R-Squared Energy Blog

Pure Energy

Son of Xethanol Goes Bankrupt

I have written several essays on Xethanol over the past few years. If you recall, they were a poster child for the theme of “overpromise, boost your stock price, and get rich quick” on biofuels.

For me, this story dates back to 2006, when an investigative journalist working for Dallas Mavericks’ owner Mark Cuban e-mailed me and asked about the company’s claims. They had announced that thy would “be the first to commercialize cellulosic ethanol” (if I had a nickel for every time I have heard that), and they issued press releases at every opportunity. It worked for a while – at one point their market cap was something like half a billion dollars – despite the fact that there was very little of real value within the company.

Anyway, the investigative journalist published his story (which seems to be offline at the moment), Mark Cuban shorted the stock just before the story was released, and I wrote up something on the company, which I considered to be essentially a scam:

Xethanol Story

Anyway, if you looked into their financials, they were spending money on everything but R&D, while claiming they would be the first to commercialize cellulosic ethanol – which would require a lot of R&D. I continued to follow the story, and predicted in February 2007 that they would eventually go bankrupt:

Xethanol Can’t Deliver on its Promises

Well, about this time last year they went bankrupt – more or less:

Xethanol Now Defunct

I say more or less, because what they did was stop operations as Xethanol, changed their direction, and relaunched as Global Energy Holdings Group Inc. At that point I said I wouldn’t write about Xethanol any more, but there is a final chapter to this saga:

Global Energy Holdings Group Files Chapter 11

Global Energy, formerly known as Xethanol Corp., warned in a recent securities filing that it needed substantial additional capital, but that the credit crunch has made it difficult to sell assets or obtain financing.

Global has had no operating revenue this year and said its sole source of revenue last year was an Iowa ethanol plant that ceased production because of high corn and natural gas prices. The company sold the Iowa plant last week and is also looking for a buyer or partner for a landfill gas project in Georgia.

I do want to make it clear, though, that when Global Energy Holdings Group Inc. was created from the ashes of Xethanol, they did so under new management. Therefore, I don’t attribute the same shenanigans to them as I did Xethanol. As far as I know they were making a legitimate attempt to make a go of it, whereas it appeared to me that Xethanol was just trying to make a fast buck off of very gullible investors. But they were handicapped by previous Xethanol decisions, and the current credit crisis was enough to push them over the edge.

I think that officially closes the book on the Xethanol saga – unless a grandson of Xethanol is born. But with the baggage that comes along with it, I wouldn’t bother reorganizing. If you still want to do business, get a fresh start.

November 27, 2009 Posted by | cellulose, cellulosic ethanol, fraud, Global Energy Holdings Group, scams, Xethanol | 59 Comments

Exposing a Two-Bit Scammer

My normal readers can ignore this, as it has nothing to do with energy or the environment.

This post is about a small measure of justice against a small-time scammer who tried to rip me off – and who has ripped others off. As I will document here, the attempted fraud happens on a regular basis. By writing this, people who are trying to figure out if he is running a scam should run across this in their Google search results – and realize that there is a history here they need to be aware of. This all started on 10-26-09, but I am back-dating this post so it doesn’t show up on the first page (but still high enough that the Google spiders will find it).

Here is the story. I like to play computer games with my kids. One of the games we play is called Diablo II, and to play together online we need two licensed copies of the game on two computers. Since I already have the software, all I needed was another key. (Actually two keys, as there is also an expansion).

People do sell game keys, and so I did a Google search for Diablo II Game Keys. Up popped a Google ad for this site: http://www.diablo-keys.com/. Here is a snapshot of part of the ad:

Note the language of the ad. “The keys are fresh from the box – unmuted, unbanned and only in use by you.” The bottom portion of the ad reads “If you have any problem with any of the keys, we will replace them free of charge, forever. All orders are shipped INSTANYLY [sic] upon purchase.”

There were other comparable ads, but this was the best price, so I bought two keys. I almost bought multiple sets – and would have later on – except for what happened after I bought the keys. Right after I got them, I tried them out and found out that they had already been registered. In other words, they were not “fresh from the box”, and were in fact worthless since I could not use them to play the game with my son. I gave the merchant the benefit of the doubt, and simply reported that the keys didn’t work:

For both of the keys below, I received this message when I tried to authenticate and add them to my Battlenet Account:

The authentication key you entered has already been claimed.

Each authentication key can only be redeemed once. Please refer to your games section of the home page to review the keys attached to this Battle.net account. If you’re sure you have not previously claimed this key, please double-check the spelling and enter it now.

The response I got was pretty lame, and immediately aroused my suspicions:

We are glad to hear from you. We fully investigate and reply to each e-mail submitted to us. Whatever your concern is, expect the best customer support ever!

Your request will be answered within 24 hours. We will be glad to fix any problem you, valued customer, could get. To ensure the best customer service, please do not submit multiple e-mails unless you have new information to submit, or if we haven’t replied for 24 hours (this usually means our response has been blocked by your junk filter).

As again, thank you for your great customership and for your trust in Diablo-Keys, top Diablo 2 reseller 🙂 !

At that point, I started wondering whether this person was trying to scam me. So I did some Google searches on Diablo Keys scam and some other related keywords. I found that I wasn’t the first to have a problem with this guy. Here is someone documenting that his keys didn’t work. And here is the amazing response from “Diablo-Keys, top Diablo 2 reseller:

So the response from support@diablo-keys.com, the same address responding to me, was to verbally insult the customer who complained about getting ripped off. I also noted that he had used PayPal, but when I bought my keys PayPal wasn’t the payment option. He was using a service called AlertPay.com. In hindsight I think what that probably means is that PayPal dropped him after people complained about being ripped off. I also ran across multiple other accounts of people being ripped off by this clown.

