using sufficiently active, selective and robust catalysts, the hope is to produce at the end of the reaction a high yield of hydrocarbons that can be upgraded into transportation fuels.

Here’s the good and bad news. Good? Biomass pyrolysis has been known for a long time to produce gas, coke, char and some bio-oil. Bad? As of 2007 however, not enough oil, and of insufficient quality to be economically upgraded into transport fuel.

The purpose of KiOR’s technology was to shift the balance radically towards bio-oil and away from gas, coke and char, and to bring down the levels of oxygen in the bio-oil.

The state of Mississippi summarized the goals in their lawsuit:

Pyrolysis oil retains approximately the same amount of oxygen content as the biomass used to create it. This amount is typically in the 40-45% range, which is far too high to be refined within the existing infrastructure of today’s oil refineries. The primary and essential goal of KiOR’s catalytic process was to reduce the oxygen and acid content of its biocrude to a level that could be successfully refined by oil companies in their existing infrastructure, while still maintaining biocrude yields that were high enough to render the Company profitable.

Biomass to fuel process

The KiOR process, from a industry presentation in 2013.

The formation of BioECON

To explore the use of biomass in a FCC reactor, among other concepts, Paul O’Connor founded BIOeCON BV in the Netherlands and Dutch Antilles. O’Connor was President and Technical Director, Armand Rosheuvel was Financial Director, Rob van der Meij was Commercial Development Director, and scientist Dennis Stamires was retained as Scientific Advisor and Consultant.

It was a world-class team. Stamires had been conducting R&D work in the area of Heterogeneous Catalysis using natural, synthetic and modified forms of Clays and Zeolites since 1955. He was a member of the team working at Linde, a division of Union Carbide, which in 1960 first announced these mind-bending zeolite catalysts at the International Congress of Catalysis in Paris. And O’Connor was already working at AKZO NOBEL’s Catalyst Division on a project involving the conversion of Biomass to liquid transportation fuels, using a Hydrothermal process and a synthetic clay (Hydrotalcite) type catalyst. Stamires and O’Connor had worked closely together at what had become Albemarle.

Their cooperation resulted in several new inventions; one focused on new anonic clay catalysts for use in the transformation of biomass to Bio-oil, as filed with the US Patent Office in April 2005, as “Process for Producing Liquid Hydrocarbons from Biomass”.

In the end, sources told The Digest that Rosheuvel arranged for the original funds to operate the Company, which were reported in Harvard Business Review in 2009 to have totaled €1 million.

A modified FCC reactor design and a catalyst suitable to biomass these were the primary needs.

Too much oxygen, too much coke

Here was the good news. Researchers such Dr. Iacovos Vasalos and Dr. Angelos Lappas at CPERI in Greece had shown that catalytically inert inorganic materi
als, such as sand and refractory alumina, could deliver the amount of heat needed to pyrolyze biomass.

But most catalysts had a biomass flaw, we learned from experts. The bio-oil they produced was very acidic, corrosive and unstable. That is, too much oxygen. Hydrocarbon fuels don’t have any Os, and the presence of excessive oxygen can compromise fuel stability and engine performance.

Some catalysts could produce bio-oils which contained much less oxygen. They were in the right range on acid and stability. But there was too much darn gas and coke, scientists told The Digest when it comes to making fuels, coke is not it. Coke isn’t worth much, and neither is gas. The solids and gases had to be minimized.

Kior process

So too did the costs. The better catalysts are cost whales. As much as $6-$8,000 per metric ton for ZSM-5 catalysts. An average FCC catalyst would cost close to $2,000 to $3,000 per metric ton.

But there was an opportunity. Why not use the same anionic Clays (known as HTCs) which are effective in removing Sulphur containing molecules from gaseous streams and liquid Hydrocarbons? They might be also effective in removing oxygen from the bio-oils.

The fatal flaw would only turn up later. Experts told The Digest that combining de-oxygenation and pyrolysis in the same reactor just doesn’t work well enough. They would need to be done separately to eliminate the oxygen without producing too much gas and coke. But that would not be uncovered until 2010.

ITQ is retained

One of the new ideas to be explored involved bringing a catalyst or simple chemicals like an acid, base or a salt into close contact, or inserting such chemicals inside the biomass particles, for the purpose of lowering the liquefaction temperature and increasing catalytic activity/selectivity.

