CEO Changes in Planned Succession at San Diego’s Sapphire Energy

4/19/12Follow @bvbigelow

I thought the best presentation at the “Rock Stars of Innovation Summit” a few weeks ago was a chat between two co-founders of San Diego’s Sapphire Energy—CEO Jason Pyle and Steve Briggs, the UC San Diego cellular biologist and a member of Sapphire’s advisory board.

It turns out that was Pyle’s last public appearance in San Diego as Sapphire’s CEO.

In a management transition announcement released this afternoon, Pyle is stepping down as CEO, effective today. Cynthia “C.J.” Warner, who has co-led the algal biofuels startup since joining the company in 2009 as president and chairman, is taking over as CEO and will continue as chairman. Pyle, an entrepreneur and bioengineer with a doctorate and medical degree from Stanford University, will remain as a member of Sapphire’s board.

As Pyle told me in 2008, Sapphire began in 2006 as a handful of venture investors started looking for the best biofuels technology to invest in. During that process, Pyle said he realized that ethanol-based biofuels would require building a duplicate fuel pipeline and trucking system throughout the United States because such fuels cause corrosive damage to conventional petroleum pipelines and tanker trucks. But algae-based crude could be used as a “drop-in” substitute for petroleum-based fossil fuels without requiring any changes in the existing fuel transportation infrastructure.

CJ Warner

Sapphire says Pyle’s vision of “green crude” and “drop-in replacement fuels” have become two of the most central elements in the national pursuit of a global, sustainable alternative to crude oil imports. The company, which recently raised $144 million in additional venture financing, is building an algal farm and demonstration processing plant in Luna County, NM, known officially as the Integrated Algal BioRefinery (and unofficially as “the Green Crude Farm.”)

In the company’s statement, Pyle says, “Now that we have recruited the most experienced Board of Directors, executive team and scientists of any company in the industry, I’ve decided that the time is right for me to move on to my next endeavor, which I will announce shortly.”

Before joining Sapphire, Warner was a group vice president overseeing global refining at BP. She has spent more than 27 years in energy, refining, and transportation, and “she is very much a big operations person,” according to Tim Zenk, a Sapphire spokesman. The CEO succession was planned, Zenk added.

“Over the last year or so, as we grew and continued to raise more money, it became clear that we needed to have a succession plan ready,” Zenk says. “After five years, people want to go on and do other things.”

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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  • anonymous

    Do you think Monsanto, Exxon and Bill Gates have been had???

    Neither Sapphire Energy nor the Algal Biomass Organization responded to requests for comment

    BY: CJ Ciaramella – February 22, 2012 5:00 am
    The federal government awarded Sapphire Energy, a green energy concern, more than $100 million for a project that is behind schedule, has only created a fraction of its expected jobs, and is, according to some experts, at least a decade away from creating a viable product.

    Founded in 2007, Sapphire is working to develop algal biofuel—a replacement to crude oil made from algae and able to be refined into gasoline, diesel, or jet fuel.

    Sapphire raised $100 million from private investment firms, including ARCH Venture Partners. Bob Nelsen, a founding partner of ARCH, served on Obama’s National Finance Committee during the 2008 campaign.

    A Washington Post investigation found billions of taxpayer dollars flowed to green energy companies backed by venture capital firms with ties to the Obama administration.

    Sapphire was no exception. In 2009, executives, board members, and employees at Sapphire contributed almost exclusively to Democratic campaigns. For example, Sapphire CEO Jason Pyle has donated only to Democrats, according to the Center for Responsive Politics.

    The company has received $104.5 million from the federal government, roughly half of which were 2009 stimulus funds from the Department of Energy, to build an algae-based biofuel operation in Columbus, New Mexico.

    Sapphire has spent more than $1.8 million lobbying the federal government since 2008, with an appreciable spike in 2009, when there were several biomass-related bills up for consideration.

    One such bill was the Algae-based Renewable Fuel Promotion Act of 2010, which would have expanded federal tax credits for biofuel to include algae-based fuels. It passed the House in 2010 but never made it to the floor of the Senate. The House bill was co-sponsored by Rep. Brain Bilbray (R., Calif.), whose district surrounds Sapphire’s San Diego headquarters. Bilbray is the only Republican to whom Sapphire executives and board members reliably contribute.

    In 2011, the Algal Biomass Organization, which promotes the industry, hired one of the biggest law firms in the U.S., K&L gates, to advocate at the federal level. That same year, Tom Udall (D., N.M.) co-sponsored a new bill, the Renewable Fuel Parity Act of 2011, that would give algal biofuel the same tax breaks as other forms of biofuel.

    There is considerable interest in developing algal biofuel. Sapphire was ranked 97 on a Forbes list of the most promising companies in 2011. There are several other companies working to develop the fuel as well.

    However, like many stimulus projects, Sapphire’s new facility has faced delays. The plant was supposed to be operational by 2011, creating almost 750 temporary and 40 permanent jobs. But Sapphire did not break ground until June 2011.

    In October 2011, two years after being awarded federal grants, the project had only employed 15 New Mexicans and spent $575,000. Sapphire Vice President of Corporate Affairs Tim Zenk told the Las Cruces Sun-News that the project has “a long ways to go.”