So I knew that I was going to have trouble, so in response to the delaying tactic I got when I reported my non-working keys, I wrote:

Guys, I have a blog with a whole lot of viewers. Please don’t try to get funny with these keys. After my keys didn’t work, I looked into it, and I see that others have reported the same problem:



So I either need to get my money back, or two keys that work. Failure to do either one will result in me publicizing this and reporting fraudulent advertising to Google Ads.

That’s when it took a turn toward the comical. Based on the response, I knew that this scammer was simply trying to wear me down and hope I just wrote it off like a lot of other people have done:

We understand this problem might be frustrating.We are proud to offer one of the best customer service on the market, at no additional cost. Your satisfaction is our priority. We will do everything we can to fully satisfy you.

Per our 100% working guarantee, all products are guaranteed to be 100% working. We would be more than happy to give you all the required technical support at no charge. Our experts are ready to assist you. If you require any instructions, we can send full guide, written in simple words.

Once more I asked for either a refund or keys that worked – or I would take action:

I don’t need technical support, I just need keys that haven’t already been authenticated. The ones you sent me have already been claimed. So please send another pair or refund the money. Otherwise I will just contact the credit card company, dispute the charge, contact Google Ads, and then write a story about this on my blog (and then it will be one of the first things that pops up when someone Googles “Diablo keys.”)

Note that I have made multiple requests for replacement keys, and all I was getting was stalling tactics. So I nearly fell out of my chair laughing when I got the following typo-riddled response. This was supposedly from a Joseph Karlson (joseph.karlson@karlsonandkarlson.com) who claims to have a law firm at www.KarlsonandKarlson.com (located in Toronto).

from Joseph Karlson
to Robert Rapier
date Tue, Oct 27, 2009 at 6:20 PM
subject CEASE AND DESIST- Diablo-Keys.com


Dear sir:

My name is Joseph Karlson and I represent Diablo-Keys.com

This notice is to inform you my client, Diablo-Keys.com, intends to press charges against your person for harassment, defamation, verbal abuse and fraud.

On October 28th, 2009, despite various answers that your cd-keys would be replaced, you have chosen to keep harassing, threatening and insulting my client’s customer support agent. As you are surely aware, such a behavior is not only unethical, but illegal.

For this reason, I now seek reparation on behalf of my customer. We are legally required to inform you that we plan to press charges on October 30th, 2009, unless you complete the following points:

* A complete apology letter for your rude behavior and abuse towards my client’s employees.
* A statement of retraction of everything submitted, posted or writen against my customer.
* A $5,000 compensation for the time and efforts deployed in this case.

If you fail to fulfill the following points by October 30th, 2009, charges will be pressed against you directly in state courts. You will then have to defend yourself directly in court.

Diablo-Keys.com intends to fully pursue you for any damage, interest, claim and compensation caused by this situation. You have fourty-eight (48) hours to complete the above points. By law, you are now considered to have been served the required preliminary notice.

For any further information do not hesitate to communicate with me.

Sincerly yours,
Joseph Karlson

So, not satisfied with simply ripping people off, now he is trying scare tactics that might work on a 12-year-old kid. But the typo-ridden rant above (just like the typo-filled website of this “attorney”) simply made me laugh. How funny is it to claim that there were “various answers that your cd-keys would be replaced” when a simple replacement set could have been sent instead of empty promises to replace the keys?

So after I stopped laughing, I responded to his lame extortion attempt. I also decided that instead of making a “statement of retraction of everything submitted”, I would do the opposite and publish all correspondence:

You are either the stupidest lawyer on the planet, or a fraud like your client to think you can “serve” someone over the Internet and across national borders. Or your client isn’t really your client and is falsifying this response (copying the real Karlson and Karlson in case that is the case). No matter, you picked the wrong person to defraud, and the end game is all the same.

Let me tell you what is going to happen. Your client is committing Internet fraud. He is fraudulently advertising keys to a game. He is guaranteeing that they work, and money back if not satisfied. He is selling keys that have already been sold and used, and therefore do not work.

So here is the deal. I tried to buy these keys for my son’s birthday. I received a lame response from your client informing me that my satisfaction is his highest priority. I informed him that I merely wanted keys that work, and then I received the same message from him again, and now this from you. So here is what is going to happen.

Your client has 12 hours to either refund my money or provide keys that work. Failure to do so will result in the following:

1. I will file a claim with the credit card company, explaining the nature of the fraud. As I have observed already, others have documented this fraud from your client.

2. I will file a report with Google, with whom your client is advertising. This will stop your client from advertising with them, as they will not tolerate fraud.

3. I will file a report with AlertPay, which your client is using to receive money.

4. I will document this on my blog, which has very high traffic. Rest assured that when people Google “D2 Keys”, on the first page of the Google results they will see “Diablo-Keys.com is a Scam.” Google my name if you think I am exaggerating.

5. I will file a report with the Internet Crime Complaint Center (http://www.ic3.gov/default.aspx)

Now, the ball is in your court. You don’t have to respond with any further lame threats. Your client has never offered to replace the keys; he just keeps saying that my satisfaction is his highest priority. So if you are truly stupid enough to harass me over this, assure that you will be counter-sued for wasting my time – and I think you know you will lose.

