BY JIM DOOLEY – For the third time in three years, the Legislature has approved issuance of $40 million in special purpose revenue bonds for a company that says it has a process to convert organic waste and even old tires into energy.

The first bond approval in 2009 was on behalf of Carbon Diversion, Inc., but it was cancelled the following year after company ownership changed in a hostile takeover and the new owners were sued by federal securities regulators for fraud.

A new bond issuance was approved last year and again this year for Carbon Bio-Engineers, Inc., founded by the original owners of Carbon Diversion.

Gov. Linda Lingle vetoed the 2010 bond authorization bill, saying that the new company had not “satisfactorily resolved issues associated with the patent and licensing” of the technology it uses to produce energy.

There are still unresolved patent issues regarding that technology, according to Jonathan Roberts, an official in the University of Hawaii Office of Technology Transfer and Economic Development.

Roberts said today that UH had licensed technology developed by UH professor Michael Antal to Carbon Bio-Engineers.

“That license is not current,” said Roberts.

“They maintain that they have developed a technology separate from ours,” he said.

The company’s website says that it uses a “thermal conversion of organic material” process that “was originally developed in conjunction with the University of Hawaii Energy Lab, with Dr. Michael Antal.”

Roberts said the company “should not be saying that. My understanding from them is that they have independently developed it. Do I believe that? I don’t know.”

Antal could not be reached for  comment.

“I know Dr. Antal would not like that they are still mentioning the collaboration with him” on the website, Roberts said.

Tim Newberry, a marketing executive with Carbon Bio-Engineers, said today, “We are not employing his technology. We’ve made some major modifications to what he has presented.”

Newberry said the company has “our own letters from patent attorneys that have looked at both patents and gave their recommendation or report that ours is not in conflict with the University’s.”

“Obviously the genesis of our system came from some of the work that Dr. Antal did, that’s for sure,” he continued.

“We would like to have a continuing working relationship with them. We’ve just got to figure out some of, all of what they’re looking for and of course what we can provide,” Newberry said.

The bond authorization bills passed by the Legislature this year and last year were requested by Hawaii state Democratic Party chairman Dante Carpenter, secretary of the board of directors of Carbon Bio-Engineers.

He told legislators in written testimony that the company “has developed a hybrid gasification carbonization process which can reduce various organic feedstock and tires (non-fossil fuel) into carbon, synthetic gas and biofuel products.”

The company is working on projects on the Big Island with the state Department of Hawaiian Home Lands, according to Carpenter.

“These projects will process a range of organic streams from biomass green-wastes to tires to macadamia nut shells, among others,” Carpenter testified.

Special purpose revenue bonds are not financially guaranteed by the state but bestow federal tax benefits on the companies for whom they are issued.

In commenting on the $40 million bond bills last year and this year, the state Department of Budget and Finance warned that IRS tax exemptions could be limited to $10 million of bond proceeds.

Sen. Sam Slom, R-Hawaii Kai-Diamond Head, raised concerns about the bill on the floor of the Senate Tuesday and encouraged fellow senators to vote against the bill, but as he is the only legislator of 76 who opposed the measure.

 

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Jim Dooley joined the Hawaii Reporter staff as an investigative reporter in October 2010. Before that, he has worked as a print and television reporter in Hawaii since 1973, beginning as a wire service reporter with United Press International. He joined Honolulu Advertiser in 1974, working as general assignment and City Hall reporter until 1978. In 1978, he moved to full-time investigative reporting in for The Advertiser; he joined KITV news in 1996 as investigative reporter. Jim returned to Advertiser 2001, working as investigative reporter and court reporter until 2010. Reach him at Jim@hawaiireporter.com