Testimony of

Jason Pyle, Chief Executive Officer,

Sapphire Energy, Inc.

before the

Committee on Energy and Natural Resources

United States Senate

June 12, 2008

*"Transcending Food vs. Fuel:*

*Moving Toward a Technology-Neutral RFS"*

Mr. Chairman and members of the Committee, thank you very much for
inviting me to participate on this important panel, and on this critical
issue.

First, let me thank the Committee for its leadership on alternative,
renewable fuels. Your keen focus and vision have resulted in the first
ever Renewable Fuel Standard. Although there will inevitably be elements
of RFS that will improve over time, you've guided the country along on
the right path. Second, within the RFS debate, I want to thank this
Committee for its vision and support for technology neutrality in RFS
legislation, even though that vision did not survive final passage. As
you predicted by supporting a technology neutral position, we are now
seeing the evolution of an entirely new generation of renewable fuels.
These fuels transcend the use of food as fuel feedstock. The current
dilemma that pits fuel against food is just the first of many
consequences of a technology-specific RFS. Without a technology-neutral
RFS, this nation will not meet its goals of providing 32 billion gallons
of renewable fuel by 2022. Although last year's Energy Independence and
Security Act has yet to foster such solutions, this Committee should be
applauded for anticipating an ever-expanding universe of alternative and
renewable fuels.

That's why I am here. I'm Jason Pyle, Chief Executive Officer of
Sapphire Energy. Sapphire is one of several of this nation's best
technology companies working to produce the next generation of renewable
fuels. At Sapphire, we focus on the production of current fuel products,
such as gasoline, diesel and aircraft fuel, from completely renewable
sources, such as photosynthetic microorganisms, or algae. Our mission is
to produce fuels for today's oil and gasoline infrastructure, and two
weeks ago we announced that Sapphire had produced the first ever
renewable, ASTM-compliant, 91 octane gasoline from microorganisms.
Please refer to the attached two documents for more background on
Sapphire Energy.

[The Problem]{.underline}

One of the many reasons we have cheap food is the availability of cheap
energy. We cannot expect to turn large amounts of food back into energy
in an economic manner. In today's debate between food and fuel, we
should not have to make a choice. Both are critical to the economy, the
environment and the world at large; we should not match one against the
other. But when price and demand rise for one, both suffer. Instead of a
Pyrrhic choice between food and fuel, I offer the opportunity to
transcend the debate and produce ample supplies of both, leading this
nation toward energy independence. Instead of a dispute between two
basic necessities, we need a dialogue that supports truly sustainable
alternative fuel sources.

Over the past year we have all seen prices and demand rise for
commodities such as corn, sugar and vegetable oil. The entire world now
feels the pressure. Daily we are faced with reports of people who
struggle to afford essentials. A host of factors has contributed to
price increases for food and fuel: weather, heightened demand, a weaker
dollar, decreasing supplies.

Just like energy, food is linked in a global market. Once we begin
fueling our cars with food crops, we witness international
repercussions. Riots occurred in Mexico earlier this year over expensive
corn flour. This price increase has been attributed to U.S. demand for
corn-based ethanol products, leaving less maize available for export.
Protests over similar issues have occurred around the world,
contributing to inflation and political instability.

Even at an increased rate of production, current domestic biofuel
processes will meet part, but not all, of U.S. demand.  If the entire
annual domestic soybean crop of 3 billion bushels were converted to
biodiesel at the current efficiency of 1.4 gallons per bushel, it would
provide about 6.5% of U.S. diesel fuel production.   Though certainly a
valuable asset to our fuel supply, it is clear that a spectrum of
additional and diverse biofuels sources will be necessary to fulfill
demand.

Congress first adopted the Renewable Fuels Standard in 2005, but wisely
recognized that neither biodiesel nor ethanol would be the final
solution. It created the program as a bridge to a new generation of
fuels, and established a system of incentives to create a marketplace
for new technologies. Congress should consider whether the incentives
are neutral and fair. Ask whether these mechanisms will lead to the
support and development of fuels that will give America true energy
independence. Congress should ensure that the next round of incentives
can be applied to advanced technologies such as Sapphire's. American
innovation is the heart of our people and our economy; I urge you to
support this with additional legislation that promotes a
technology-neutral RFS.

[The Solution]{.underline}

Food for fuel concerns are real, but can be managed. Industries such as
ethanol from corn and biodiesel from vegetable oil can continue to play
an important role in the energy mix. However, if we intend to
practically and economically reach the goals of the RFS, we must be
ready to rapidly embrace new fuel technologies. We must call on American
ingenuity and entrepreneurialism for the solutions.

When Congress passed the Energy Policy Act of 2005, it put the country
on a path toward an energy future independent of imported resources. As
Americans, we must support this vision. We should strive to maximize
production, create fuel-efficient cars, reduce the amount of driving we
do and, finally, develop alternatives to fossil fuels. All these efforts
deserve increased support. But without a truly new source of fuel, the
system will remain in turmoil, prices will soar and the conflict between
food and fuel will persist.