12 hours to replace the keys. Any other response will result in Actions 1-5 above, no further response from me, and publication of all correspondence related to this (which will put a damper in your client’s scam). To be honest, I will probably do all of that anyway, but if I get keys that work I might be in a generous mood and forget this ever happened.

Following that, I did go ahead and file reports with the Internet crime division (he may only be scamming $5 at a time, but I hate low-life scammers), I filed a dispute with AlertPay, and I filed a complaint with Google Ads. No response the next morning, so I sent my final communication:

You have had 8 hours. Four more hours and I also have a word with the FBI’s Internet crime division. I think they would be interested in the $5,000 extortion attempt below.

About to get on a plane. When I get off, if I don’t have 2 working keys, or a refund, don’t say you weren’t warned. And I don’t bluff.

This will be the last communication from me.

One more comical response from the “attorney”, who doesn’t seem to understand the difference between civil and criminal law. (I think it obvious that this wasn’t written by an actual lawyer; if it was then it truly is the stupidest lawyer I have ever encountered):

from Joseph Karlson
to Robert Rapier
date Wed, Oct 28, 2009 at 4:19 AM
subject Re: CEASE AND DESIST- Diablo-Keys.com


Dear sir:

Thank you for your response. Any additional evidence is appreciated and only adds to our evidence.

By harassing, threatening and blackmailing my client, Diablo-Keys.com, you have committed fraud under federal law. Although we intend to prosecute you under state laws, this crime is a felony in most of the United States and punishable by up to three years in jail and/or $100,000. As you are without a doubt aware, verbal violence is not tolerated, and Diablo-Keys.com will not make an exception.

As your e-mail was very clear, we will begin legal procedures against Mr. Robert Rapier in the state of Hawaii. Karlson and Karlson is authorized to practice civil law in the United States.

I have recommended my customer to refund your order both to help procedures and to prove good faith in the case of Diablo-Keys.com, Inc Vs. Robert Rapier. For now, you have nothing to do. As required by US Law, every legal document will be served to you. For now, you have nothing to do, except maybe finding a suitable attorney.

Diablo-Keys.com had no choice but to prosecute you to protect its brand, image and quality service. While it is sad this matter couldn’t be settled off court, you have given us very little choice.

For any further information do not hesitate to communicate with me.

Sincerly yours,
Joseph Karlson

LOL! Yes, Diablo-Keys is going to “prosecute me.” Oh no, I have to get an attorney. I might go to jail for three years! What a douche. Then the scammer himself responded twice more:

from Lawrence Irwin “joyandmercy@gmail.com”
to Robert Rapier
date Wed, Oct 28, 2009 at 4:09 AM
subject Re: CEASE AND DESIST- Diablo-Keys.com

Thank you for the additional evidence. I know you mentionned this was the last communication, but please keep writing to us: every e-mail is more and more evidence and our lawyer LOVES it.

Our lawyer has been very strict: we are unable to make comment this situation. We will see each other in court.

Sincerly yours,

So Lawrence Irwin (which is probably just a name this loser is hiding behind) at joyandmercy@gmail.com, is “unable to make comment” on the advice of his make-believe attorney. But stupid people rarely know when to shut up. So two minutes later, he sends this:

Yes, continuing the theme of illiteracy, “such it hard” is his answer. He must have gotten help with the spelling from his “attorney.”

So if you happened upon this because you were trying to determine whether http://www.diablo-keys.com/ is a scam, now you know. Here is how the scam goes:

1. He sells you invalid keys that have no value (and because you can find invalid keys from free from lots of places). You pay $5 because he claims they are new.
2. You report that the keys are invalid, and he promises to investigate.
3. He sits tight and hopes you forget all about it.
4. If you are persistent, he has his make-believe attorney write a threatening letter.
5. If you continue to be persistent, he refunds your money, lashes out like a two-year-old, and has his make-believe attorney send another letter.

It is just brilliant enough to have been crafted by a couple of 7th grade dropouts.

If you are coming here because you have gotten a pair of bad keys and are trying to get resolution, my recommendation is to file a fraud complaint and dispute the charge. If the guy had any actual working keys, he would have sent them instead of refunding my money after I made multiple requests for a replacement, before finally disputing the charge.

The guy could have had an actual business, but instead tries to scam people, and then scare them if they complain. If you are looking for a legitimate site for Diablo keys, after this experience I went to http://www.mmo1st.com/ and got a pair of working keys for $7. No problem at all from them, unlike the scammer/con artist/fraud at Diablo-Keys.com who will charge you $5 and then proceed to waste your time.

October 13, 2009 Posted by | Diablo, games, off topic, scammers, scams | Comments Off on Exposing a Two-Bit Scammer

Updates on the Diablo Scammer

Update 12-09-09: All of the scammer’s websites that he tried to use when scamming me are now offline. Further, I am cooperating with the authorities to actually track him down and bring him to justice. You can read about the initial account here: Exposing a Two-Bit Scammer

Update 12-03-09: This saga has also been mentioned over at The Consumerist. (And thank you to people who have forwarded me game keys). There are two things I want to clear up. First, I am not the person who posted the story at Reddit. I only became aware of the story because I saw the traffic coming in from Reddit on my Stat Counter.

Second, a number of the commenters at The Consumerist have alluded to the idea that I was trying to buy illegal keys. That is absolutely untrue. I have the software and licenses already, and I had it installed on the computer I was using. I was attempting to buy another pair of licenses so my son and I would both have licensed copies so we could play online together. People do legally sell licenses to software all the time. (As one poster at the Consumerist noted, the Consumerist has hosted “morning deals” for Diablo CD keys). I just looked around and thought I found the best deal. If I buy your licensed copy from you, there is nothing illegal about you selling it to me. And since I have the software, all I needed was a license. (Explained well by this commenter at The Consumerist).

