Forbes is engaging in some hard-hitting investigating of various companies' finances.
Their latest article considers the alleged troubled finances of Earth Biofuels, a small Dallas-based outfit trying to build a national chain of filling stations dispensing biodiesel. The company took on country-western singer Willie Nelson as a director when it licensed his name for "BioWillie®", the brand under which the biodiesel, made mainly from U.S. soybeans, is marketed.
According to the article, Willie gets a royalty of $0.01 for every gallon sold. Meanwhile, the company (like all producers of biodiesel from agricultural products) benefits from a federal subsidy of $1.00 for every gallon sold.
Here's a flavor of the story:
If you care to find them, 18 pages into Earth's financials are insider transactions, including $16,000 a month in rent for a truck stop and convenience store in Mississippi owned by director Blackwell, a series of trades between Earth Biodiesel and Apollo and a $160,000 investment in Blue Wireless, a penny stock venture McLaughlin controls. McLaughlin insists all transactions have been fair to Earth.
The Forbes article claims also that the company's Chief Executive, Dennis G. McLaughlin III, has what it calls a "colorful background":
He presided over the $100 million bankruptcy of the company he formed in 1993, Aurora Natural Gas. Duke Energy Trading sued him for fraud, saying he used shell companies to double-bill Duke to the tune of $26 million. Duke ultimately settled and gave McLaughlin a release. McLaughlin blames the bankruptcy on one of his employees and on Duke itself, for inflating gas prices in late 2000; as for his not disclosing it in Earth's SEC filings, he says he has "never been employed by a company when it filed [for bankruptcy]." Right. According to Earth's most recent 10-K, he was Aurora's chief from 1993 to 2001, the year it filed for bankruptcy.
To be fair, I should mention that Earth Biofuels has subsequently issued a reply alleging numerous errors in the Forbes article.
So here's a prediction for the coming year: There will be many more such stories in 2007, as reporters start to pick up the scent of dodgy companies set up to cash in quickly on the biofuel bonanza.
Comments
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froggy Posted 11:28 pm
02 Jan 2007
i suppose that is capitalism at its finest.
froggy
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amazingdrx Posted 12:12 am
03 Jan 2007
Come on Willie, join the plugin serial hybrid, distributed V2G, solar collector algae/biodiesel gang. Farmers could make more money selling clean electricity and solar collector grown biodiesel than commodity fuel crops.
Commodity chemical corporate farming is the cause of the demise of the family farm. Renewable energy could revive it and organic farming could make family farming expand.
It is here in wisconsin already. 25% of dairy farms here now use rotational grazing, a short step away from full organic. Which more and more of these rotational grazing operations are going to for even better family farm income.
These farms are also CSA friendly. With plenty of organic fertilizer on hand.
http://amazngdrx.blogharbor.com/blog
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Sam Wells Posted 10:10 am
03 Jan 2007
Finally, I am sure that Willie Nelson didn't plan on his endorsement to become political football due to some hair-brained business deals way off his radar screen. What was he supposed to do, hire an auditor and an Inspector General to check for improprieties? Sometimes you folks amaze me. /Sammie
Onward through the fog
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Ron Steenblik Posted 4:58 pm
03 Jan 2007
My blog was not to challenge the merits of biodiesel as a fuel, but to draw attention to an interesting article on one of the more prominent biofuel retailers in the United States.
The point in the original Forbes article was about more than "hair-brained business deals way off his [Willie's] radar screen", but about a company that appears (according to Forbe's analysis) to be engaging in a number of insider transactions and has over-extended itself in connection with an ethanol plant:
Earth Biofuels missed a Dec. 4 deadline for coming up with $80 million in financing to restart a long-shuttered ethanol plant south of New Orleans, the company's largest investment to date. At the very least it stands to lose its $5 million deposit, to say nothing of an additional $22 million it has put into the project. With just $41,609 in cash on the books as of Sept. 30, that's a pretty big hit.
