Can Two Software Geeks Free Us From Foreign Oil?

By William Tucker

It felt like an opening night gala in Hollywood held on a spectacular bluff overlooking the Pacific. After assigning their Porches and Lamborghinis to the valet parking attendants, the guests were immediately whisked down a red carpet and into an outdoor lighting studio where they posed for souvenir photos. From there they could spend a few minutes browsing the electric-powered Fisker Karma, a Tesla S (Motor Trend’s 2013 “Car of the Year”) and a methanol-powered Pikes Peak International Hill Club racecar, all parked in the driveway. Then it was down a long, specially improvised tunnel that felt like it should be festooned with cave paintings. The illuminated passage opened onto a broad veranda featuring a view that seemed to stretch from San Diego to Santa Monica.

So began the launch party for the Fuel Freedom Foundation, held at the magnificent mountaintop villa of software entrepreneur Eyal Aronoff, co-founder of Quest Software, and his charming wife Yael (above) in Newport Coast, California, just south of Los Angeles. The tunnel was built just on the off-chance that it might rain. But then it never rains in Southern California, right? Well, this turned out to be one of the rare exceptions. Before Stray Cat Lee Rocker had finished his set on the specially assembled outdoor stage, it started to drizzle. No problem! The more than 50 youthful attendants were immediately handing out umbrellas. The drizzle soon became a steady downpour, however, and so the guests, who had come from as far away as New York and Oregon finally retreated inside, where things became even more convivial.

“It was a memorable evening,” said Aronoff, who completely revamped his villa for the occasion. “People say they are always going to remember it because it rained.”

That may not be the only takeaway. They may also remember it as the evening when America took its initial steps on the road to becoming free of foreign oil.

The Fuel Freedom Foundation is the brainchild of Aronoff and fellow software entrepreneur Yossie Hollander, who as a 12-year-old participated in a 1969 IBM test to see if pre-teens could program. (He could.) Now retired from stellar careers in the software industry, the duo has combined to put together an all-star cast of advisors and executives dedicated to the task of clearing away the regulatory underbrush and moving the country toward replacing the gasoline with a variety of domestically generated alternatives.

“Right now America is spending more than $300 billion a year on imported oil,” says Hollander, an ebullient conversationalist who previously founded the Our Energy Policy Foundation. “That‘s half our trade deficit. If we could substitute any of our abundant domestic fuels, we would not only free ourselves from insecure sources of energy but could halve our trade deficit as well.”

Fuel Freedom’s answer is to bust through regulatory roadblocks and free up the market for all manner of alternatives – ethanol, biodiesel, compressed natural gas, methanol from any number of sources and even electric cars. (That’s the reason for the Tesla.) Although Aronoff and Hollander are at pains to say they don’t discriminate between the alternatives, the one most people seem to feel holds the greatest promise is methanol manufactured from natural gas.

“Methanol is the largest business opportunity of this decade,” says Aronoff as he surveys the guests drifting from the hors d'oeuvres to the two-dozen varieties of pasta to the chicken-and-salmon barbecue. Not as gregarious as Hollander, he still has something of the computer geek about him. “We now produce 1.7 trillion cubic feet more natural gas than we did before we started fracking. That 1.7 TCF would sell today for $4 billion on the gas market. But if we transformed it into 17 billion gallons of methanol, it could replace 10 billion gallons of gasoline, worth more than $30 billion. That’s almost a tenfold increase in value. The economic opportunity here is enormous.”

“We have lots of energy sources in this country but what we need is liquid fuel for transport,” adds Hollander, after pausing to introduce Congresswoman Loretta Sanchez who is on hand to rub shoulders with her Orange County constituents. “Methanol easily substitutes for gasoline. The Indianapolis 500 racecars have run on methanol since the 1960s. It only has 60 percent of the fuel value of gasoline but you can easily compensate with a slightly larger tank. It could be delivered with the same infrastructure we have for gasoline.”