I have a hard time believing that if people are setting up websites and selling cracked licenses that Blizzard isn’t shutting them down. After all, the last time I checked Blizzard’s attorneys had essentially stopped people from selling game items on eBay – and this used to be a big business. So I had no reason to think there was anything shady here. Come on, do you think I would have written about it if that was the case? If people are setting up websites – and advertising with Google Ads – to sell cracked licenses, then this is news to me. But I admit this is not something I know a whole lot about.

Update 12-02-09: For those linking in from Reddit, yes, www.d2key.com is the same guy running the scam at www.diablo-keys.com. (Update 12-07-09: As of today both sites are offline, as is that of the fake law firm. The former because the guy “sold out” of keys. LOL! If you follow any of the threads below, that mantra of “I am making loads of money” is very consistent with the behavior of my scammer; he would make this claim in every e-mail he sent to me. He apparently has a self-esteem problem, trying to compensate for his inadequacies by lying about making lots of money).

For those who doubt this, here are screen shots showing both sites at the same IP address (courtesy of Reddit viewers):

Regarding that, our scammer says “I do not have a good response for that (yet).” Translation: I haven’t yet thought of a plausible explanation for that. He has now changed it, but that was the case earlier today. There are also reports at Reddit that the initial support e-mail was listed as the same for both websites (again, now changed). I also have very specific other proofs that I am not going to share publicly, but have shared with Reddit moderators.

File a claim with PayPal immediately and let them know what he is doing. He reinvented himself because PayPal banned him for running the original scam (more on that below). This guy isn’t just a scammer, he is a complete scumbag; twice threatening to harm my elementary school aged son. (I published one of the threats below; the first one was so graphic and horrible I am not publishing it).

He will be glad to know that he is getting the kind of exposure I promised him: around 3,000 views from Reddit today and rising. Thanks Reddit readers! Oh, and someone at Reddit proved that the “law firm” threatening to sue – Karlson and Karlson – is indeed fake as I presumed. Too bad. I wanted to see this scumbag in court.

October 8, 2009 Posted by | Diablo, games, off topic, scammers, scams | Comments Off on Updates on the Diablo Scammer

An E-Fuel MicroFueler Dealer Responds

After publishing the previous story, I went back and searched through my Gmail to see when I had first heard about the E-Fuel MicroFueler. It turns out that about a year ago a regular reader of my blog – and someone I had exchanged a number of e-mails with – sent me the first bit of information and asked for my opinion. He told me at that time that he had become a dealer of these systems.

At the time, the idea was to use sugar as the feedstock. I made a number of comments, including my concern that the capital costs alone were too high to make the unit economical. I said that I felt like they would need to get capital costs down by 2/3rds, and I questioned several assumptions in the economics. Further, I flagged up a concern that people who couldn’t program their VCRs would be expected to produce ethanol in their garage. On the other hand, I did favor the idea of localized production of fuel (and still do).

Following the previous essay in which I pulled no punches, we exchanged several e-mails. I told him that I felt like what was being presented about the MicroFueler’s capabilities bordered on fraud. In response, he said he wanted to clarify a number of points raised in the L.A. Times article that I addressed. Since he is not authorized to speak on behalf of E-Fuel, he will not be identified and this will be his opinion – and not the official company position. One of my core principles is to allow people to respond to my criticisms, so in the interest of fairness, I present excerpts of his response to me.

On the topic of the government picking up half the cost, he wrote:

Section 30C of the US Internal Revenue Code (as amended by the Stimulus Act) provides an income tax credit of 50% (up to $50,000) for a taxpayer to install “Alternative Fuel Vehicle Refueling Equipment” as long as the fuel is used in a “trade or business”. Individuals can qualify for a credit of up to $2,000. This credit applies to commercial E-85 pumps, natural gas refueling equipment, hydrogen, biodiesel, and yes, even MicroFuelers. The credit also applies to other “turn-key” ethanol fuel production/dispensing solutions. The same government that provides these incentives is the same one that gives incentives to the petroleum industry for exploration, infrastructure, research & development, etc. Fair is fair.

If individuals qualify for $2,000, then that puts the out of pocket cost at $8,000 – and not the $5,000 that I have seen mentioned again and again.

Regarding my comment about people being trusted to put the correct amounts of ethanol in their vehicles, he wrote:

There was a study by the University of North Dakota that looked at the ability of unmodified non-flex fuel vehicles to run on ethanol/gasoline blends. The study showed that these vehicles could run quite well on high-level blends such as E-50, E-60, etc. The study also looked at fuel economy when using these various blends and concluded that blends of E-20 or E-30 might well be the “optimal” blend in terms of overall fuel economy for non-flex fuel vehicles, but the results tended to be different for each make/model/year vehicle tested.

“Optimal” in the real world translates (and this is very important) into two things:
1. Lowest net cost per mile (including vehicle manufacture & upkeep)
2. Lowest net “well to wheel” emissions per mile (including vehicle manufacture & upkeep)

Optimal Ethanol Blend-Level Investigation

Unfortunately, it didn’t address the question of vehicle longevity, but we have many real-world data points that support our position that ethanol is unlikely to cause any problems.