To explore that concept, the Instituto de Technologia Quimica (ITQ) of Univesidad Politecnica de Valencia in Spain was contracted to conduct experimental work.

Khosla Ventures enters the picture

Vinod Khosla

Vinod Khosla

BIOeCON needed additional funds to operate and to support the outside contractual R&D work, and was also looking to find investors. Alex Stamires, who was working with Khosla Ventures on an unrelated project and whose father was consulting for BIOeCON, contacted Khosla executive assistant Cyndi Jung in the first week of October 2006. Jung managed the “catch-all” email inbox for venture ideas and was a logical first stopping point for making an introduction. Calls followed, and a write-up summary of BIOeCON‘s background and business interests, a telephone pitch, an in-person meeting, and several months of due diligence.

“The due diligence was no small thing,” O’Connor told Harvard Business Review. “They hired four specialists to look at our technology, and this went on in a very intensive way for three or four months. In the end, their conclusion was that it was very interesting but at an early stage. We needed to do a pilot.”

Khosla Ventures offered a term sheet in the second half of 2007; an agreement was reached to form a joint venture, KiOR, which was incorporated in Delaware on Nov. 1, 2007. It received a Series A investment which totaled $1.436M on November 15, 2007 and $2.916M on July 14, 2008. A Series A-1 investment of $9.999 million was also made in July 2008. All investments were made by Khosla Ventures II, LP.

Rob van der Meij was appointed President and CEO, and Paul O’Connor became CTO and was a KiOR Board member.

The end of the honeymoon, and a change of CEO

The honeymoon ended almost immediately. It was clear that the newly-minted KiOR would be moving to America. Khosla’s request to the company was to hire talented, highly experienced and creative technical personnel, and the US bench was the deepest. But, where?

Strong disagreements ensued. At first, the company set up shop temporarily in Houston. The company consisted of Rob van der Meij (President and CEO), Paul O’Connor (CTO and KiOR Board member), Jacques De Deken (Director), Hans Heinerman (Director), Robert Bartek (Applications Manager), Steve Yanik and Mike Brady. Dennis Stamires was appointed Senior Fellow Scientist, on a consulting contract.

Denver and Houston were the Headquarters finalists. The pro-Denver contingent preferred to be close to the National Renewable Energy Laboratory in Golden, the University of Colorado and the Colorado School of Mines. It was an area, where, as one member of the team put it, “a lot of highly educated persons were living. R&D work was going on at NREL on renewable fuels and the NREL management had expressed interest in collaborating with KiOR.” Papers putting the case for Denver were circulated amongst management on March 19, 2008 and June 1, 2008.

So, why was Houston chosen?

Ultimately, three factors came into play. One, the company was already there. Second, Houston afforded access to expertise in catalysts and in FCC unit development and operation.

The third Houston advantage was more problematic but ultimately decisive. By April 2008, in the April/May 2008 period, arguments and disagreements emerged between Rob Van der Meij and Paul O’Connor. The issue regarded, as one person familiar with the problems remembered it,“ primarily, Van der Meij’s style of management and the direction KiOR was going.” Not long afterwards, Samir Kaul, representing Khosla Ventures on the KiOR board, was called in, and ultimately Rob van der Meij departed in May.

Fred Cannon

Fred Cannon

Among the candidates to replace van der Meij was Fred Cannon, an executive formerly the head of AkzoNobel’s (and later Albemarle’s) catalyst business. He had worked with O’Connor in the past. As the Harvard Business Review outlined:

O’Connor had a hunch that the still-nascent technology to convert Biomass into Liquid Fuels (BTL) would make significant advances over the next decade. “In 2004, BTL was still virgin territory in terms of patents and processes,” recalled O’Connor. “I believed that if we went into this now, we would be leaders.” O’Connor took his idea to Fred Cannon, then Houston-based vice president for Albemarle’s Alternative Fuels division. Cannon was excited by this idea, and the two presented it to the president of Albemarle. However, the president declined to invest in BTL.

Cannon had a successful interview with Khosla and was hired as the new President of KiOR in June 2008. Management then decided to locate the KiOR lab and office facilities in Houston where Cannon was living.