Senators, my colleagues and I at Sapphire Energy have been thinking
about this for a long time. We knew that an energy source based on
agriculture would serve this country best as a stepping stone to a green
energy future. We knew that energy requiring vast amounts of fresh water
resources was not a viable option. And, finally, if we wanted to make a
difference quickly, we knew we needed a fuel that could be transported
and refined just like petroleum. Two years ago we asked ourselves, "In a
perfect world, how should the next generation of fuel be produced and
distributed?" These were our founding principles:

1.  Fuel production must not use farmland. Period.

2.  Fuel production must be carbon neutral.

3.  Fuel production and delivery must use the existing petroleum
    infrastructure.

4.  Fuel production must scale domestically to reach tens of billions of
    gallons per year.

5.  The next generation of fuels must be compatible with today's
    vehicles.

That sounded like a tall order. But Americans have dreamed big and
delivered in the past -- atomic energy, highways and railroads that
crisscross our nation, a man on the moon, mapping the human genome. Now,
a similar ingenuity has developed a completely renewable and homegrown
source of gasoline. I offer that we do not have to sacrifice food
production for fuel production. We do not have to choose between
powering our industries and feeding the hungry.

The Sapphire processes and technologies are so revolutionary that the
company is at the forefront of an entirely new industrial category
called "Green Crude Production". Products and processes in this category
differ significantly from other biofuels because they are made solely
from photosynthetic microorganisms, sunlight and CO~2~; do not result in
biodiesel or ethanol; enhance and replace petroleum-based products; are
carbon neutral and renewable; and don't require any food crop or
agricultural land. The Sapphire process produces a replica of light
sweet crude, green crude that can be used in traditional refining to
make real gasoline, diesel, and aircraft fuel. Our feedstocks produce 10
to 100 times more energy per acre than cropland biofuels. A side benefit
of our process is that the microorganisms consume pollutants and convert
them to fuel. Using the Sapphire process, we have dramatically altered
the domestic energy and petrochemical landscape and avoided the food
versus fuel debate.

Please allow me to reiterate, the Sapphire process does not create
ethanol; it does not produce biodiesel; it does not use crops or
valuable farmland. Sapphire fuel is the fuel we use today, the kind that
is in your car or truck or airplane right now. It's gasoline, diesel and
aircraft fuel. Senators, this is a solution. This is a truly renewable,
truly sustainable, alternative fuel--- "Sapphire's green crude oil".

This fuel, Sapphire fuel, is the world's first truly renewable
petrochemical product, produced by converting sunlight and CO~2~ into a
renewable, carbon-neutral alternative to conventional fossil fuels,
without the drawbacks of current biofuels.

This fuel is compatible with the current energy infrastructure---cars,
refineries, and pipelines.

Sapphire's scalable production facilities will produce this fuel
economically because production will be modular, transportable, fueled
by sunlight, and not constrained by arable land, crops, or other natural
resources. Sapphire has turned sunlight into gasoline.

[The Government's Role]{.underline}

Governments often offer subsidies in areas in which they hope to create
incentives for certain economic behaviors. Naturally, governments must
act as arbiters to separate those who qualify from those who do not
qualify for the subsidies. Unfortunately, sometimes those separations
create an artificial division that prevents the subsidies from achieving
their goal. The nation has asked for energy independence and cleaner
fuel products. Thankfully, our lawmakers have responded and given us a
Renewable Fuel Standard. Unfortunately, the artificial division of
technology within that standard is hindering the most promising fuel
technologies from developing alongside existing renewable industries.
The nation asked for energy independence and cleaner fuel products, not
a specific subsidy for a specific fuel process. If we want to have 32
billion gallons of renewable fuel in 2022, we are going to need every
source of technology and development possible to deliver it. Please take
the handcuffs off of innovation and allow all forms of renewable
technology to participate in the Renewable Fuel Standard.

We at Sapphire are fortunate in that we receive financial support from
top venture capital firms such as ARCH Venture Partners and Venrock, and
from one of the world's largest and most visionary foundations, the
Wellcome Trust. Not all emerging producers of green crude or renewable
gasoline, however, will be so fortunate. By continuing to subsidize
mostly the existing technologies instead of emerging alternatives, the
government runs the risk of discouraging a real future of renewable
energy.

I support technology neutrality when it comes to subsidies for renewable
fuels. In other words, none of the technologies and products that would
help achieve the RFS should receive favorable treatment---not biodiesel,
not cellulosic ethanol, and not fuels from algae. A growing competitive
market should separate winners from losers. A subsidy system should
support a constantly changing landscape of fuel and fuel technology. I
recommend a technology-neutral platform that supports criteria rather
than specific feedstocks, fuels or fuel processes. I am offering a
future that relies on non-arable, non-agricultural land; a future based
on domestic fuel production and a supply of fuel we use today within 5
years time. I believe this will be an essential part of the renewable
fuel landscape and I urge you to assist me and other innovative
companies with technology-neutral legislation.

[Conclusion]{.underline}

The unfortunate phrase "food vs. fuel" suggests a conflict, a dilemma.
We have faced this dilemma because there have been virtually no viable
alternatives to existing sources of fossil fuel. Until now. At Sapphire
Energy, we can change all that. This is the fuel that can address the
food versus fuel dilemma by enabling ample production of both.

Thank you again, Mr. Chairman, for the opportunity to appear before you.
I will gladly take questions from you and the Committee at the
appropriate time.