Okay, here we are not on week seven office hours. So [LAUGH] I have sent a Google invite to Rob McBride, who's over at Sapphire, and in theory, he should be joining us, but I don't see him yet on my little screen. So I've got Travis out trying to figure this out, but maybe Rob will pop up at some point and then he can help answer questions too. Okay, thanks everybody for joining again. I hope you guys are doing well on the material. Nothing earth shaking in the news this week. Price of oil back up to 103 bucks a barrel and then back down a little bit. Seems to be staying right around something between 100 and 105 bucks a barrel. Kinda jumping back and forth around that. I guess we don't have any big event. There's obviously in Syria and Israel and Egypt there's plenty of places around the world that are causing trouble right now. But at least so far until some big event happens we'll have to see where that goes. So let's go through a couple of questions here's one from Douglas Sand it says, why aren't biofuels being promoted to capture and remove CO2 in the atmosphere so we can reduce CO2 levels? I would think turning massive amounts of plant material to charcoal, a stable material, could produce atmospheric CO2. So, Douglas, it absolutely could. It does. That's how all of the trapped CO2. So at one point in our history, maybe more than a billion years ago. We were close. Some people say 20% CO2. Some people think higher than that. It's hard to know for sure but it was way, way higher than it is today. And then all those little photosynthetic microbes started working away on that CO2 converting it into oxygen and they sequestered that all into charcoal into oil and to petroleum, into all sorts of things that are buried underground. As we burn the fossil fuel, we release that, CO2 goes into the atmosphere, if we recapture it by CO2, we absolutely capture that stuff. The reason people have not promoted that, people know this, and we said this would be great. People haven't promoted it because capturing CO2 and burying it is not economically viable. You have to capture that CO2 and then get some valuable product out of that captured CO2 So if you can turn it into fuel, fuel is valuable. You can sell it. You can turn it into building material. Some people think about capturing this in cement. It's got CO2 in it. That comes from limestone, limestone comes from living animals. It's captured CO2. So you have to do something valuable with that captured CO2 in order to drive the economics so that is the main reason that it is not discussed very much. It's simply, how do we get the economics of this to work? But would it capture CO2? Absolutely, and if you sequestered it, could you reduce CO2? Yes you could. Okay. Here's another one. This comes from Martin Kay. If we wanna reduce CO2 and average temperature in the climate, then burning any kind of biological energy is not gonna get it done. Why is this statement wrong? Well, that statement is not wrong. Right? But that statement only is half, sort of half right. It misses half the point. And that is that if you burn a fossil fuel, if you burn cellulosic ethanol or if you burn corn ethanol or if you burn algae biofuels, you release that CO2 into the atmosphere. And it's true that that CO2 released into the atmosphere is gonna impact climate change. Okay? The issue is that that CO2 was captured the day before by photosynthesis. So when you capture it the day before and then release it, the net gain in the atmosphere could be zero. It's not zero, but it could be zero. Okay, then the second half of this question says, nuclear has been the cleanest and most efficient energy source for the last 60 years. So, it's true that nuclear power does not put out any CO2. And that when we have nuclear power plants they potentially can be very good for reducing our CO2 output. The biggest problem with those has been the safety issue, exemplified, I think, recently, by Fukushima. And before that, by Chernobyl. But even just here in San Diego, just last year, by the shut down of San Onofre nuclear power plant. So nuclear has the potential to create energy without increasing greenhouse gas emissions. Absolutely true statement. And in that sense, very clean energy. Its biggest problem is that it does not have a good history of safety. Fukushima, granted it was a horrendous event that caused that, right, a magnitude nine earthquake and then a tsunami that flowed in. But it knocked out three of those reactors, one of which is still not in containment. One of the Fukushima cores melted out of containment and is someplace underground, and people don't know where. And it's still radioactive and it's still spewing out radioactive material. If that same thing had happened here in San Onofry, and that had gone into a complete meltdown, you would've had to move people out of all southern Orange County and northern San Diego County. I can't even imagine what the economic cost of that is. That is some of the most expensive real estate in the world. And the circle around Fukushima, in which they evacuated people, if you put that same circle around the San Onofre power plant, it would be many trillions of dollars. You would not in a lifetime of electricity generation, be able to pay for that. It's old technology. It's 50 year old technology that we use in power plants, and why we haven't updated that is a complex issue. It has to do with training people. It has to do with a lot of things, but frankly, the safety record in nuclear power plants is not good. When I was in Japan last November, one of the ministers got up to say, we were told when we built these plants that there would only be an accident 1 in 10,000 plants. And in fact, the number's 1 in 400 and so less greenhouse gas for sure. Potentially good clean energy, but so far bad track record and that makes it something that, I don't know. It's a tough thing to answer, all right? It's like all technologies, it's always a two edged sword. You get good things with it and you get some