KiOR consultant Dennis Stamires remembered:

“By locating in Houston, there was a very limited number of qualified technical personnel with the type of expertise needed by KiOR available to be hired, or willing to move to Houston to work for KiOR. Therefore, a lot personnel was hired who had no experience in the area of KiOR’s business or qualified for the job. Some were friends or ex-colleagues to Cannon and O’Connor.”

“Not even close to what other people had done”

Just as the company was experiencing its spring 2008 management crisis, the results began to come in from the lab work in Valencia. The results were disappointing.

The pyrolysis testing results of the pretre
ated biomass samples were based on what has been described as “expensive catalyst (an inorganic synthetic material, and a proprietary to BIOeCON).”

Among the problems? ITQ’s data showed excessive amounts of water, coke, gas and char and a relatively small amount of bio-oil that had a low acidity. But there was more. KiOR technical personnel began to voice concerns about scaling up the process, and extra costs in removing the impregnated metals on the biomass, and associated environmental problems/costs to dispose waste byproducts, and contaminated water.

ITQ Valencia was reporting:

51% liquids in all, 21.8% water and 29% organic liquids 21% gas and 27% coke and char.

Results at this level are discouraging, scientists told The Digest, because of the high char, the high coke levels. Also, the oil content was low. The water content was described as “very high”, and in all, the results did not indicate “an economic process, and not even close to what other people had done.” Moreover, the organic liquids were expected to contain high oxygen levels, so that the actual fuel content would be much lower.

“A Recipe for Technical Failure”

In the summer of 2008, Dr. Jacques De Deken, a Technology Director, who had flagged the problem of the bad ITQ results to key scientific team members, raised a red flag to management. He indicated his view that the KiOR BCC Technology was not on track to produce at commercially viable qualities or yields, and that KiOR must make a drastic change both of the process and the catalyst.

According to sources familiar with the company’s activities at the time, Cannon and O’Connor agreed to discount De Deken’s findings, and reject his recommendation to change the process and the catalyst.

There are two versions of De Deken’s departure from KiOR. In the state of Mississippi’s lawsuit against KiOR, the state contends that De Deken was a KiOR consultant, who resigned from the Company in September 2008. The state contends that “Vinod Khosla discussed with De Deken the reasons for his departure and requested that De Deken provide a written memorandum…Khosla forwarded DeDeken’s critique to Cannon on October 13, 2008.”

However, the letter of resignation has subsequently come to light. In fact, De Deken was a KiOR employee rather than a consultant, and his last day in the office was August 11, 2008. On that day, De Deken provided directly to O’Connor and Cannon a detail of his objections. In part, scientific. But in another aspect, cultural.

“I was hired by KiOR as its Director of Technology,” De Deken wrote, “with the understanding of being responsible for all of KiOR’s process development and engineering activities.” De Deken protested that after 5 months of employment, “KiOR is in breach of our agreement”.

He stated that “the strategy in rushing towards demonstrating the BCC technology at a multi-barrel-per-day scale without corroborating experimental data, under the pretense of self-deception of ‘creating value’, is a recipe for technical failure. Indeed, I do not believe that we currently have the experimental results, catalyst(s) or science base to justify the rush and expense of an LPBCC unit or demonstration in the Ivanhoe facility at this time.”

Culture Clash

But De Deken was not finished. He aimed his next comment squarely at the management culture of KiOR.

“What is even more worrisome is that genuine efforts to establish a dialog about relevant technical issues have been met with systematic attempts to downplay or dismiss virtually every issue as soon as it is brought up. Clearly, the creation of lasting value is not possible without also developing credible, sound and robust technology. KiOR’s obvious lack of commitment to building a strong and much-needed R&D effort to make this possible is a further indication that KiOR is not really serious about developing successful technology.”

Sources familiar with the company’s operations and internal communications have confirmed to The Digest that although the company did not disclose internally the reasons for De Deken’s resignation, “most persons involved knew the real reasons, since Jacques was also strongly objecting the plans under discussion at that time, to use the same BCC Technology as described in the ITQ report, at the FCC Pilot Plant of KBR Corporation in Houston, as he was expecting it to be a waste of monies and valuable time of KiOR.”