Perhaps that is just bad luck. One wonders, nevertheless, who Willie employed to perform his due diligence.
I am sure, as you say, that Willie Nelson didn't plan on his endorsement of the company's biodiesel to become political football. But let's not forget: the Man is also one of the company's directors. If the company succeeds, good for him. If it doesn't, he'll have to share in the responsibility.
Yes, biodiesel can be made from many sources. It is a fine use of yellow grease, tallow, and any other "waste" oil. It is indeed made from soybean and rapeseed oils, though if grown as dedicated fuel crops the costs are high. Soybeans are one of the lowest-yielding of all commercially grown oilseeds, producing only around 50 gallons of oil per acre. In the past, soybean oil has been a byproduct of the production of higher-value protein meal. Per-acre yields of oilseed rape are more than twice soy's, but the meal byproduct generally commands a lower price in the market.
As demand for the oil for biodiesel expands in the United States, the supply of byproduct soybean meal will increase, putting downward pressure on prices. Huge increases in the supply of distillers grains, a byproduct of corn-ethanol production, also threaten this market.
Some analysts predict, as an unintended consequence of generous subsidies to promote biodiesel production from virgin agricultural products ($1.00/gallon from the feds, plus other subsidies from the states), that the profitability of soybean-based biodiesel will actually decline.
The discussion in the United States on biodiesel has, unfortunately, focused almost entirely on soybeans -- naturally, since (like ethanol), its politics has been driven by a belief that it will be a salvation for farmers.
Looking further afield, however, the biodiesel industry if much more diverse. Biodiesel can and is being made from higher-yielding plants in developing countries. Some of that production involves cutting down rainforests, some (e.g., jatropha grown on marginal land) does not.
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Biodiversivist Posted 4:03 am
04 Jan 2007
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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Ron Steenblik Posted 4:09 am
04 Jan 2007
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amazingdrx Posted 5:19 am
04 Jan 2007
Biodiesel from algae grown in CO2 absorbing solar collectors is the way to go, it can be located on roofs and over parking lots.
And ditch the internal combustion engine (we'll never make enough fuel for these 14% efficient throwbacks)in favor of serial plugin hybrids (an elkectric motor, batteries, and backup generator)that use solid oxide fuel cells that run on that biodisel. These powerplants will get 10 times the mileage of ICEs. Waste biodisel is great too.
We need all the marginal crop land devoted to absorbing CO2. One acre of restored prairie absorbs 1.8 tons per acre per year. That way we can lower cO2 levels and reverse climate disaster.
We also need to convert all waste like manure runoff that is facilitating the release of methane from sediment in lakes, rivers, and wetlands to biogas and organic fertilizer. That would generate farm income from clean electric power and organic fertilizer that would make organic farming financially feasible. That organic soil also stores a lot of cO2.
Only 4000 square miles of restored prairie would absorb present US CO2 emissions. Combine that with 50,000 square miles of organic farms converted from chemical ag, and it might just be possible to reverse this disaster. Get the rest of the world in on it and we could pull the Earth out of the fire in a decade.
http://amazngdrx.blogharbor.com/blog
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Ron Steenblik Posted 7:32 am
04 Jan 2007
But absent subsidies, farmers would be (should be) free to sell their crops to whomever they want, no? And if, because of high oil prices, they would get a better deal from a biodiesel manufacturer than from a traditional crusher, who's to stop 'em?
Otherwise, yours are useful observations, Amazingdrx (how do you pronounce that name, by the way?), especially on the issue of carbon sequestration: worthy of an article in itself.
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amazingdrx Posted 2:40 pm
04 Jan 2007
Amazing Dr X, like it looks.
No I don't think farmers (corporate agri-biz)ought to have the right to sell crops that they grow in a way that destroys the soil and releases CO2 sequestered over millenia into the atmosphere in a few decades.
