By Marcus Stern
WASHINGTON (Reuters) - Two companies involved on the ground level of an expensive Pentagon effort to embrace biofuels have used familiar strategies in building their profiles in Washington, using hefty campaign contributions and aggressive lobbying to secure support.
One company, Solazyme Inc, a subcontractor on a $12 million alternative fuels contract from the Navy, also has raised its Washington profile by hiring as strategic advisers former senior Clinton administration officials with close ties to the Pentagon or Department of Energy, according to corporate records.
Solazyme and Gevo Inc, a Colorado company that won a small Air Force biofuels contract, are on the cutting edge of a $510 million Pentagon effort to switch to biofuels to curb reliance on foreign oil. But the high per-gallon cost of the biofuels has spurred controversy on Capitol Hill, where some Republicans have branded the program as wasteful and raised questions about political ties.
The Navy is paying $26 a gallon for the fuel it is using to test its "green fleet" concept. The prime contractor is Dynamic Fuels, a Louisiana-based company that is a joint venture of Arkansas-based Tyson Foods and Oklahoma-based Syntroleum Corp. Solazyme, which makes its biofuel from algae, is a subcontractor. Dynamic Fuels makes some of it fuel from animal fats.
The Air Force is paying Gevo $59 per gallon. Gevo makes its fuel by converting sugar into isobutanol.
Proponents of the program - as well as the Pentagon - argue that costs per gallon will dramatically drop after production ramps up and will eventually be competitive with fossil fuels.
Even as the biofuel companies work to build revenues in an emerging field, their investors and employees have worked the political system, campaign finance records show. Investors, officers and employees at Solazyme and Gevo have contributed hundreds of thousands of dollars to political campaigns in recent years, primarily to Democrats.
Both companies have relied on extensive lobbying to help them win modest contracts.
Solazyme relies on in-house lobbyist Drew Littman, a former staffer to Democratic Senators Al Franken of Minnesota and Barbara Boxer of California. This year, it also hired McBee Strategic Consulting L.L.C., which represented Solyndra, the solar panel maker that went bankrupt after receiving more than $500 million in federal loans.
Solazyme also solicits strategic advice from two prominent Clinton administration officials - former CIA director R. James Woolsey, who has served in other administrations as well, and former Deputy Energy Secretary T.J. Glauthier.
Glauthier also served for five years in the Clinton White House at the Office of Management and Budget. He was on President Barack Obama's transition staff and worked on the energy portion of the stimulus bill.
"I had no contact with any agencies or others in the administration about Solazyme's bids or contracts for biofuels," Glauthier told Reuters.
Jonathan Wolfson, chief executive officer of Solazyme, said the company needs a strong Washington presence to counter the entrenched interests of rivals, including the oil industry. Shareholders of the publicly traded company deserve to know about legislative and administrative developments in Washington that might affect biofuels, Wolfson said.
Biofuels lobbying pales in comparison to the lobbying budgets of the oil and gas industries, he said.
Wolfson said campaign contributions by people associated with Solazyme had nothing to do with the company's Washington agenda. Most came from one person - board chairman Jerry Fiddler, who has given $358,000, mostly to Democrats. Fiddler, long active in Democratic politics, made his fortune selling his software company to Intel.
"Jerry's political donations are Jerry's private, personal business," said Wolfson. "I can absolutely guarantee you there are not discussions with management or with the board about what Jerry does with respect to his political donations. The fact that Jerry donated a lot of money is accurate. The fact that T.J. (Glauthier) had a relationship in DoE (Department of Energy) is accurate. But people are drawing lines to things that are not reality."
Fiddler could not be reached for comment.
Gevo spent $360,000 over three years for the services of Green Capitol LLC, according to lobbying records. The principals of the firm are a former Capitol Hill aide who worked on energy programs and a former official of the Air Transport Association, the major airlines' trade organization, who pushed the Air Force to experiment with biofuels.
Gevo's Air Force contract was worth $639,000.
A key Gevo investor is venture capitalist Vinod Khosla, who co-founded Sun Microsystems and has given $474,000 in campaign contributions since 1996, mostly to Democrats, according to a Reuters' compilation of campaign finance data on opensecrets.org.
Khosla told Reuters through a spokesman that he had no knowledge of the Air Force contract and declined further comment.
Of the companies helping provide biofuels to the Navy and Air Force, Tyson Foods has by far the highest profile in Washington.
Its political action committee has given $1.9 million in contributions since 1990 to candidates of both parties. Its president, John Tyson, has made $225,000 in contributions to both parties in the past six years. The company has spent $10.7 million on lobbying in the past five years, according to opensecrets.org.
Formed in 2005, Gevo seeks to retrofit ethanol plants to make isobutanol, which is more powerful and less damaging than ethanol to the machines that burn it, including cars. Gevo reported revenues of $64 million in 2011.
Solazyme, founded in 2004, creates oil from microalgae grown in fermentation tanks. Solazyme reported $39 million in revenues in 2011.
(Reporting by Marcus Stern; Editing by Marilyn W. Thompson; Desking by Vicki Allen)