The move to the KBR pilot plant for testing

One reason why De Deken’s resignation came at a difficult moment was that he was closely involved in negotiating and making all the technical arrangements to test the BCC Technology at pilot scale, and the company had expected to start the testing in mid-September 2008. As the state of Mississippi summarized in its lawsuit:

The first technical step to commercializing the technology would be to develop a pilot project, for which KiOR needed a suitable laboratory space. The pilot scale unit would produce several liters of biocrude a day, less than a barrel. A second step, which would need to follow quickly on the first, was the development of a smaller, laboratory-scale unit, producing in one employee’s words “a few cubic centimeters per run, with many runs a day that will allow us to look at a lot of variables” in terms of feedstocks, catalysts, and pretreatment techniques. This unit would pre-screen catalysts and feedstocks before these entered the pilot lab in larger quantities. Once the pilot unit was up and running, KiOR would move toward the development of a demonstration project, producing between 10 and 100 barrels of biocrude per day.

KBR, a major oil refining engineering concern, maintained a FCC pilot unit that was located very close to KiOR’s offices in Houston, and their unit was selected for KiOR process and catalyst testing, scheduled for September 2008.

A crisis of design

By this stage, and independent of any testing that would take place with the KBR-designed pilot unit, a quiet war of ideas had erupted within KiOR regarding the design of KiOR’s reactor. Specifically, hope was fading among technical staff and consultants that a “one-pot reactor” would work as originally hoped.

A fundamental concept that Paul O’Connor and Dennis Stamires formed was combining the two reactions of pyrolysis and catalysis in one reactor, occurring simultaneously. Consolidated bioprocessing had been described as “the Holy Grail of biofuels” by Dartmouth’s Lee Lynd, and “one-pot reactors” were very much in vogue at the time.

On the fermentation side, companies like Mascoma and Qteros were developing bugs that could accomplish extract sugars from cellulose and ferment them, simultaneously.

It was rare but not unheard of. Combining pyrolysis and catalysis had been explored as early as 1998 by a research team led by Vasalos and reported in the Journal of Applied Catalysis, where a typical FCC Pilot Plant and a commercial FCC catalyst was used.

Skeptics

Proving the soundness of the technology was critical to KiOR’s pathway to success.

Needed: a new catalyst and heat-transfer material

The BIOeCON concept, which became the proposed KiOR reactor technology, was to employ a new (non-FCC Catalyst), a synthetic inorganic clay-like material, which exhibited certain deoxygenating activity for producing low oxygen-containing Bio-oils. The regular FCC Catalyst used by Vasalos was used widely in oil refineries to crack petroleum feedstocks to light hydrocarbons and make gasoline. But
the regular FCC catalyst would leave too much oxygen in the bio-oil, making it unsuitable for upgrading.

The material in question? Hydrotalcite, or HTC.

It was an anionic synthetic clay of the mineral class of double-layered hydroxides. Both O’Connor and Stamires had, and in many cases, together with Prof. William Jones from Cambridge University in UK, and with many others at AKZO NOBEL and subsequently at Albemarle, done extensive R&D work using LDHs as catalysts or sorbents in several types of oils upgrading and conversion, and commercial oil refining and upgrading applications.

Here was the weakness of the concept, which would turn up in testing.

“By combining in one-pot reactor these two distinctly different reactions,” Stamires would later recall, “the thermolysis (a heat transfer/physical reaction) with the deoxygenation/decarboxylation (a chemical reaction), the efficiencies and selectivities of both reactions would be highly compromised and distorted. It produced more water, gases, coke and char.”

As Stamires would tell The Digest:

“To achieve a high efficiency liquefaction of biomass, these small particles must receive a high heat flux in a short time, following with a quick efficient quenching of the Bio-oil vapors. To accomplish this, we needed to use a material which has a high heat capacity and also high heat transferring properties, a good heat conductor. As was ascertained later on, the anionic type of clays, such as the Hydrotalcite, has a very low heat capacity and heat conducting properties. That’s because of its highly porous crystal structure, and low bulk density.”

From the start, then, hydrotalcite was the wrong material to use, The Digest was told.

But testing would turn up another problem. Hydrotalcite is a very active catalyst, used primarily for promoting oil gasification type reactions; the surface gets quickly coated with heavy tar like carbonaceous materials, which further reduce its heat conducting properties when present in a one-pot biomass liquefaction reactor.