In fact I think real farmers would survive and thrive with a switch to organic farming and farms as wind, solar, and manure biogas energy suppliers. I think they would choose this voluntarily if they knew about it. University extension ag programs finally study and educate farmers about organic rotational grazing farming here in Wisconsin now. After 17 years at least of badgering (hehey, badger).
Most commodity chemical ag farmers can't even get their crop loans unless they use all the gmo seeds and chemicals recomended. Crop insurance is null and void without all those expensive soil destroying poisons.
I think farmers and all small businesses ought to be protected from this type of monopoly corporate serfdome.
This so-called "free" market argument is very familiar and extremely repugnant in the face of it's destruction of real innovation and real competitive capitalism. Watch "Who Killed The Electric Car".
Then tell me who you think is killing organic agriculture and renewable energy. Because I know it would beat what we have now on every possible level, including cost, given a fair chance.
http://amazngdrx.blogharbor.com/blog
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amazingdrx Posted 2:44 pm
04 Jan 2007
What would you say to your new (or old) congressman if you could get the first spot in line from whichever lobbyist is lined up to "contribute" on her/his first day.
Mine is new, a democrat I worked for in the local campaign.
http://amazngdrx.blogharbor.com/blog
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Ron Steenblik Posted 3:44 pm
04 Jan 2007
I was speaking of the right to sell a legal and phyosanitarily safe product once it is produced. I should think that corn and soybeans will always be legal to produce.
You are speaking of limits on the production side, specifically related to pollution and resource degradation.
Personally, I would hope that no farmers are selling crops that they grow in a way that destroys the soil and releases CO2 sequestered over millennia. But isn't the most efficient point of policy intervention at the pre-sales stage -- i.e., at the incentives that lead (or allow) the farmer to produce in that way?
Such policy interventions start with eliminating distorting subsidies and the kinds of narrow-minded policies that require specific chemical inputs for loans. They also involve, as you say, education and extension. Standards for certifying organically produced goods also play a roll, of course.
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amazingdrx Posted 7:42 pm
04 Jan 2007
There was 20 feet of soil on the prairies when settlers first plowed the sod. A wheat boom resulted, then a bust when soil was depleted in a few decades. That first wave started the CO2 release and soil destruction.
Then chemical fertilizer came along and quickly released the rest.
Hoping won't put it back. organic farming will. Year after year it will store cO2 and restore our human friendly climate. The myth that chemical agriculture is necessary to feed the world is based on industry propaganda. Mechanization of organic farming makes it just as productive and much more energy efficient.
http://amazngdrx.blogharbor.com/blog
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Ron Steenblik Posted 8:34 pm
04 Jan 2007
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amazingdrx Posted 3:00 am
06 Jan 2007
Wind, solar, and biogas to boost the farm economy. Then start to do the research to make organic fertilizer from digestors a substitute for chemical fertilizer. Extend the rotational grazing program to include organic farming.
Research modified farm equipment to inject liquid organic fertilizer in conjunction with farm machinery manufacturers and find organic methods to substitute for pesticides and herbicides that can be mechanized.
Convert tractors to run on plugin electric power and biogas instead of diesel.
I doubt that the federal government can/will do any of this. As with many reform movements, women's suffrage, health care, minimum wage the way to go is state by state. When finally the political momentum is obvious the feds may jump on board.
But they are mainly stuck on ethanol from corn and other chemical agri-bizz boondoggle and bribery schemes now. Unfortunately Democrats from farm states are falling for this in large numbers.
A massive wave of very large wind machines needs to cover the high wind areas of the northern great plains along with a lot of restored prairie converted from marginal cropland. Farmers going broke from drought out on the plains need to share in the prosperity from this energy revolution. Their property rights must be respected by cutting them in.
Get rid of corporate welfare for fuel farming, fossil, and nuclear power to pay down the deficit from these oil wars and give direct tax credits to farmers, consumers, and homeowners as incentive for investment in plugin vehicles and renewable energy.
There's an energy/farm policy.
http://amazngdrx.blogharbor.com/blog
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