not so good things with it. There is no, we've said it many times. There is no silver bullet, right. There is no one solution that we're all just gonna find. Right? Everything we're going to use for energy has some impact, whether its fossil fuel, whether its nuclear, whether its bio fuels. Okay? Okay. Next question. Either I missed something, or you California dudes are smoking algae. [LAUGH] Right. All right, Richard. Using 5% of the US to grow 50% of our crude oil is not possible. This is larger than California, and two times the Great Lakes. What is the real number? Okay, well, I have not been smoking algae, or anything else. So let me tell you how these numbers work out. Here's the basic rule. Right now in algae ponds. At our current level of production, we produce about 2,500 gallons of crude oil per acre per year. The theoretical maximum number that we could produce if everything worked perfectly is a number something up around 12,000 gallons per acre per year. So the target number that we aimed for and that we think we can realistically achieve in the next five years or ten years is 5,000 gallons per acre per year. Okay, so Richard, take out your pencil because here's to where the numbers go. Today, we grow 97 million acres of corn this year I think. Just under 100 million acres of corn. And 40% of that crop is going to go to corn ethanol. So 40 million acres all right? So if we took that 40 million acres of corn that we are growing to produce 14 billion gallons of corn ethanol and instead planted that into algae then we would have 40 million times 5,000 is 200 billion. So we would produce on that same acreage, 200 billion gallons of crude oil. Now, who knows the number of how many gallons of oil we burn as fossil fuel? Two hundred billion. We consume about 300 billion gallons, of total crude oil every year and about 200 billion of that goes to fuel. Something like 150 billion in gasoline and 40 billion in diesel, something like that, all right? Those are the kinds of numbers, but more or less 200 billion. That means that if we took same amount of land that we are growing corn ethanol on and converted that to algae biofuels, we wouldn't be at 50% of our crude oil, we'd be at 66% of it. Now, what is 5% of the U.S. to grow 50%? I don't have the number in front of me right now to know how many acres there are in the United States. But my bet is it's something like that. That's probably 5% if I had to guess, right? And you can look it up and send me an email and tell me what that number really is. But that's the simple math, right? 5000 gallons per acre per year times 40 million acres corn ethanol 200 billion gallons, okay? That's the way I'd add it up. All right, let's pull up a couple, here's another algae question that you guys have voted up on the list. And it says right here, it says algae needs sun, warm temperature. Oh, this is another one from Richard. Okay, Richard's on a roll. Algae needs sun, warm temperatures, and water. Rare to find all three in one place. Have you ever been to Hawaii? They're all right there. Aqua culture farms use high flow of well water to reduce contamination and disease. True enough. Sunny hot area means high evaporation losses, not if it's high humidity. What is the best potential? I don't know what BPD and location for algae farms in the US. So, that's a good question, those are all legitimate, so absolutely true. Algae needs lots of sunlight it helps a lot if you have warm temperatures, and water. Not absolutely essential, algae grow in the arctic, no problem at all, they'll grow down at 0 degrees centigrade, but they grow slower. So for really high productivity, you need all three. So the very best places are places that the land is flat, so you don't have to do a lot of modification to it. Put your algae farm on there. The land is cheap, meaning that you're not gonna do this in Newport Beach, or here in San Diego, or in Miami. Land is too expensive there for that. So cheap, flat land with a good water source. But what could that water source be? That water source could be ocean water. No problem at all. It could be brackish water. It could be recycled municipal waste water any of those waters work really well and then you wanna have a place where evaporation rate is not too high and that generally means high humidity so a lot of people who originally thought oh we're going to grow these things in the desert right, we're gonna go out there to Arizona and New Mexico. And in fact, Sapphire's first plant was in New Mexico. They had a very good saline underground aquifer, plenty of water. They calculate they can grow there for 50 years. But nevertheless, if you're in a place that is hot and high sunlight and low humidity, therefore, high evaporation, the salt concentration in that water keeps increasing all the time, and that means you have to replace it. So you're better off if you're in a place that is warm water, lots of sunlight, and actually high humidity. Hawaii, Imperial Valley, coastal Texas, Florida, lot of places actually on the planet we can do this. So Pacific Northwest National Lab did a very nice study of this. They came up with I think 17,000 different places where at least 1,000 acres of algae could be grown in the United States. If you look at that map, and you can find it on their website kind of coats the coast in Texas and Louisiana and Florida, and then several places here in California. Imperial Valley, actually, a really great place here, and some of you will know there are several algae companies over there. Earthrise has been there 40 years producing spirulina. They do that in fresh water, agricultural fresh water, but they're quite economically viable and many other groups are going out there. Hawaii is a great place to grow it, by the way. There's a couple companies over there, Cyanotech and Solana are over there. General Atomics had a facility over there. I think it's called Global Algae Innovations now. So several groups over there in Hawaii, really good place to grow. Lots