BP Berkeley Venture Means Big Money, Big Controversy

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Dow Jones Energy Service

HOUSTON, TX — Even among the recent string of energy industry-sponsored university research ventures, BP PLC’s (BP) $500 million Energy Bioenergy Institute led by the University of California at Berkeley is making a splash — and some serious waves.

The contract, expected to be signed in the next few months, is among the largest pacts ever between corporations and academic institutions. But at Berkeley, whose campus loves nothing so much as a good dustup, some fear the alliance could harm the school’s reputation for academic integrity.

“No BP. No BP,” students chanted on a recent video seen on YouTube. In another protest, also available on the Internet, the student group Stop Berkeley-BP staged a mock graduation ceremony with oil-stained diplomas.

The Berkeley brouhaha illustrates the credibility challenge facing Big Oil in some circles as it fashions its response to rising concern about global warming and the need for cleaner energy, an industry-wide quandary that presents unique hurdles for BP at this time.

Once hailed by environmentalists for being the first major oil company to acknowledge global warming as a major concern, BP has lost standing with non-governmental organizations in recent years. Its clean-energy venture comes on the heels of a series of recent accidents and scandals, including a deadly Texas refinery explosion in 2005 and a pair of oil spills in Alaska in 2006.

BP is “the one setting the agenda,” said Ignacio Chapela, a Berkeley professor of environmental science who opposes the contract. “The fact that it’s a lot of money doesn’t mean we have to accept it, especially coming from a corporation whose scandals don’t seem to end.”

The university’s administration acknowledges the concerns, but says they’re unfounded. The backing of a major oil company, with its deep pockets and global logistics, allows the university to “launch a large effort” to help avert an impending crisis, said Graham Fleming, deputy director of the Lawrence Berkeley National Laboratory.

BP spokesman Ronnie Chappell declined to comment on the intra-campus squabble. We’re confident that we’ll be able to achieve a final agreement with Berkeley that works for them and works for us,” he said.

Public university, public trust

BP‘s Berkeley program is the latest in a series of mostly-smaller clean energy research ventures sponsored by major oil companies.

ConocoPhillips (COP) recently announced a $22.5 million research program on biofuels at Iowa State University. Chevron Corp. (CVX) gave $12 million to the Georgia Institute of Technology and $25 million to the University of California at Davis for similar research, while Exxon Mobil Corp. (XOM) leads a $225 million Global Climate and Energy project headquartered at Stanford University.

Oil companies have been talking about protecting the environment for years, but these academic programs are among the most concrete steps they have taken in response to rising concern about global warming, in the absence of federal legislation mandating emission cuts.

Even though these programs are on the rise, they represent a minuscule percentage of what the companies spend prospecting for hydrocarbons, their main source of income. ExxonMobil, the largest global oil corporation, dedicates around $20 billion a year to its capital projects to find and develop and refine petroleum.

But the academic push is an acknowledgment by the industry that alternatives to hydrocarbons are needed to help quench the world’s growing energy demand, boosted by the rise of new industrial powers such as India and China. At the same time, growing environmental concerns call for fuels with lower greenhouse emissions, and methods to capture carbon dioxide, which is seen by most scientists as the leading cause of climate change.

While there has been little popular outcry at the Chevron and Conoco ventures, the projects have been controversial in California — and not just at Berkeley.

In March, Hollywood producer Steve Bing withdrew a $2.5 million donation to Stanford University after ExxonMobil touted its climate research partnership with the university in a TV commercial and several newspaper ads, according to news reports. The Irving, Texas-based oil giant has long been criticized by environmentalists for its stance on global warming.

Noting Bing’s move, the nonprofit Foundation for Taxpayer and Consumer Rights emphasized that Berkeley should be even more mindful of the public trust because it is a public university.

Berkeley must not become “a green wash for one of the world’s largest oil companies,” said a letter sent by the foundation to two of the university’s top administrators and California’s Lt. Governor John Garamendi. The letter said Berkeley should spike the deal if BP insists on control.

The criticism, paradoxically, comes at a time “finally the industry is doing something progressive and positive,” said Amy Myers Jaffe, head of the Baker Energy Forum at Rice University in Houston, a think tank that receives funding from the oil industry. “If it wasn’t such a large amount of money, I’d say it’s a publicity stunt, but the companies are serious.”

Difficult balance

BP chose Berkeley and its partners over other top universities because they “have a reputation for making big scientific breakthroughs and translating them into real world application,” said BP spokesman Chappell. BP scientists will have offices both at Berkeley and the University of Illinois, and the latter will provide 340 acres of farmland to study biofuel production.

Under the Berkeley agreement, BP would have a time-limited first right to negotiate an exclusive license to results arising from the research it funds, according to the Energy Biosciences Institute‘s website. The venture comes amid a surge in the San Francisco Bay area in venture capital for alternative energy ventures.

When BP selected Berkeley to lead its biofuels venture in February, some academics resented what they deemed as a surprise announcement. The Academic Senate — a governance board composed of Berkeley faculty — decided to back the project after a meeting in April.

But some faculty members and students still oppose the definitive signing of the deal, expected by mid-year. Opponents are still concerned about the influence BP‘s money will have on academic appointments and the direction of research.

Although abundant, the oil company money won’t distort Berkeley’s mission, said university spokesman Robert Sanders. BP‘s contribution would take the research funding Berkeley receives from corporate sources to between 5% and 7% of its total funding, up from its current level of 3%, he said. Over 90% of the university’s research funding comes from federal institutions such as the National Institute of Health and the National Science Foundation.

The debate has also spilled over the potentially disruptive environmental and social consequences of biofuels themselves. Some academics dismiss biofuel as a viable technology, arguing that it would raise food costs, encourage deforestation, and ultimately worsen the lot of the global poor. The effect of biofuels on greenhouse gas reductions would also be minimal, they say.

“We’re concerned by the consequences of turning the world into a farm,” said Chapela.

Some supporters of the project acknowledge that the university must remain vigilant and include a wide range of academic voices to ensure that the research will ultimately be profitable not only for BP or developed countries, but for the world at large.

“The whole project needs to be driven by the social sciences,” and not only natural scientists, said Daniel Kammen, who directs Berkeley’s Renewable and Appropriate Energy Laboratory.

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