Methanol is corrosive and a few engine adjustments would be required. “It’s just a matter of substituting for rubber and aluminum in a few valves and hoses,” says Hollander. “Any mechanic can do it for $100-300 depending on the car. But the real solution would be to have the auto companies produce flex-fuel vehicles at the factory. The only reason they are reluctant now is because putting methanol in your tank is illegal. That’s what the Foundation wants to change.”

And there lies the rub. Through an odd quirk in the law, burning methanol in your engine is currently against EPA regulations. It’s not that there’s any great harm anticipated. It’s just that the EPA is required to write specs for anything you put in your gas tank. It has done the job for corn ethanol but has never gotten around to doing it for methanol. “It’s just a matter of urging them to write the regulations,” says Hollander. To give the EPA a little encouragement, Fuel Freedom is advocating for the Open Fuel Standard Act, now before Congress, which would cut through the regulatory thicket and require the auto companies to design cars that can run on all manner of fuels. The Foundation is hoping for passage sometime next year.

Try to do anything these days, of course, and somebody will tell you it’s already being done in China. Unfortunately, that holds true for methanol. “The largest methanol producer in the world right now is China,” says Aronoff as he and Yael guide their guests through another round of after-dinner treats in their marble-lined kitchen. “They have a million cars on the road already.”

California had 500 methanol cars in action in 2005 after a ten-year effort but Governor Arnold Schwarzenegger pulled the plug in favor of corn ethanol when methanol became too expensive. That was just before the fracking revolution. In 2000 the U.S. produced 10 million gallons of methanol from natural gas but soaring prices drove most of the industry abroad. Now those producers are coming back.

“Methanol has a worldwide market as an industrial feedstock,” says Hollander, after introducing Stephen Johnson, a former hedge fund manager who is trying to build a biofuels-from garbage facility in Illinois. “It’s a proven commodity. There’s no mystery about it. Methanol is produced today in commercial quantities for $1.20 a gallon. That’s the equivalent of $2-a-gallon gasoline. What we need to do is open up the market to competition.”

Fuel Freedom has assembled an all-star cast to help its case before the public and Congress. On board are R. James Woolsey, former head of the CIA; Gal Luft, an advisor at the Institute for the Analysis of Global Security; Peter Goldmark a former president of the Rockefeller Foundation and director at Environmental Defense; Dr. Jim Hamilton of UC San Diego, an expert on the impact of oil prices; and John Hofmeister, former CEO of Shell and founder of Citizens for Affordable Energy.

At a luncheon held before the evening gala the advisors painted a grim picture of the security risks America incurs in depending on foreign oil. Luft told the group the country’s naval defenses are stretched paper-thin trying to protect the Strait of Hormuz, the Horn of Africa and other sea lanes around the world. Hofmeister said domestic oil production will plateau but our natural gas resources can make us the Saudi Arabia of methanol. Dr. Hamilton argued that the 2008 financial meltdown, although fueled by an overleveraged housing market, was actually ignited by the oil price run-up of 2008 – another consequence of foreign dependence.

So what does Fuel Freedom plant do next? The team has a four-point 2013 agenda:

1) Generate public support through media and communications, including a full-length documentary film illustrating the potential of alternative fuels.

2) Challenge the Environmental Protection Agency to remove commercial and regulatory barriers.

3) Develop a proposed Fuel Conversion Plan to present to the Obama Administration that would include pilot programs at the state and national level.

4) Build alliances with other environmental groups, energy security organizations, think tanks and NGOs.

By the end of the evening, the 400 guests had had their fill of food, drink and entertainment. Far from dampening spirits, the move inside had made the evening even more enjoyable. Nor were they unwilling to express their gratitude. Inspired by the impassioned presentations from Woolsey and Goldmark, plus a spirited video message from Virgin Airlines founder Sir Richard Branson, the illustrious gathering pledged more than $500,000 to begin America's move toward a future free from foreign oil.

William Tucker
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