of sunlight, lots of warm temperature, humidity is pretty good so evaporation isn't too bad. The biggest issue over there, obviously, is cost of land. And it's an island, it's a big island. There's many islands over there. There's eight of them, but they're pretty big, pretty big footprint actually. But land kind of expensive, and then they tend to be hilly so I don't how large of a scale we can go there. Certainly on some of the high value products, for animal feed, for fish feed stuff like that. Really good place to go. But several companies over there and giving it a run. And as I said, Cyanotech has been there, oh, I don't know, going on 40 years now, maybe a little less than that, maybe 30 some odd years. Produced an astaxanthin, and Spirulina selling it for human consumption. It had been profitable for many, many years. So obviously that's one good place to grow. Okay, next question up. This comes Jim Freidle and he says, globally, the population in urban areas continues to grow, but many cities never envision a future with large co-located algae ponds next to waste water plants, and that is true. In those cities, can bio-reactor grow an algae from waste water still be economically feasible. So, I would have said, several years ago, no, simply because every bio-reactor that I ever saw that got proposed, even the ones people would say these are cheap. They were still really expensive compared to what sort of what could be considered economically viable for fuel. And some of the early analysis that got reported were people who were doing life cycle analyses and looking at biofuel production from algae. Almost all of them came to conclusion that ponds had to be at something less than $10,000 per acre. Right? That's what's called your cap X. You know what does it cost you to actually build the ponds and the facilities and get them up and going? That has to be less than $10,000 breaker. I just couldn't see any sort of bio-reactors that could fit that criteria. But over the last couple years I've seen these presentations of people who've made these thin film reactors and they're sort of half pond, half bio-reactor. I don't know what you'd call it. They're sort of these hybrid guys. And so I think those have actually some potential. Right, maybe those things could be cheap enough. I think the other things that's happened is people have sort of realized that fuel, there's lots of things that we can make from algae that are higher value than just the fuel we burn. So those might be lubricants or plastics or some other polymer. And those even today fetch two times, three times, sometimes if it's a really sorta high-end, the polymer that comes out of it. Those can be eight times more expensive than fuel. But that means eight times more profitable if you're the guy producing it. So yeah, I think there is some chance to put these things near cities. And then, I'm still continuously amazed that we're allowed to dump our waste water just back into the ocean, or sort of just to pump it underground without thinking about recycling those things. Especially in California, where this year the drought is really hitting us hard. So I think we really need to start thinking about how we recycle that water. I think a really good idea is that we go out to Imperial Valley and we take the waste water from Los Angeles, and rather than dump it out into the ocean there in El Segundo in their Hyperion plant, 800 million gallons of water per day, we turn around and ship that thing, it's pretty flat. You can go down to the 10 freeway and you don't have to go over any hills to get from Los Angeles, or very small hills, to get from Los Angeles into the Coachella Valley, as it's called there in the north. And then we could have enormous algae ponds that are producing something valuable. Maybe fuel, maybe some high end plastic, maybe even animal feed from that waste-water plant and then recycling the plant. The algae will pull the nitrogen and phosphate out of it, they'll get that stuff to be low salt. I think there's a potential that California should be thinking about this. And you can use that water either for agriculture, for all of the golf courses that are out there. I mean lots of golf courses use recycled water as it is now but pass that one more time through algae and I think there's enormous benefit. So I don't know we'll see about those things. [COUGH] Those are sort of the inventions for the future, and we'll see what happens and if those show up or not. All right, let's see what we got here. I already answered that question. I don't why, maybe I just didn't select it before. Okay. Here's one on Richard Hertz's lecture. Rob showed up. Hey Rob, can you hear me? >> Hey Steve. >> I can't here you. Do you have your, turn your microphone on. See the little thing in the corner that says mute? >> I can, can you hear me now, Steve? I'm just talking to Travis on the line just to make sure that everything's good. Travis, I think I'm on. I see Rob talking, but I don't hear him. >> Okay. >> Can you hear me now Steve? >> Just have to move things around. [LAUGH] Just to make sure. >> Can you hear me? >> That everybody on Google Plus know that Rob and I are not too big of techno nerds. >> We can't even master Google Hangout to get both of us talking. >> Can you hear me now? >> Rob we still can't hear you. Turn your microphone on. >> It's on. >> There must be something that says mute. Or maybe I'm off. >> Hello? Can you hear me now? >> I gotcha. >> Cool. >> Can you see the questions? >> Q and A. Let's go into Q and A. >> Q and A, and they'll pop up in the corner. Okay, yeah, so I can see them. Answer questions by selecting one from the list. Okay, cool. What's going on? >> There you go. So Rob, maybe if you wouldn't mind just spend a minute and kind of introduce yourself. I think people should know you from the video, but if you wouldn't mind just tell our audience who you are. >> Sure, so my name is Raul McBride and I work at Sapphire energy just down the road from where Steve