April 12, 2007

Development alliance builds between forest and energy giants

Here's a match that demonstrates the mutually beneficial synergy possible between collateral sides of the energy paradigm shift.

On the one hand we have Weyerhaeuser - epitome of the evolving forestry management and paper industry - looking for new ways to enhance the value of their raw assets (forestry resources and wood waste) while reducing their liabilities (high overhead as their paper products operations face an uncertain future). On the other, Chevron - fossil fuel giant with unseemly profits in direct proportion to their public relations liabilities.

It was Chevron and their California oil production which would have been taxed the most had Prop 87 passed. While it may be hard for them to admit, Prop 87 probably accounts for many of their recent investments in biofuel development. In short, it was a wake-up call. That and the fact that they are now buying ethanol at increasingly high prices to blend as an oxygenate in most of their biggest markets (5.67% of gasoline in California). Expect the trend of states to adopt legislation requiring higher blending percentages to increase.

Whatever the reasons, this is a good sign that wood, forestry sustainability, environmental impacts, and forest industry carbon emissions will begin to receive increased attention and development funding because of their value as a source of perennial, non-food biomass.

Here is the full text of their joint press release:

Chevron and Weyerhaeuser Create Biofuels Alliance
Letter of Intent Aimed at Development of Renewable Transportation Fuels Derived From Cellulose

SAN RAMON, Calif. and FEDERAL WAY, Wash., April 12 /PRNewswire/ -- Chevron Corporation (NYSE: CVX) and Weyerhaeuser Company (NYSE: WY) today announced a letter of intent (LOI) to jointly assess the feasibility of commercializing the production of biofuels from cellulose-based sources.

The companies will focus on researching and developing technology that can transform wood fiber and other nonfood sources of cellulose into economical, clean-burning biofuels for cars and trucks. Feedstock options include a wide range of materials from Weyerhaeuser's existing forest and mill system and cellulosic crops planted on Weyerhaeuser's managed forest plantations.

The two companies said the partnership reflects their shared view that cellulosic biofuels will fill an important role in diversifying the nation's energy sources by providing a source of low-carbon transportation fuel. The venture leverages the strengths of both companies, combining Chevron's technology capabilities in molecular conversion, product engineering, advanced fuel manufacturing and fuels distribution with Weyerhaeuser's expertise in collection and transformation of cellulosics into engineered materials, innovative land stewardship, crop management, biomass conversion and capacity to deliver sustainable cellulose-based fiber at scale.

"Chevron is investing in cellulosic biofuels because we believe they will play a role in meeting future energy growth," said Dave O'Reilly, chairman and CEO of Chevron. "This collaboration aligns with our long-term business strategy to accelerate the commercial development of nonfood based biofuels. While there are several research and technology hurdles that will need to be addressed before large-scale commercialization of cellulosic feedstocks occurs, we believe this partnership will accelerate the achievement of that reality. Both partners share the objective of sustainable commercialization of these fuels at industrial scale."

"Weyerhaeuser takes ideas from the laboratory to the forest and mill to create innovative uses and value from our forest and land resources -- in this case, a sustainable source of renewable energy for transportation," said Steven R. Rogel, chairman, president and chief executive officer for Weyerhaeuser. "Crops created for and dedicated to fuel feedstocks offer the opportunity to augment value creation from our managed forest lands. We are pleased to partner with Chevron to combine the power of our forestlands, knowledge of cellulose technology and legacy of environmental stewardship with Chevron's expertise in energy technology. Working together we can create new, sustainable sources of biofuel."

Both Chevron and Weyerhaeuser already have separate research partnerships under way to accelerate the development of cellulosic biofuels. Chevron has forged alliances with the Georgia Institute of Technology, the University of California at Davis, the Colorado Center for Biorefining and Biofuels, and the U.S. Department of Energy's National Renewable Energy Laboratory. Weyerhaeuser is collaborating with several research universities, national laboratories and technology-based companies in research on conversion of forest products into ethanol and other biofuels.

Many states nationwide are seeking opportunities to diversify fuel sources with secure, renewable, low-carbon and environmentally sustainable alternatives. Ethanol produced from biomass such as forest and agricultural waste does not present a conflict with food supply sources such as corn and is considered greenhouse-gas neutral when derived from sustainable management practices.

About Chevron
Chevron is one of the world's leading energy companies. With more than 56,000 employees, Chevron subsidiaries conduct business in approximately 180 countries around the world, producing and transporting crude oil and natural gas, and refining, marketing, and distributing fuels and other energy products. Chevron is based in San Ramon, Calif. More information about Chevron is available at http://www.chevron.com.

About Weyerhaeuser
Weyerhaeuser Company, one of the world's largest forest products companies, was incorporated in 1900. In 2006, sales were $21.9 billion. It has offices or operations in 18 countries, with customers worldwide. Weyerhaeuser is principally engaged in the growing and harvesting of timber; the manufacture, distribution and sale of forest products; and real estate construction, development and related activities. Additional information about Weyerhaeuser's businesses, products and practices is available at http://www.weyerhaeuser.com.

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