But that wasn’t all.

Hydrotalcite was found to have a very high gasification catalytic activity and very efficiently converted most of the biomass oxygen and carbon to carbon monoxide and carbon dioxide gases, and water. Leaving only a small portion of the biomass carbon and hydrogen to form liquid hydrocarbon bio-oils. So, yields with HTC were doomed to be low in addition to the tarring problem and the heat conduction issue.

A new material is developed

The KiOR R&D team, though stymied by the troubles with HTC, developed a novel theory that the HTC material might be modified to address these shortcomings.

Stamires, working with KiOR R&D manager Mike Brady, a catalyst technology expert, asked CPERI chief Dr. Lappas to calcine (or heat treat) to at high temperature a sample of HTC, for sufficient time to completely destroy the crystalline structure and porosity.

Stamires recalls:

“This high temperature treatment transformed the original crystalline Hydrotalcite to a new material of the Spinel class, which exhibited very low pore volume and surface area, high bulk density, and low catalytic activity, and it was a totally different material to the original Hydrotalcite. When tested in the KCR Pilot Plant, as a heat transfer medium and also as a catalyst for biomass liquefaction to produce Bio-oil, this new material having the Spinel crystal structure, produced much more Bio-oil, with a reasonable low oxygen content, than it’s precursor Hydrotalcite.

“This material, with Spinel–like structure, exhibiting bi-functional properties, specifically, as a heat conductor and as a catalyst that proved to be a useful material for use by itself or in combinations with other materials in biomass thermo-liquefaction process.”

The switch to a two-pot reactor that didn’t happen

The R&D team were beginning to see a fatal problem emerging with the one-pot design, in test results obtained at the ITQ Valencia Lab, as well as later on by the tests done at KBR’s Pilot Plant in Houston and subsequently at KiOR’s own KCR Pilot Plant.

The two distinct reactions taking place at the same time (i.e., the physical/Thermolysis and the chemical/decarboxylation/cracking), as it turns out, require individual customized process variables optimizations, and are different for each reaction. So, there’s what one source familiar with KiOR’s process described as “a gross compromise of the individual efficiencies of these two different processes, resulting in a very poor liquefaction and Bio-oil and Bio-oil yield, while a substantial amount of carbon and hydrogen are converted to carbon oxides and water.”

An inflection point

At this stage, these are lab discoveries. Certain results had been disappointing. And, there was disappointment in the efficacy of a single reactor to conduct both reactions simultaneously. It’s not surprising given the novelty of running biomass through a FCC reactor, modified or otherwise. Complicated physical and chemical reactions are taking place simultaneously, with side and cross reactions. It’s the nature of science to explore these puzzles and solve problems.

It was a bleak but not fatal outlook. Better results were obtained with a modified HTC. A new “Two-pot” system, having individual reactors for thermolysis and for cracking, could have been pursued aggressively at this inflection point. In fact, Brady, Cordle, Stamires and Loezos filed a patent application on such a KiOR technology, which was granted in 2012. More on that here.

Prior to the IPO, these steps were not taken in a systematic way, The Digest was told.

Starting up at the KBR Pilot Plant

A dispute erupted within the KiOR community in September 2008 over the testing program for the FCC Pilot Plant at the KBR facility in Houston. Issues included the biomass feed, which included the pretreated biomass feeds, catalysts and process conditions.

Some emphatically stated that before any new materials be tested under different process conditions, and with other process variables, a systematic calibration of the equipment and processing scheme should be first done to establish a reference base-line.

“Especially since this FCC Pilot Plant had not be used before for pyrolyzing biomass in the presence of a catalyst,” as one KiOR staffer would recall later.

It was not a difficult test series to mount. Well known process parameters were available from many similar tests and equipment used before, and there was research papers published regarding optimum process conditions for maximizing bio-oil yields, using sand as a heat carrier, in the absence of a catalyst. Ensyn, for example, had been using sand for years as a heat carrier in a pyrolysis reaction.

The purpose? An equipment check and standardization test, including the duplication of published similar test results, would have given information to confirm that the equipment was working as intended, and given a baseline of performance for this FCC pilot unit, compared to pyrolyzing biomass in different reactor designs, under same process conditions and with the same heat transferring medium. In short, setting a starting point where the impact of a new KiOR reactor design and a new catalyst could be measured.