is. We're a biofuels company trying to commercialize LG as sort of a production platform for production of biofuels. We've got production facilities out in New Mexico, and our primary R and D facilities here in San Diego. I'm a scientist by training. And I have a background in evolution in microbiology. >> Excellent. Okay Rob, I just selected a question, and this is definitely one for you. Can you see it? It just popped up there from Martin K? It says, is nutrient management a serious issue for algae production? And Rob is the guy to answer that. >> Absolutely. I can't see the question, but I can answer it because you just told it to me, if that's alright. So nutrient management. Nutrient management is critical cuz obviously, you're trying to produce something cost effectively at scale, and nutrients are a key component of the cost. Particularly when you're trying to think about making biomass to produce oil to tackle some fraction of the needs in the US. When you scale to that level, you start to impact the entire sort of nutrient supply industry in the US and compete with nutrients for agriculture, so on and so forth, so it's critical to be able to manage them well. One of the advantages of using algae to produce something is that it has the ability, if managed well, to have a much higher utilization efficiency than agricultural crops. And what I'm saying utilization efficiency, it refers to, if you put a kilogram of nitrogen onto a field, how much of that nitrogen actually ends up in the biomass of the corn or the product that you're trying to make. And with algae, we gotta have that number be somewhere close to 100%. It's never gonna be 100% entirely but you've got a much better chance of doing that Than you do with most agricultural endeavors. If you can manage that well, you've got a good chance of managing your cost. Then the critical second step to that is recycling nutrients once you've extracted oil for biofuels. And hat's critical to make the economics work, and where we would be working on [INAUDIBLE]. Did that answer, Steve? >> One of the other things, Rob, that we might be seeing is that obviously, if we're extracting the fuel component from the algae, then the nitrogen and phosphate are not going in. Those are not part of the fuel. If you're going to do something else with it, like animal feed, etc., then the nitrogen and phosphate should stay in. I think many people have had this yeah, we can sort of have our cake and eat it jet fuel and [INAUDIBLE]. That it is possible to do a completely different sort of method. Right now at Sapphire, you guys are focused mainly on fuel, and you recycle the nutrients but in other systems, that might not be the case. Is that true? >> Absolutely, as you point out with fuel, you want to recycle it and then if you're making a food product, you're not gonna want to do that necessarily, so that nutrient is then leaving the system. But the advantage of it leaving the system with something like food is that you can support the cost of that nutrient leaving the system with a higher value of the product that you're producing. It works out in sort of an economic context. With fuel though, if you're not recycling it and it's just going out into waste, then you're adding valuable costs to a barrel of oil that you can't really do because it's a commodity that is traded at high volumes and at low margins. >> Excellent, excellent. Roger, our next question popped up here. This is also one you can answer but I'll block it, if you don't want to. It says that, I'm sorry, [INAUDIBLE] control temperature in enclosed algae systems and methods have an adverse impact on the energy needed for algae production. Rob, while you're answering, why don't you talk about what are the methods for controlling temperatures in open systems. >> Great question. That is one of the challenges of growing algae in closed photobioreactors. You do have to manage the temperature in some environments, and obviously that's a costly endeavor and Steve [INAUDIBLE], I don't know the extent of all of the possible ways to manage temperature. I do know one of the low cost strategies is using something akin to I think what they call in the South, a swamp cooler. You can use the sort of evaporation of water to actually take heat out of the system and you can either do that using a wet wall or by spraying directly onto the photobioreactor. Those are sort of commonly used, relatively low cost strategies. Obviously, you can use various types of air conditioning approach where you're either cycling water through it and using a water cooler to keep the temperature controlled, or you can just control the environment. Steve, I don't know if there are any others that you know about. >> Yeah, the only thing that I would mention, I think with this question John is asking is can you actually [INAUDIBLE] systems by anything other than an evaporator. And the general answer to that is no, I don't think anybody believes you could have some, cooling is more expensive. Cooling requires more energy. If you've gotta to cool a system, that's an expensive proposition by evaporation. >> Absolutely. [CROSSTALK] >> Closed systems have evaporation [INAUDIBLE] but closed systems use much less water than an open pond because there's no evaporation, so that's true. They have to have a way to cool, sso you either use very expensive air conditioning or you [INAUDIBLE] on top of them [INAUDIBLE] for a [INAUDIBLE]. If you do that then [INAUDIBLE] production goes up. It's one of the, I would say, little [INAUDIBLE]. All technology is a double edged sword. If you have improved water usage, cut down evaporation, then you're probably going to have a problem with temperature. >> Sounds good. >> Let's see, we're gonna get another question. Get a good one here. Here's one for you, Rob. What it says is carbon capture and storage helps supply CO2 and if so wouldn't this require these algae photobioreactors to be located near natural gas plants to make the process most effective. Rob, maybe