Friday, May 6, 2011

Eldorado taps produced water for algae biofuel

Paul Laur, president and CEO of Eldorado Biofuels LLC, sees bright green in the toxic waste water that plagues the oil and gas industry. Algae green, that is. Eldorado is launching a pilot project this month in Lea County, in the heart of southeast New Mexico’s oil patch, to clean the toxins out of produced water and use it to grow algae for biofuels. If successful, Eldorado’s green crude could attract a lot of greenbacks from investors, Laur said. That’s critical, because Laur expects to pump about $2 million into the project to eventually reach 20 acres of biofuel production. “It all hinges on proof of concept on a commercial scale,” Laur said. “We’ve only done it so far on a bench scale, but we’re pursuing grants and private funding to scale up to 10 acres, then 20. If we prove it, I don’t think financing will be a problem.”

The company  has invested about $500,000 to launch operations. It also received a three-year, $500,000 grant from the U.S. Department of Energy through the National Alliance for Advanced Biofuels and Bioproducts, a coalition of national laboratories, research universities and private companies that formed last year with $49 million in DOE backing.
Eldorado is one of 12 biofuel businesses working with the NAABB, said José Olivares, Los Alamos National Laboratory’s biofuels program manager and executive director for the biofuels alliance.
“Eldorado has developed technology to clean produced water to a fairly good extent,” Olivares said. “We’re now testing that water to cultivate algae.”
Using produced water to grow algae provides many benefits, Laur said. It resolves the need for massive amounts of water to grow algae on a commercial scale in New Mexico’s water-strapped, arid environment. It also provides a separate revenue stream for El Dorado from oil and gas operators, who Laur believes will pay to get rid of produced water rather than treat it themselves and pump it back underground.
Such extra revenue is critical to make commercial-scale algae biofuel operations economical. “We have ample sunshine and land to grow algae in New Mexico, but the missing component is water for thousands of acres of algae production,” Laur said. “Our niche is using produced water from the oil and gas industry.”
Gregg Fulfer of the Fulfer Oil and Cattle Co. in Jal said Eldorado could attract a lot of interest from operators looking to cut costs when disposing of produced water. Laur’s project will be located on Fulfer’s property, where about 100 oil wells generate some 1,000 barrels of contaminated water per day. “I end up with about 100 barrels of water for each barrel of oil I produce,” Fulfer said. “I usually just inject it back into the oil formation, but that’s very costly. It would be a big help if I can send it to an algae plant instead.” Depending on contamination levels, Fulfer said it costs between $1 and $3.50 for each barrel of produced water injected back underground. That’s a huge expense for Lea County operators, who dispose of about 400 million barrels of produced water every year, according to the DOE’s Natural Energy Technology Laboratory. “If Eldorado can reclaim that water and find a beneficial use for it, that would be a very valuable proposition,” Fulfer said.
Eldorado has partnered with Alfonz Viszolay of VM Technology Inc. in Santa Fe to clean produced water. Viszolay is an engineer and inventor who has worked with algae-based fuel and waste water treatment since the 1970s. “We’re employing his technology,” Laur said. “We have exclusive rights to develop and market it to treat water for algae-based biofuels.” Economically growing and converting algae to biofuel on a commercial scale will be challenging. To date, no technology startup has demonstrated an ability to produce algae-based biofuels at a cost competitive with oil, currently about $100 a barrel. That’s why extra revenue streams are critical for Eldorado. Along with charging to treat produced water, the company will sell algae byproducts, such as feed for cattle or fertilizer. But with oil prices climbing, Laur believes algae-based biofuels will become more economical. “I fully expect oil prices to reach $400 per barrel in our lifetime,” Laur said. “There’s a sense of complacency now, but even if oil goes to $200 per barrel, algae biofuel development will become a Manhattan Project on steroids.”
Eldorado will produce its first barrel of biofuel by July. The company has broken ground on its project, and Laur expects to employ 100 by year-end. New Mexico Junior College in Hobbs will train employees, said Vice President for Training and Outreach Robert Rhodes. “Eldorado has a lot of support because it’s building synergies with the oil and gas industry,” Rhodes said. “We have a lot of confidence in this project.”

Premium content from New Mexico Business Weekly

By Kevin Robinson-Avila, NMBW Senior Reporter

Date: Friday, May 6, 2011, 4:00am MDT

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