In a memo to staff dated September 18, 2008 and addressed to all KiOR personnel, entitled ‘KBR Plan’, CTO Paul O’Connor objected doing any calibration to establish a baseline, and the use of sand in the KBR FCC Pilot Plant equipment, and requested to take out from the 2008-09 Experimental plan the use of sand and equipment calibration. The reasoning is not clear.
Possibly the costs and the timelines, based on KiOR’s timelines to scale and available cash. Perhaps other factors.

For sure, by the first week of October 2008, the FCC Pilot Plant at the KBR facility was ready to start testing KiOR’s BCC Process and Technology. The pretreated biomass feed and the catalyst were the same ones that were used in the tests performed at ITQ in Valencia earlier that year. The same set-up that hd led to the discouraging results were reported to KiOR the previous spring by ITQ.

Funds run low

By Q4 2008, a staffer recalls that “available funds to operate KiOR were practically depleted, and a considerable amount of the available funds were consumed in R&D funding of the four Labs conducting projects for KiOR’s business mission and objectives, and this difficult situation became a serious concern and aggravation to certain KiOR Managers.”

By this time, work was underway at ITQ (Valencia, Spain); Twenty Universit (The Netherlands); CPERI (Greece); and KiOR’s own lab in Houston.

And, the BCC one-pot reactor and the previous catalyst were not discarded, either work proceeded exclusively on these systems “for over one more year,” according to one staffer, “while delaying KiOR for another year in starting to develop a new feasible Technology.”

An Internal War Rages

In October 2008, KiOR’s VP for Strategy, Andre Ditsch, “who also was looking to raise funds urgently needed for KiOR to operate,” as one observer put it, issued an internal challenge to the cost and results associated with the work with the outside labs. Cost was one issue, but usable information was another.

“Ditsch concluded that KiOR was not getting any useable and valuable information from these four KiOR sponsored R&D projects. Also it was holding back the KiOR R&D work from being able to develop new technology that could have been able to meet the KiOR business objective,” recalled Dennis Stamires.

In October 14th and October 18th emails to CEO Fred Cannon and CTO Paul O’Connor, Ditsch questioned the value of sponsoring such outside R&D work, and proposed to terminate all the three outside contracts. As an alternative, he proposed to use the funds to hire qualified technical personnel to do the work at KIOR’s own laboratory facilities.

The result? In the short-term, discord and friction between Ditsch and O’Connor, which staffers described as becoming more serious and disruptive to KiOR’s business in the following months.

But Ditsch was far from alone in questioning the value of the work. More than one year later, Robert Bartek, writing on Nov. 30, 2009, said “From my point of view, the value of the work done at Valencia is essentially useless“. With the departure of Jacques De Deken, Bartek had assumed the direct responsibility of Catalyst Development and Pilot Plant testing work, reporting to the CTO.

However, the work was not stopped or fundamentally re-scoped, as the timing of Bartek’s email outburst confirms. The reasons are unclear.

Disastrous results from the FCC pilot test

With De Deken gone, the Pilot Plant testing work at KBR was supervised by Peter Loezos and Robert Bartek, and testing started the first week of October. The results of the tests were reported on Nov. 20, 2008 by Peter Loezos in an email entitled ‘KBR Mass Balances’.

“Overall, the oil yields in the KBR results were much lower than those reported in the ITQ Report from the Valencia R&D group,” a staffer recalled, “where they used in their tests the same biomass and pretreated biomass, as well as the same catalyst.”

An analysis and report of the tests at KBR was issued on Nov. 20, 2008 by KiOR Science Director Dr. Conrad Zhang confirmed the low yields in a report entitled ‘Summary of analytical results from test results reported on November 3rd, 11th, and 14th. The yields have been described as “never above 30 gallons per bone dry ton of biomass” in terms of gallons per ton by those familiar with the results.

The story continues

We’ll explore what happened with KiOR and those “never above 30 gallons’ yields, in the next part of our story, tomorrow.

Further reading

The O’Connor resignation letter

The March 15 2012 O’Connor email memo

The March 22 2012 O’Connor technology assessment

The April 21 2012 O’Connor technology assessment

The April 30 2012 O’Connor memo

The Spring 2013 O’Connor note

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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