indirectly by telling people where you get your CO2 right now, how do you imagine you're going to get your CO2 for commercial use in the future? >> Great question. The simple answer to that is yes, you need co-location makes a lot of sense economically. Carbon is a big cost driver, and so if you can minimize those costs, you obviously go a long way towards reducing the cost of a barrel of oil. One of the ways to minimize those costs is to not have to factor in transportation. If you have to transport the CO2, obviously, that makes it pretty expensive. Co-location is an ideal situation. However, not all facilities that produce carbon dioxide are located in areas that are ideal for the cultivation of algae. There are alternative ways to actually get that CO2 and there's a number of CO2 pipelines that run across the countryside. In my opinion, a CO2 pipeline is actually a more attractive solution for the supply of CO2 than a facility is. The primary reason for that is your CO2 consumption in an algae farm is not uniform and if you're running a power plant, you want to have off take in a uniform way. What do you do with all that CO2 at night? You just put it into the atmosphere. But if it's in a pipeline, then you can take it when you need it and not take it when you don't need it. Ideally, that's what would happen is you'd be either on a property where you've got some storage or located next to a facility. Currently, we get our CO2 from the largest CO2 provider in the world, Linde, which is a German company that has a number of facilities around the world. I think that they are generating that CO2 from some location in Colorado and then we are shipping it down to our facilities in New Mexico. >> Excellent. Rob, they tell that when I'm talking, you have to mute the phone. >> Okay. [CROSSTALK] >> That Google Plus jumps back and forth and tries to hear you and me at the same time. Okay, great. All right great. I'm gonna pick out another question here and it says, let's see. Here's a good one. And Rob, I think you can talk about this one too. It says, has any research been done looking into using a secondary organism that would eat the cell wall of the algae but leave the lipids behind? Also, curious as to why ethanol production is in the big picture when it doesn't seem to add much value to the fuel. That's yours. That's yours. Rob. Gotta take your mute button off. >> Okay, thank you Steve. Thanks for telling me that. I was talking for a little while I think. Okay, so as far as I'm aware, I don't know of any research going on using another organism to remove the cell wall prior to extracting lipids. I think that that sounds like a great idea. There are some strains of algae that are considered for the production of biofuel that don't have that cell wall so obviously they may be attractive to some degree. Although there may be costs for no having that cell wall during the production of that biomass, that may sort of offset the value of not having that cell wall. And, then, what was the second part of the question, Steve, sorry? >> So the second part of the question says, why ethanol production is in the big picture when it doesn't seem to add much value to the fuel? And I'll answer that one if you don't like it. >> Yeah, you can take that one. >> Okay, so ethanol is in the big picture because you can blend it with gasoline and when blended at 5% it absolutely enhances the value of gasoline. It's called an oxygenate. So you put a little bit of oxygen in the gasoline and it burns much better. So that's kind of part one. And we used to have these other additives, which improved the octane and made fuels burn better. But they were kinda toxic, so we got rid of them. Although there's some debate on how toxic they were. But at any rate, ethanol does do that. So it's good at 5%. The second part of that equation is that American farmers grow a lot of corn and they felt that if they could sell a fair amount of their corn as fuel, that that would be an economic benefit to them and Congress agreed with that. And so Congress, when they pass something called Renewable Fuel Standards, one, put on the books that we were gonna burn lots of ethanol. There now is a big debate because people have started to do better life cycle analyses. And have recognized that corn ethanol might not be so good for the environment. There's indirect land uses, there's the fact that you gotta put the fertilizer and the tractor and all the rest of the stuff, it actually causes greenhouse gas when you're growing it. So it's one of those things historically, very recent history, over the last seven years it became a big industry. It definitely helps the American farmer, right, by taking 40% of your corn crop and turning into ethanol that you blend with fuel. That's a big bump in the economics of the Midwest. So very powerful lobby. Congress was trying to do a good thing. Maybe some unintended consequences of that, but that sort of put us where we are today. Okay so that's all we're gonna say about that. Let me pick another question here and see where we're gonna go. Here's a couple on thermochemical stuff. But, Rob, that's not going to help you. Let's see, okay, here's one right here. And the questions says, if we can make use of biomass algae in this case to obtain liquid fuels and gases, would there be a difference between the energy you get from one meter of liquid fuel versus one meter of gas? Rob, you can take a stab at that, if you want. If not, I think I know what that question is asking and I can answer it. >> I'm gonna pass it to you, Steve. >> Okay, so there's a couple of different way to look at this one. So one of them, sort of a fundamental question that you're asking is, once I have algae biomass, what's the most energy I can get out of it? So in Sapphire's process, the way Rob does it, they're going to extract the lipid from that, and that's going to give them a crude oil, and they're gonna ship that down to a refinery, and that refinery is going to fraction it into gasoline