    In November 2011, the federal government kicked more money Sapphire’s way—this time a $54.5 million loan from the Department of Agriculture.

    According to the most recent quarterly report filed at Recovery.gov, the project is less than 50 percent complete and has created 36 jobs.

    Questions have also been raised about the viability of algal biomass as an alternative fuel.

    Mary Rosenthal, the head of the Algal Biomass Organization, predicted in 2010 that algal fuel could compete with oil within seven years. However, a 2010 report by the University of California Berkeley’s Energy Biosciences Institute said it would take a decade of testing to even determine if algae companies can produce mass quantities of fuel at competitive prices.

    The fuel is not yet commercially available. The main consumer has been the U.S. Navy, which paid $12 million for 450,000 gallons of biofuel in 2011. That works out to $26.67 per gallon.

    Neither Sapphire Energy nor the Algal Biomass Organization responded to requests for comment

  • http://sapphireenergy.com Tim Zenk

    Dear Anonymous,

    The article you pasted into your comment has been widely debunked already, as it cites numerous erroneous facts and figures that the writer made no effort to validate or fact-check. Maybe it’s because this publication describes its mission to engage in “combat Journalism” that gives its publishers the freedom to present statements in a partisan and libelous way? I don’t know the answer to this question nor am I particularly concerned but if you care to square up your facts about Sapphire Energy, please allow us to lay them out for you here.

    • We don’t see how increasing the availability of crude oil for our domestic use could possibly be a partisan issue. We believe what we are doing is patriotic and supports America’s goals of improving our energy security and creating domestic jobs.

    • Sapphire’s Green Crude Farm is on-schedule and on-budget to be completed in 2014. The first phase of the facility is presently being commissioned and brought online, and will be producing crude oil this summer.

    • The Green Crude Farm is a $135 million dollar funded with both private and public funds: $85 million in Sapphire Energy’s private equity and a $50 million dollar grant from the DOE.

    • To date, the project has created more than 500 full-time equivalent employees in an area of the country known for some of the lowest incomes and highest unemployment rates in the nation. The project has generated at least $9.5 million in direct economic impact in Southern New Mexico, known for its very difficult economic circumstances.

    Finally, the entire Sapphire Energy family is proud of our work on behalf of our nation to improve our national energy security by inventing and producing a new form of crude oil, which our economy needs so desperately. We are passionate about energy production and believe that algae cultivation is one of the strategies that will improve our nation’s strength and economy.

    Tim Zenk, VP of Corporate Affairs
    Sapphire Energy, Inc.

  • http://www.olinhyde.com Olin Hyde

    It is disappointing to see a visionary and entrepreneurial CEO be replaced by a former BP executive who has never founded a company, never scaled a startup into an enterprise, and has never invented anything.

    Sapphire is filled with many great people who are world-class experts in their field. They need inspirational leadership — more like Steve Jobs (Apple’s founder) and less like Tony Hayward (CEO of BP).

    CJ appears to be “safe” choice made by institutional investors who are more comfortable with bureaucrats than they are with visionaries. She has huge shoes to fill considering Jason was an Airborne Ranger, MD, PhD and leading scientist.

    Probably all of this comes down to Sapphire taking too much money from too many big investors.

    Let’s hope that CJ can rise to the occasion. The fate of our nation is tied to her success considering that Sapphire is the closest to solving our dependence on foreign oil.

  • anonymous

    Hmmm….55 Phd’s at a cost of how many million per month?

    “We don’t see how increasing the availability of crude oil for our domestic use could possibly be a partisan issue.” Its not but is that oil for transportation or nutraceuticals?

    Where is the oil for fuel that we have been hearing about for years?

  • anonymous

    Whatever happened to algae and biofuels?

    Sapphire Energy, among other hardy survivors, press forward, as others melt away or re-focus on higher-value, smaller-market products.

    The Game-Changer as Attractor of capital and talent
    Why stay with fuels at all? I asked Pyle. Why not dovetail into one of those easier niches? “One of our strengths,” he reflected, “has been in raising sufficient capital and attracting great talent. One of the reasons for that its that certain people will invest money, or their time, if you are going after the really big problems. You can’t attract this kind of capital or talent if you are making plastics. Fuels – they are the single largest problem on the planet, and the chance to do something really game-changing is the attractor.

    “And at a practical level, there are a lot of speciality chemicals out there, and bio-based technologies may well succeed in making them directly. But for a lot of chemicals, they are made using crude petroleum oil, refined into basic building blocks. And the crude oil replacement is going to undercut a lot of the other technologies on cost.”

    But the conversation around algal biofuels, and biofuels in general, has become more difficult to manage, over the years. How does one maintain momentum with capital, with people, with supporters in the government?

    “The conversation hasn’t become all that much harder around the topic of drop-in, renewable transport fuels. It’s only when the technology is umped in with all of renewable energy that you get lots of opposition.”

  • anonymous

    “Dr. Richard Sayre, your co-director of the consortium has recently relocated to your home base, LANL. So he represents our starship for the biofuels development effort here at Los Alamos National Laboratory, and we’re very excited to have him here.”

    Another algae biofuel expert?

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