KiOR: the inside true story of a company gone wrong, Part 2

Bleak refinery upgrading report and a “see ya later” from Catchlight

In May 2010, samples that had been provided from the KiOR Pilot were the subject of a report from Catchlight Energy, the Chevron /Weyerhaeuser Joint Venture. Catchlight reported on two samples, one containing 11% oxygen content and one containing 17%. Their conclusion: they couldn’t effectively process either sample. O’Connor told The Digest that Exxon also reported trouble.

They did indicate that they believed that, with time, a process could be found that would tolerate the 11% oxygen content sample, though it would require alternative equipment that Catchlight was not in a position to finance. They further indicated that the 17% oxygen content bio-oil could not be processed by any existing refinery plant hydroprocessing equipment, and that new technology would have to be developed from the ground up, for that.

Either way, the idea of delivering a bio-oil to Catchlight was out. Catchlight indicated that, going forward, they would only be interested in handling a finished fuel blendstock that had been hydroprocessed by KiOR. Whether that meant using standard or modified equipment, or developing a new technology, would be up to KiOR and at KiOR’s expense.

KiOR does not disclose Catchlight Energy’s deep reservations in this slide deck overview given in 2013.

Selling it to Mississippi

“By mid-June 2010,” as the state of Mississippi recounts in its lawsuit, “Khosla Ventures had retained Dennis Cuneo to assist KiOR in obtaining a favorable state economic development package. Cuneo is a former Toyota executive who enjoyed valuable relationships with Governors of southern states. Cuneo quickly arranged meetings for KiOR and Khosla with the governors of Arkansas, Louisiana and Mississippi. The first executive level meeting between the State of Mississippi and KiOR occurred on July 1, 2010 at the office of Governor Haley Barbour. Three entities were present at the meeting: KiOR, Khosla Ventures and the State. KiOR was represented by Fred Cannon, Mike McCollum (KiOR’s Vice President of Supply) and Andre Ditsch. Khosla Ventures was represented by Vinod Khosla, Samir Kaul and David Mann. Also present for Khosla Ventures was Dennis Cuneo. The State was represented by Governor Barbour and two MDA officials, Adam Murray (MDA Project Manager) and Justyn Dixon.”

Among the documents providing support for the meeting’s agenda was “An Overview of KiOR in Mississippi” white paper, provided to the Mississippi Development Authority, which made the following claims:

1. “Existing refining infrastructure can easily upgrade the oil into transportation fuels, making KiOR’s oil a direct substitute for imported crude oil without changing the refining to automobiles supply chain and infrastructure.” 

2. “Our product is a high quality crude oil that can be converted into on-spec gasoline, diesel and jet fuel with standard equipment in operation in every US refinery.” 

3. “Our process is already competitive with oil at $50/barrel with existing subsidies, and will be competitive with $50/barrel oil without tax credits in 2-3 years with catalyst tuning and process development, allowing economical access to nearly all available feedstock.” 

The state of Mississippi alleges that the financial information provided to the state “did not account for the construction and operation of a hydrotreater and hydrogen plant at the Columbus facility.”

At the time, KiOR may have well held out hopes that a hydrogen plant could be built in partnership with a vendor, who would pay for construction and operation and charge a hydrogen delivery fee to the project. However, given the July 2010 date of the initial Mississippi meeting, there is no doubt on the Catchlight score. At best, KiOR may have believed that other refiners would be able to process its bio-oil.