and diesel, etc. That's the highest value, but that might not be the most energy, so some people have said, couldn't we take whole algae biomass, right? And rather than fractionate it into the crude oil component and refine that into oil and then try to recycle the others, couldn't we take that and put it into, for example, an anaerobic digester and just turn it into methane? Or could we actually just burn that, so that the actual caloric content, the energy content of the algae, the most you can get out of it's true, it would be by burning it. All right? That would release the most energy out of that. But that's actually not the energy we need. If you guys look right now at the price of a barrel of crude oil, that's about $106 a barrel. But if you look at the same number of therms, or the same amount of energy from natural gas, from methane, you were to go out and buy that today, what you would find out is that you're only paying about one-sixth the cost. So in other words natural gas is six times cheaper than crude oil, on a per calorie or per energy basis. The reason for that is because, number one, because of fracking. We've got a glut of natural gas but the [LAUGH] main reason, that's classic, Rob, but the main reason is that liquid fuels are super valuable because you can put them into your gas tank. And they can sit there for a month, and then you can use them. Whereas methane, you have to store it, and you have to do a bunch of other stuff with it. So the highest dollar value is always for liquid fuels. That's why Sapphire goes after them. The highest caloric content could be in methane, but it's low economic value. Rob Do you want to say anything? >> [APPLAUSE] >> [LAUGH] >> That's it. >> [LAUGH] That's all you- >> That was great. >> Thank you so much. Where do you get these sound effects? All right, here's a good one. This is an opinion, and Rob, I'm going to get you to weigh in on this one too, okay? Because I know you guys are thinking about this as well, and this comes from Martin K. He says, if food is the next major issue as you hinted in your lecture six office conference, Martin I did not mean to hint about that at all. I meant to directly say, food is what is impacting the world right now. It is directly tied to the cost of energy. All right? But his question says, why are we still focused on food versus fuel in the energy scenario? So there are a couple of really important reasons for this, right, and they are all economics. The number impact, I believe in the world today. It is not cost of the gallon of gasoline, it is the cost of wheat. But the cost of wheat is directly tied, it's one to one. When the price of energy goes up, the price of food goes up. Rob, I want you to spend just a minute and talk about some of the options that I know Sapphire is looking at right now. Instead of taking their algae and turning it into fuel, of taking that algae and turning it into feed, and how the economics of that work. Hope I'm not putting you on the spot. >> No, not at all. It's a great question and I think it's worth for a second considering that does not the dichotomy between food of fuel when you're thinking about LG. Primarily, LG is really attractive, because it offers a very sort of useful way to predict produce biomass and if you use a certain platform you could do it cheaply. Once you have that cheap biomass you've got a number of different options with regards to what you're going to do with that biomass. You can get the protein out of it. You can use it for feed, you can use it for food. You can extract the lipids and you can use it for oil. And essentially, Sapphire is developing and has been developing over the last seven or eight years. Everything that we've been doing is focused on producing a platform that outputs biomass that's cheap. Right? That's what we're working on. And obviously the cheapest biomass would be useful for fuel, but we're not exactly producing a ton of biomass for what we need to economically make a barrel of oil. But we're continuously decreasing that cost. And on the way down, right, as you're making that kind of biomass cheaper and cheaper and cheaper, there are other markets that become really attractive in terms of, you know, realizing value for ton of biomass. And those markets, as you discussed, are protein for human consumption, protein for feed consumption, so on and so forth. Protein and food can support a higher production cost for a ton of biomass. So if we're at a number, 2000 bucks a ton, I'm not saying that that's a real number, and we need to be at 200 bucks a ton for fuel, well maybe you can, along the way while you're continuing to reduce the cost, maybe you can start to generate revenue which can then be put back into our needs to continue to reduce that cost and make food, and sell it, so I think that it's a platform. That platform can be used depending on how efficient it is to produce biomass for any one of a number of different applications. And I do agree with you, Steve, that food is critical. We've got seven verging on seven billion people and limited resources. And I think algae's a great, it's well poised. The platform is well poised to tackle the food issue and the fuel issue. But I think you can look past food and fuel, right, and you can look at water as a critical resource. Water remediation critical, right? There's a lot of other challenges that that platform if it's a robust and an efficient platform can be directed to addressing. So I think algae's got tons of potential, not just in food or fuel. But in other areas, too. >> Thanks. And I just wanted to point out one other thing that sort of is complementary to what Rob said. And that is that every company. If they're gonna be successful always has to think about the economics alright and by that what I mean is if sapphire's gonna produce algae bio mass so Rob manages to produce over the next couple of years a thousand tons of algae bio-mass. If someone is willing to buy that algae bio-mass as animal feed and pay