Xconomist of the Week: 5 Questions with Sapphire Energy CEO Jason Pyle

12/1/11Follow @bvbigelow

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the U.S. Navy and Department of Energy. The USDA knows production agriculture is a key component of the supply chain to produce these fuels and its resources and expertise needs to be brought to bear. Who is better to do that than the USDA?

Today, the USDA manages a portfolio of direct loans and guarantees of approximately $114.7 billion and has been in this business for at least 75 years. The USDA portfolio makes it one of the largest lenders in the United States. The due diligence process the agency puts companies through is serious and exhaustive.

Now lets look at USDA’s track record. Of that $114.7 billion portfolio, as of June 2011, the department had a delinquency rate of about 2.72 percent for direct loans and 3.61 percent of all receivables that include all direct loans and loan guarantees. Compare that delinquency rate to the private sector as reported by the Federal Reserve bank and you’ll see they have a delinquency rate about 5.97 percent, or almost two times that of the federal government’s portfolio. I think it’s clear whose record is better. The USDA has done a good job here. The returns to our nation can’t be overlooked.

I firmly believe loan guarantees and federal support are an absolute necessity to transition this nation to crude oil replacements and make our nation more energy secure. Alternative fuels are not a “nice to have,” they’ll soon be a “need to have.” Private industry, especially in this economic climate, can’t do it alone. There is healthy venture capital interest to fund the strongest science in our space. But venture investments must be augmented by government funding to reduce private capital risks, and to speed new technologies to market.

Since the industrial age, energy acquisition and a timely transition to viable new energy sources and systems has been one of the most important elements of strategic planning that we rely upon our government to provide. Once a technology proves out commercially, the market can and will easily take over. The payback potential to our citizens and our government is enormous.

X: How has Sapphire’s business strategy changed since the company was founded, particularly in terms of financing industry-scale production?

JP: Our core mission has not changed—to create a domestically produced, environmentally friendly, replacement for crude oil. Sapphire Energy is synonymous with U.S. energy security. We’re solely focused on crude oil replacements. But with the current economic climate, we have adjusted our funding strategies and timelines. The process will take longer, and the government’s future involvement is in question.

What should not be in question, though, is our nation’s need to be leading the world in developing replacements for crude oil. The data doesn’t know politics, and it doesn’t lie. The world needs a lot more crude oil. Energy security is not just someone’s bumper sticker, it’s a very serious global problem and one the United States needs to win.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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