We know that most vehicles built after 1989 have parts that are ethanol compatible (fuel pumps, fuel injectors, fuel lines, etc). In fact, if you compare part numbers between today’s “flex fuel” and “non-flex fuel” vehicles, you’ll find the exact same part number used in both applications. There is a lot of fear, uncertainty, and doubt about whether ethanol can be used in non-flex fuel vehicles – but the fact is that we’ve been using high-level ethanol blends (up to E100) in a number of unconverted non-flex fuel vehicles with no problems except the occasional “Check Engine” light… and the only reason the Check Engine light comes on is because the on-board ECU thinks that the fuel system is putting too much fuel into the engine so it assumes there is a problem when, in fact, there really isn’t. It’s just that the ECU was never programmed to take the possibility of using ethanol (lower energy density) into account. In these cases, the “Check Engine” light is a false indication of a non-existent problem.

I am familiar with the University of North Dakota study. It was paid for by the American Coalition for Ethanol. I think we would agree that if an anti-ethanol result was found as a result of research funded by the American Petroleum Institute, ethanol proponents wouldn’t accept that at face value.

The study has been widely spun as showing that an optimal ethanol blend was E20 or E30. But I looked at the report, and previously commented on it at TOD. Here were some of my comments on this paper:

I took some time to review this paper again. This is what I see from the ethanol tests. Look at Figures 10-13. Here is the reality of the tests:

Figure 10. 2007 Toyota Camry, 2.4-L engine – 6 of 7 tests show worse fuel efficiency on an ethanol blend. There is one apparent outlier, which was the basis for the claims. (And it looks like a classic outlier, with almost all of the other points falling as predicted).

Figure 11. 2007 Chevrolet Impala (non-flex fuel), 3.5-L engine – 5 of 5 tests show worse fuel efficiency on an ethanol blend.

Figure 12. 2007 Chevrolet Impala (flex fuel), 3.5-L engine – 8 tests, 2 show better fuel efficiency, 2 show the same, and 3 show worse fuel efficiency on an ethanol blend.

Figure 13. 2007 Ford Fusion, 2.3-L engine – 4 of 5 tests show worse fuel efficiency on an ethanol blend. There is one apparent outlier.

So, what can we conclude? Of 25 data points, 18 confirm that the fuel economy is worse on an ethanol blend. That is 72% of the tests, and these tests were paid for by the ethanol lobby (which is why I suspect the results were spun as they were). The outliers are interesting enough for further investigation, but you have vastly overstated the test results. In reality, if you pulled the results out of a bag, you have only a 28% chance of improving your fuel efficiency on the basis of any particular test. Further, the outlier didn’t always occur at the same percentage, which would be quite problematic even if the result is confirmed.

On the L.A. Times article itself, and my claim that the author had been duped:

“Duped” might be a bit strong, but there were certainly a few problems with the article. I’m not sure if Tom/Chris misspoke or if they were misquoted (I wasn’t there), but the inaccuracies should have been identified and cleared-up before the article went to press. Incorrect? Perhaps in some ways. Misleading? Maybe. Intentionally misleading (fraud)? No… I’m confident that there was no intent by E-Fuel or GreenHouse to be misleading. I think it’s unfair to expect any journalist to have the same level of technical knowledge and industry experience that we have, so I’m prepared to live and let live when an article doesn’t get everything exactly right. The fact is that nobody “lied” here, and there’s really no way to control what gets printed. No journalist in the world would allow us to review the article before it goes to print.

I agree that someone with more experience could have handled the interviews or at least reviewed the article before it went to press. And perhaps an “interview” isn’t the best way to present the concepts that were discussed. Maybe a “press sheet” or “whitepaper” would be more appropriate. We (the biofuels industry in general) need to be careful to properly manage customer expectations because, ultimately, failure to do so could seriously undermine our credibility.

Regarding my comment that a big ethanol refinery would be more efficient:

Energy efficiency of huge biorefineries isn’t going to be much different than in the MicroFueler. It takes a certain amount of energy to distill no matter what quantities we’re talking about. Take a look at Floyd’s 1982 design and then look at the MicroFueler design and you’ll see it’s pretty well thought out. Where “the big boys” have a definite advantage is there economies of scale with respect to capital costs. Where we have a huge advantage is the cost of feedstock, carbon balance, and the (near) elimination of the whole petroleum distribution system.

I disagree with that. A smaller purification system is going to suffer heat losses to a much greater degree. It is inevitable. You see it all the time when trying to run a laboratory column to simulate a production column. Efficiencies aren’t nearly as good because of the higher relative heat losses.

Regarding the comment that 100 billion gallons of fuel are thrown away:

Misquoted or misspoken. He probably meant to say that the US is sitting on about 100 billion gallons worth of cellulosic biomass on a sustainable, annual basis. That’s the USDA/DOE “Billion Ton” study. There’s a fine line between “thrown out” and “not utilized”. Then there’s all the stuff that we’re paying to haul away to landfills (another 6-10 billion gallons worth). Tom knows the difference, but somehow the two thoughts got combined into a single statement.

We exchanged a number of e-mails regarding the claims around adding water to ethanol to improve the engine efficiency. I have seen some references to that, but I haven’t been able to find actual results. (See this article, for instance). My comment was that the results may have been spun like the University of North Dakota study cited above. But one thing that I told him I don’t believe is credible is that a person was running out of fuel and added 3 gallons of water to their tank to get home (see the previous story for that example). It is possible that a vehicle running on ethanol – and with a pretty full tank – could “tolerate” that much water.