him $1,200.00 a ton instead of converting it to fuel at $400-500 a ton, Rob is going to make the economic decision to sell it at $1,200.00 a ton every time. Right? Because that's what companies have to do. You have to maximize your profit. That's how you stay in business. Now, at some point, Rob is going to produce so much algae biomass that all the chicken farmers and pig farmers, their chickens and pigs are going to be full. They're going to tell him, hey our pigs are so full we're not willing to pay $1200 a ton for algae anymore, we're gonna pay less. And then when they start to pay less, the fuel guys will be hey, we'll buy your algae biomass. So that economic decision is always made all of the time, and you're always selling into your highest value market. If you don't do that, you're a crappy businessman, and crappy businessmen go out of business pretty quick. And Rob is not a crappy businessman so I know that's what he's gonna do. Okay, next question. And Rob this is definitely one for you. It's a two part question so I'll ask in different parts. Is crop protection for algae well defined? So let's start with that one right there, you answer that. Is crop protection for LG well defined? >> I'm not entirely sure what that means Steve, so let me give it a shot and then let me know if I'm on the right track. So we know that it's an issue, And it's a well defined challenge, right, that has been experienced by anybody who's tried to grow algae outdoors. The particular component that contributes to that challenge I don't think is well defined. So we know that crop protection is an issue, but depending on where you are and how long you've been outside for and what's happening, whether it's rained or not, the constituents of that challenge I think are variable. And are in the process of being more well defined or sort of identified and articulated but I think that there are a lot of unknowns in that area. Is that getting at the question? >> Yeah so what I would say what's well defined is that crop protection is going to be essential in order to get algae biofuels to work. If Rod doesn't come up with an integrated strategy that allows his algae to grow robustly all the time then he's gonna lose yield. So crop protection is well defined in the sense that, you better be working on that thing front and center. But then, it's a crop. Algae is just like corn and wheat and soybean and everything else. So, are there strategies that they're deploying to protect their crop? Yes. Has rock managed to grow algae down in New Mexico for I think more than 12 months, 14 months or something like that. Kept one time going so they've got a really good track record now of being able to keep their pawns alive for a long time. But that took a lot of work and that took an integrated strategy where they were using some chemicals some biological control some strain selection you name it. So it's well defined that its a very important thing they do and like any agriculture new problems are showing up all the time the second part of discretion it says, with the winds of New Mexico, and the outta control migration on the southern boarder, I don't know about that one, are there pathogens from Central America that could be harmful. Well, I don't think they're killing them with the migration from Central America, but certainly the winds blowing new pathogens all the time, and I'll let Rob answer, put it back one. >> I just want to sort of, you know, Steve's using rub as a designator for sapphire, right? I'm part of team here and there's a ton of other people doing a lot of hard work on all these different challenges, I just want to make sure that's okay, I'm not in any way responsible for the success so far, but I do contribute to it, so that being said, great point. I think the winds are an important transmitter of a lot of the pathogens, or a lot of the. Pests that end up in ponds. Those are microscopic organisms. Fungi, bacteria, other algae. And then another way for microorganisms or pests to be transmitted long distances is with waterfowl and other birds. And where we're located, we're on a pretty central migratory pathway. And so there's lots of different pathways that pests can get into our systems and we've experienced that. Different years you knew pests keep popping up, and so it's quite obvious that there's a lot of stasisity involved in how those pests get into the system, but the definitely do and wind and weather patterns, and migratory patterns are all contributors to that process. >> All right, Greg. Let me pick another question out of here, and it says. What's a good one for us to go? Aha, here and I lost it. Sometimes my Google jumps around a little bit when you guys vote on them. Dang it. Got it. Okay, and this one comes from Ed and he says, what does the harvesting operation look like in getting the algae out of the ponds? And I think there's a good picture of that on the videos but I'm gonna let Rob explain a little bit in the second half of the question. What does the harvesting operation look like, and is there a machine that picks it out of the pod, or is the water pumped through a separator of some sorts? So Rob, give that one a fire would you? >> Sure. So I think different operators have different systems, so that's a really great question. And if you go online and you look at, obviously algae, you'll see that lots of different systems out there. Some of them are really cool looking, right? There's one where you're driving a boat across the top of a lake and it's got this paddle wheel on the front that's scooping up algae onto a big net, so there's, there's lots of ingenious ways to do it. But again, as Steve mentioned, right? Economics is driving what we're doing. And the key factor for us is concentrating algae or getting algae out of water is an expensive process. You've gotta move water, but it's critical that you do it and you do it effectively with low-cost technology. And so what we do, is we've taken an off-the-shelf technology that was developed