Oil prices fuel options

PHOENIX — With the price of oil still above $100 a barrel, everything from wood chips to chicken fat is being scrutinized as an alternative to traditional fuel. But when it comes to airplanes, finding the right mix poses a special challenge.

"When you're in an airplane, you don't want your fuel to start solidifying," said Robert Dunn, a Department of Agriculture chemical engineer who is studying biodiesel jet fuel.

The airline industry is aggressively pushing for homegrown alternatives to petroleum-based jet fuel, while leaning on customers with a variety of new travel charges to help control a projected $61 billion industrywide fuel expense this year. A number of alternatives to standard jet fuel have been studied for years, though aircraft manufacturers say the challenge is to find ideas that will work now.

Jet engines can be retrofitted to run on hydrogen, for example. But hydrogen does not pack the same punch as traditional jet fuel — kerosene — and would require airlines to buy planes designed with massive tanks. That is a tough choice for cash-strapped carriers, said Billy Glover, managing director of environmental strategy at Boeing Commercial Airplanes.

The best bet right now for non-conventional fuel comes from South Africa, experts said. The country has powered its airline industry for a decade using a coal-based jet fuel blend developed by petrochemicals group Sasol. It's technically a "synthetic" fuel, which means it can be used without altering engines or other aircraft equipment.

A number of U.S. companies are developing a variety of similar synthetics. Airline experts say three companies in particular could provide as much as 3 million gallons a day of synthetic fuel by 2012: American Clean Coal Fuels in Portland, Ore., Baard Energy in Vancouver, Wash., and Rentech Inc. in Los Angeles.

Though significant supplies will not be ready for several years, the Commercial Aviation Alternative Fuels Initiative (CAAFI) — a coalition that includes the Federal Aviation Administration and airline, manufacturing and airport associations — wants to set standards by the end of the year for a 50 percent synthetic jet fuel. CAAFI wants standards for a totally synthetic fuel ready in two years.

Executive Director Richard L. Altman said the push for new fuel standards is meant to show investors that airlines will buy synthetic fuel. Doing so will send needed dollars to energy startups that one day may replace foreign oil, Altman said.

"Nobody will invest unless the fuel is certified," he said. "So we have a bit of a chicken-and-egg problem."

Meanwhile, Boeing and Air New Zealand later this year will test a biofuel made from the oil-rich seeds of the jatropha tree, a Mexican plant that grows in warm climates. Other tests will follow on Continental Airlines and Japan Airlines flights. In February, Boeing partnered with Virgin Atlantic to test a fuel that included a biofuel mixture of babassu oil, which comes from a palm tree in northern Brazil, and coconut oil.

But many biofuels may create more problems than they solve, however. Using edible feedstocks such as corn and sugar could raise the price of food. And palm trees for babassu and coconut oil could lead to clearing large chunks of rain forest.

These are some of the reasons why algae-based synthetic fuel is getting a lot of attention. Algae is inedible, and it has a relatively high yield compared with other crops.

Investors have pumped almost $84 million into companies developing algae-based fuel so far this year, up from $29 million in all of 2007, according to Cleantech Group, an industry research firm.

Despite its promise, it will be years before algae biofuel could be sold at a price that would make sense to an airline, said Dave Jones, co-founder of LiveFuels, an algae fuel startup in San Carlos, Calif.

"If anyone is below $50 a gallon, I'd be stunned," he said.

Even if prices come down, most airlines see synthetic fuel as a chance to run a greener airline, not necessarily a cheaper one, said Nancy Young, Air Transport Association's vice president of environmental affairs.