But this much is true. It takes a lot of energy and capital to get that last 5% of water out of ethanol that is produced. Cars can run on ethanol that contains water (hydrous ethanol), albeit at a lower efficiency (which is why the water is removed). Brazil runs some of their cars on hydrous ethanol. But the claim that this improves the efficiency is pretty far-fetched, in my opinion. One of the articles I recently read stated that the water lowered the combustion temperature, thus increasing the efficiency. But if you look at the equation for efficiency of an engine, a lower combustion temperature will normally result in a lower efficiency. Regardless, I don’t put much faith in highly counter-intuitive results until they have been well-replicated (see ‘cold fusion’). And if they are – it would be a potentially revolutionary finding.

On the cellulosic issue, he wrote:

The MicroFueler is an automated fermentation, distillation, and dispensing platform. Our fermentation process regulates agitation, temperature, and other parameters to optimize output, but fermentation is fermentation. Distillation isn’t rocket science. If you can boil water then you can distill ethanol. We happen to be able to do this very efficiently and we produce a very high quality fuel. So the question is, can we really hydrolyze cellulosic materials to liberate the sugars and then convert them into ethanol? The answer is yes. The better question is “can we do this efficiently in order to get close to the maximum theoretical yields?”

You can’t just put grass clippings in a MicroFueler and walk away from it and expect ethanol fuel. There’s more to it than that. But, it’s not a big deal to put a grinder, pump, and a 300 gallon tank next to a MicroFueler or to add a bottle of enzymes now and again. It’s like having a pool, and then having the pumps, filters, to make it work, and the chlorine to keep it all clean. Or like a washing machine for that matter. Laundry detergent is mostly enzymes, and the clothes don’t wash themselves.

There’s another issue here which is that people toss around the term “cellulosic” far too often without really knowing what it means. Food waste (starch/carbohydrates) is very easy to work with, but it’s not cellulosic. People think that anything other than corn is cellulosic. Blame that on the media.

Around the economics, he essentially said that not everyone will save money, but some will save a lot of money. I haven’t seen the assumptions that went into those financial calculations, but I am highly skeptical that the average person would save any money.

In his conclusion, he again hit upon the local production aspect, which was the one part I did find appealing:

And here’s the $64,000 controversy… Say for example I feed my MicroFueler a steady diet of corn (grain) and amylase enzymes. I grow the corn on my farm, make the fuel on my farm, and feed my chickens the WDGS that are left-over from making ethanol. No transportation. Then I collect the chicken manure and spread it back in my corn field (which I also irrigate with the wastewater). By the way I’m also paying a premium for wind power to run my MicroFueler in this scenario. Is this sustainable? Does this defeat the argument that all corn ethanol is patently unsustainable (by definition)? I guess it all depends on the price delta between a bushel of corn and a gallon of gasoline. High gas prices and low corn prices you better believe I’m making fuel.

I don’t think anyone would argue that corn ethanol is unsustainable by definition. If a farmer is growing his own corn and taking care of the soil, and using that to produce his own ethanol, then he has a shot at sustainability. We lose the plot when we try to ramp that up to be a large scale solution.

To conclude, I recognize that my original article was pretty harsh. But that is because in my opinion there had been a distinct pattern of embellishment with this device, and if there is one thing I loathe it is people making far-fetched promises around renewable energy. I found the L.A. Times article to be irresponsible, either because the journalist did a poor job or the developers were overselling their device.

The end result of articles like this is that it creates the potential for money – private equity and taxpayer funds – to flow to an undeserving source. Ultimately this will have the effect that the funds will dry up, and promising technologies won’t be funded as a result. Imagine funds for cancer research being diverted to some of the fraudulent cancer cures, and you have the sort of example that gets me worked up. That is the reason I am quick to pounce on embellishment.

August 26, 2009 Posted by | biofuels, ethanol, Media coverage, scams | 68 Comments

Another Journalist Fails Due Diligence 101

I have had a number of people ask me about the E-Fuel MicroFueler, so at one point I did a bit of investigating. It is essentially a small still, but apparently has a fermentation capability if the feedstock contains sugar. However, they stress that it works best with wastes that contain alcohols (which a still would simply clean up) and they say in their FAQ that “under most circumstances consumers will contract with their dealer to service the MicroFueler and maintain a regular delivery and supply of feedstock.” What that means to me is that they will send you spoiled beer or wine, and the person who failed Economics 101 and bought one of these can then use electricity to turn the feedstock into alcohol. They can then tell those Arabs that they don’t need their stinking oil.

The unit lists for 10 grand, but they claim the government will gladly pitch in half the cost. I can’t tell you how pleased I am at the thought that the government is making such good use of my tax dollars.

They are also setting themselves up for a lawsuit when someone puts too much ethanol in their vehicle and damages the engine. Their website highlights a study suggesting that the optimal blend for an auto may be E20 or E30.

But today, a journalist who has absolutely no business writing about something like this wrote a very misleading story on the unit. And the reason the story is so misleading is that the journalist was completely out of her element and couldn’t tell how badly she was being duped. Yet it ended up in the Business Section of the L.A. Times:

Making fuel at home: Waste wine primes the pump

The subtitle states: “The MicroFueler makes ethanol out of organic waste in minutes. It can be installed at individual homes, and companies are eager to supply owners with garbage.”

There is so much wrong in this story, but I am going to focus on some choice excerpts:

It sounds too good to be true:

She could have stopped right there and applied the first rule of Due Diligence 101. It is easy to fool people when they are outside of their area of expertise. If she is not qualified to ask the right questions, then if it sounds too good to be true she probably should have dropped the story or pulled in an expert for an opinion. But alas, she continued:

The problem with ethanol, [inventor and CEO Tom] Quinn said, was energy inefficiency — not only in the carbon cost of growing, harvesting and transporting the corn that was used to make it, but also in the distillation process that turned it into usable fuel.