in waste water treatment, where they're dealing with huge amounts of water on a regular basis, and we've adapted it to help us to concentrate algae out of a pond, right. So algae in an open pond system, most algaes in an open pond system, can get up to densities in the one gram One to two grams sort of per liter, so they're pretty dilute when you compare those to some bioreactors or other bioprocessing applications. And so what we do then, is we inject a polymer, we pump the algae out of the ponds, inject a polymer into that side stream. The polymer will interact with the algae and cause it to aggregate and clump together, and those clumps will then be able to be floated to the surface using dissolved air. And once they're on the surface, we can scoop them off using a slow rate. So that's the process that we use. And that water then gets returned to the pond so we recycle that water and we don't lose a lot of nutrients and things like that. But it's a really effective low cost way for us to concentrate that algae to a small enough volume where it then makes sense for us to use a more energetically or a more expensive technology like centrifugation to concentrate it even further. If you would try to centrifuge upon the amount of water and the amount of energy that you would need to use would mean that you would have to sell that biomass really expensively to justify that type of an energy input. So we use a dissolve the air flotation technology, it's already low cost technology. There are a lot of other options out there and from our estimations most of those are pretty expensive. >> All right, good. So I think we have time for one last question. I'm looking through to see if there's one that's a little more controversial because I know Rob likes controversy here. But not seeing anything that's. Oh, let's see. Here's a good one. Here's a good one because it can give us a little chance to say something. It says, does cost in the future become a factor in the production of alternative fuels given the fact that conventional oil production will not keep up with production? >> Does cost in the future become a factor given the fact that we can't carry on producing energy at the rate we're producing today? Is that the question? >> Yes. >> Okay great. >> I think by that what he means is the cost of fossil fuel is going to go up because fossil fuel we can't keep up with demand? >> Hopefully, I mean that's what we're banking on. If you look at the energy situation right now, right, it's a little bit different than we predicted it to be maybe five or tens ago, particularly in the US. I think the US is now one of the largest producers of you know gas and well sort of energy in the world, right. And we weren't in the situation 5, 10, 15 years ago we were sort of a net importer, and now we are a net exporter. And that's primarily attributed to our innovations in fracking technology that have allowed us to get a lot more energy out of these wells and these strata. And the result of that is that energy hasn't gone up necessarily as much as we would have liked it to. Right now it's projected that we'll have some pretty solid supplies up until 2030 or so. But, inevitably, it's a closed system we're gonna improve technology we're gonna improve our ability to find new oil but as Steve mentioned as supply starts to decrease and as it becomes as we start to look in more and more extreme environments and we use technology that's more expensive to get oil out of these systems. It's inevitable that that cost will continue to increase. And we're relentlessly driving the price of our production down so that we can compete equitably with oil at the current value and if we can do that then the further cost drives up. It just gives us more of a margin moving forward. But we hope to be competitive at current prices and then if energy prices continue to increase after that it'll just make us more attractive as an investment opportunity because our margins will just continue to increase as those prices increase. >> Great. So I'm gonna by throwing in my last little two cents on this. So what Rob said is we're a net exporter. That's only true of gasoline. We're still a big net importer of crude oil. So fracking has increased our production about 3 million barrels per day. We're up to about 8.5 million barrels per day. We still consume about 19.5 million barrels per day. So that's 11 million barrels gotta come from something else. A million barrels a day comes from corn ethanol, some from other sources. The price is at $103 a barrel today. Fracking has definitely kept that price from going crazy meaning $150 or $170 a barrel. But it's also sort of established that it's never gonna be cheaper than $100 a barrel. Because it'd probably cost you $90 a barrel to get oil out of the ground using tracking technologies. What Rob said was in the future, that's not going to get cheaper. We're going deeper. We're going more extreme. That price is going to continually go up. Whereas in a biological system, the way Rob and Sapphire does it, you can make improvements to the system that drive the price down. That's what we've done in agriculture. Corn and soybeans are much cheaper today than they were 50 years ago. They're tied to energy so they've gone up as energy has gone up but we've made enormous increases in yield. Corn has gone up sevenfold increase in yield over the last 80 years and Rob and his group has done the exact same thing in algae. They're going to increase those yield enormously as we go forward. So that's it. We're outta time for today. Thank you very much. [LAUGH] Sorry for our little glitches. It took us a while for us to figure out how to push the mute button. I hope the feedback loops weren't too bad and you could actually here what we said. Rob, thanks very much for joining us today. Best of luck over there at Sapphire, and I'll see you next week at the SAB. Turn your mute button off. >> Great. Thanks, Steve, I appreciate your time. >> Okay. >> Take care. >> Bye now.