Yet ironically this system works best with waste ethanol that was produced using corn, and will be cleaned up with a distillation process that will be less energy efficient than the ones in full-scale ethanol plants.

“In the U.S. alone, more than 100 billion gallons of organic fuel is thrown out,” said Quinn, who reached out to ethanol scientist Floyd Butterfield to see if they could collaborate on a system that could make ethanol in a manner that was cost effective and better for the environment.

I would like to see a source for that. I do not believe it. Our gasoline demand is around 140 billion gallons per year right now, and I am to believe that we throw away an amount equivalent to over 70% of what we actually use? And I guess that would be this Floyd Butterfield? At the link Floyd tells the tale of having converted a truck to run off of pure ethanol. Once when he was running out of ethanol and wasn’t going to be able to make it home, he stopped and put 3 gallons of water in and drove the rest of the way home. This is great news, because the MicroFueler produces ethanol with 5% water.

As they say on their technology page, “E-Fuel scientists have experimented with multiple blends of ethanol and water and have determined, contrary to conventional wisdom, small amounts of water improve the efficiency of burning ethanol.” It occurs to me that they should sell this research to the government and the ethanol industry, which is currently spending lots of money to get that last 5% of water out.

Here is where the ignorance of the journalist starts to show badly:

The idea was to use organic waste rather than corn to make a product known as cellulosic ethanol. Although Quinn’s MicroFueler is most effective with wastes that are high in alcohol, ethanol “can be made out of any waste — lawn clippings, dairy products, old chemicals, cardboard, paper, bruised and discarded apples from the grocery store. It can be fermented and turned into fuel in minutes,” Quinn said.

First of all, this unit does not make cellulosic ethanol. To suggest or imply that it does is simply false. In fact, here is what they have on their website:

To further simplify the E-Fuel100 ethanol production for consumers, the MicroFueler supports a variety of organic waste as fuel (among them are discarded liquids rich in sugar, waste sugar, liquids with residual alcohol, cellulosic materials** and even algae**).

At the bottom of the page, we see this: **Additional processing outside of the MicroFueler may be required. May be? So you are telling me that I might be able to throw cellulosic materials or algae into this thing and get ethanol from those feedstocks? Well, all I can say is prepare to be sued for fraud.

So far, only one MicroFueler is up and running. It was installed in late June at the Pacific Palisades home of Chris Ursitti, CEO of GreenHouse International Inc., the San Diego firm that is distributing the units and supplying feedstock to those who install MicroFuelers at their homes.

Once you get a few more units out there, you better line up some good lawyers. You are certainly going to be sued for false advertising.

GreenHouse has contracts with Karl Strauss Brewing Co., Gordon Biersch Brewing Co. and Sunny Delight Beverages Co. to convert 29,000 tons of their liquid waste using MicroFuelers.

Though Ursitti is the only one now using the system, the plan is for a tanker truck to pick up the companies’ waste and deliver it to home-based MicroFuelers, which convert it to ethanol on site. MicroFueler owners are charged $2 a gallon once they pump out the fuel.

So, let’s get this straight. A brewing company has a bunch of liquid waste that contains alcohol. They aren’t going to clean up this waste themselves and recover the alcohol. Instead, they are going to put it in a tanker truck and haul that waste to people’s houses and dump it in their MicroFuelers. The owner of the MicroFueler, having paid $10K to buy one of these things, is now going to pay for the electricity and then pay another $2 a gallon for the finished product. They are then going to put it into their vehicle, hopefully in proportions that don’t ruin their cars. Wow.

Again, the journalist makes a patently false statement:

Converting expired beer and other liquid wastes into cellulosic ethanol takes minutes and uses three kilowatt-hours of electricity to produce one gallon of fuel.

How about some voodoo economics?

Factoring in the $5,000 federal tax credit, an annual household fuel consumption of 2,080 gallons and a $2 charge a gallon, GreenHouse estimates the average consumer payback time is about two years.

First off, they have just about doubled the annual household fuel consumption. There are an estimated 112 million households in the U.S., and our total gasoline consumption is about 140 billion gallons. That is 1,250 gallons of gasoline per household. But because of the lower energy density, I will have to replace that gasoline with around 1,800 gallons of ethanol (actually about 1,900 since it contains 5% water).

I am going to spend $5,000 on the unit since they assure me that I will get a $5,000 tax credit (hey, they haven’t steered me wrong yet, have they?) and I am going to pay $2/gallon plus electricity. So over the course of 2 years the average household would pay $5,000 (plus another $5,000 from the taxpayer) plus $3,800 (1,900 gallons at $2/gal) plus another $1710 of electricity (again, taking their word that it is only 3 kWh of electricity per gallon, and using $0.15/kWh) for 3,800 gallons of ethanol to replace 2,500 gallons of gasoline.

Today’s average retail price of gasoline is $2.64. So in two years an average household would pay $6,600 for gasoline. The total price over two years via this ethanol route (and I am assuming free feedstock and value for your labor) is $15,510. But if they are correct and we taxpayers get to kick in $5,000 (and why wouldn’t we for such a revolutionary invention?) then the cost is only $10,510. So much for a two-year payback. As I said, this is for those who failed Economics 101, and is being helped by a journalist who failed Due Diligence 101.

I will say that things have certainly changed a lot since Quinn and Butterfield were featured in the New York Times a year ago. At that time the unit was going to be fed sugar (which they were going to import from Mexico because of the cost), was going to cost only $1/gal, and when the alcohol was burned it was only going to produce 1/8th as much carbon as you would get from burning gasoline. Quinn was also certain that it would strike fear in the heart of the oil industry. Now a year later the unit prefers to be fed alcohol so it can produce alcohol, will cost $2/gal, and will produce almost as much carbon as one would produce from burning gasoline.

What a racket.

August 23, 2009 Posted by | due diligence, ethanol, scams | 71 Comments

How To Sniff Out a Fraud

I tend to get a lot of e-mails from people either claiming to have invented the next big thing in alternative energy, or from people who want to know if a particular company has something that seems worthwhile. Generally, I can sniff out the scams and pseudoscientists pretty quickly. There are lots of telltale signs.

In general there will be no patents, nor patents pending. They will often tell tales of having their invention suppressed. A secret catalyst or secret formulation is another frequent theme. (People too often ascribe magical properties to catalysts. Catalysts can speed up a reaction, but they do not allow you to get around the laws of thermodynamics.) Scam companies will often incorporate a hot buzzword into their company name or the name of their technology, like ‘nano…’ (implying nanotechnology). Claims that the technology will solve the world’s energy crisis are all too common. Many times, it simply comes down to “if it seems too good to be true…” However, I normally give people the benefit of the doubt and I investigate further.

Sometimes a scam isn’t easy to sniff out, and sometimes an invention is a real breakthrough. Since I have often been asked about how to sort the wheat from the chaff, I will document a recent investigation into a company that looked promising at first glance. The company first came to my attention via a poster at The Oil Drum who posted a link about a company called AlphaKat. Here was the post:

I have a member on my website board who is pushing really hard biomass gasification as means to save us all. Here’s the company he mentioned earlier with process capable of using everything one can think about:


Can anyone give some comments about this?a few Utube videos full of high optimism also…


sounds too good to be true – therefore it is?

I checked out some of the videos, which sounded intriguing but highly improbable. Regardless, I did some digging. The technology was invented by a German named Christian Koch. Dr. Koch had teamed with Austrian immigrant Michael Spitzauer to bring the technology to the U.S. Dr. Koch has a U.S. patent pending on the process (United States Patent Application 20050115871). You can see interviews (in English) with both Dr. Koch and Spitzauer here:

Interviews with Koch and Spitzauer

I noticed a couple of things when I read through the patent. First, the claims that were being made were that it could turn any biomass into diesel, but the patent seems to indicate that you must start with an oil of some type. The technology sounds very much like thermal depolymerization (TDP), which as we know works (except not on things like woody biomass), but is not economical. It was certainly not a biomass gasification process. However, there is nothing that I am aware of that is capable of unraveling cellulose and turning it into a fuel in 3 minutes. So it definitely sounded too good to be true.

This sounded interesting, so I worked my way to the website of Michael Spitzauer. The website is incredibly cheesy, poorly designed, and full of fractured English. If you dig, you can see that he has made his wife – a former cocktail waitress – a Senior Vice President of the company. Technical expertise among the team seems to be in very short supply. I also spotted the tell-tale buzzword “Nano”-diesel:

Green Power Inc

At this point, things are starting to smell funny. Digging a little deeper, I found that Spitzauer has been convicted of fraud, and has been involved in multiple shady dealings. He was also scammed by a Nigerian advance fee scheme, so may not be the sharpest knife in the drawer:

Austrian Fights Extradition

Something’s Rotten – Green Power

Yet Another Gas Scam? – Discussion on Snopes’ Message Board

Trash-to-diesel technology raises eyebrows

In that last link, he says the oil companies are out to get him, and this is why his past has been exposed:

“The big oil companies in Europe and this country have made threats to us, but even if they would do something to our lives, this company will go on,” Spitzauer said. “Our plant works, and we will make diesel for the people.”

But doubts have been raised about the claims made for Green Power’s technology and about Spitzauer’s personal history — a history that includes a fraud conviction in his native Austria, a lengthy extradition battle in a separate case, and the bankruptcy of his previous business venture.

In an interview, Spitzauer, 38, said none of that was relevant to Green Power and its prospects. “What easier way is there to discredit somebody than to look at something in their past?” he said. “We are here for the future.”

So, we have a process that sounds too good to be true and the involvement of a convicted fraudster who is now saying the oil companies are out to get him. Not knowing more, I would steer clear. This all sounds much like the claims that Xethanol was making. Some of their key players had been previously accused of fraud as well. What happened? Their claims fell apart, and Xethanol finally went bankrupt (as I had predicted) because they couldn’t do what they said they could do:

Xethanol Now Defunct

Finally, I should point out that Michael Spitzauer has had a falling out with Dr. Koch. So it is still possible – albeit I think remotely – that Dr. Koch’s original invention is what he claims it is. But, if you want to put the technology to a real test, run some biomass through the machine that is spiked with a radioisotope (maybe C14) that would show up in the product. I will bet money that the spiked carbon doesn’t show up in the hydrocarbon, and that will be the end of that. If I were a prospective investor, I would insist upon such a test.

This particular case turned up a lot of dirt pretty easily once I started digging. It isn’t always that easy. But there are a still a good number of people who are convinced that this is for real. I think it is very telling, though, that skepticism runs high among the chemists and chemical engineers mentioned in the various links. But as I said, one can design tests to prove or disprove the claims.

March 9, 2009 Posted by | Alphakat, fraud, scams, Thermal Depolymerization | 73 Comments