LS9's world headquarters looks like a dorm room on move-out day. The reception area at the biotech company's San Carlos, California, digs is stark white, unashamedly bare. No one has bothered to spring for prints or posters for the walls, not even from Ikea. Haphazard stacks of boxes line every corridor. It's no surprise LS9 doesn't put much of a premium on appearances—after all, its most important employees are patented microbes too small to be seen. "This is where we grow the bacteria," says Steve del Cardayré, the company's vice president for research and development, leading me to a lab space no bigger than your typical college double. He points to a vat containing an oatmeal-like slurry—carbohydrates derived from plant matter that feed the microbes. "After they're finished growing, all we have to do is take the mixture out and spin it, and density makes it separate into its components."
The most important of those components is 21st-century black gold: a compound chemically identical to the diesel fuel that powers millions of U.S. cars and trucks. LS9 leads the newly emerging pack of companies that, with DNA-engineering technology, are custom-creating potentially lucrative species of bacteria that can manufacture fuel on command. LS9's biggest competitor, Emeryville, California-based Amyris Biotechnologies, recently started making bacteria-based diesel in addition to its longtime focus on developing a bioengineered malaria drug. And biotech's big daddy, Craig Venter, a champion of modifying microorganisms to make fuel, has entered the fray; his latest brainchild, Synthetic Genomics, plans to create bugs that excrete hydrogen and ethanol—though, due to the complexity of engineering completely new organisms, the company likely won't produce any fuel for years. But LS9, founded in 2005, has a head start on its rivals—and is closest to putting bacterial gas in your tank.
As crude-oil prices have risen toward the $100-per-barrel mark, the arguments for alternative fuel sources have grown stronger. "What intrigued me was the strong economic case for bacteria fuel," says LS9 president Robert Walsh, who joined the startup after 26 years at Royal Dutch Shell. Because the fuel produced by LS9's microbes is virtually pump-ready—requiring only a simple cleaning step to filter out impurities—making bacteria fuel uses 65% less energy than making ethanol, which needs extensive chemical processing that drives up its price and damages its good-for-the-planet cred. LS9's finished product also has 50% more energy content—a gallon of bacteria fuel would last your car about 50% longer than a gallon of ethanol. "LS9's fuel has a number of advantages in terms of cost, security of supply, and impact on the environment," says Noubar Afeyan, CEO of Flagship Ventures, one of the VC firms that contributed to the startup's $20 million of funding in 2007. "It offers a commercially attractive path to sustainability."
That path began unexpectedly at Codon Devices, Harvard geneticist George Church's rapid-DNA-synthesis company. Church and his lab staff had regular brainstorming sessions in which they liked to muse on out-of-the-box applications for the technology they'd developed, which allowed them to redesign the genomes of existing organisms with a few mouse clicks. One day, someone suggested engineering a bacterium that could make fuel, since the lab had just been awarded a Department of Energy grant. "We're dependent on petroleum, so we don't need some alternative to petroleum. We need a way to make petroleum itself," del Cardayré says. "Biology can do it. Over the course of billions of years, cells have figured out that hydrocarbons are a good way to store energy."
Accordingly, LS9 is staking its prospects not on inventing an entirely new biological pathway, but on exploiting an existing one. Bacteria naturally turn the sugars they consume into fatty acids, which are later converted to lipids for storage. By a stroke of genetic serendipity, fatty acids are only a few molecular linkages removed from diesel fuel, so it has been fairly simple for LS9 scientists to tweak existing bacteria—including familiar varieties such as E. coli—to yield new, diesel-producing strains. "We divert those fatty acid pathways," del Cardayré says. "It's like a detour."
The strategy has already met with small-scale success; an assortment of odd-shaped beakers lines the San Carlos lab's shelves, each holding a few teaspoons of amber-colored diesel. Walsh estimates large quantities of the finished fuel will be market-ready in three to five years. The company is also perfecting a bacterium that produces crude oil, which could be sent to refineries and turned into any imaginable petroleum product, from gasoline to Vaseline.
Still, a host of practical problems must be solved before this industry can take off, and some may prove to be deal breakers. For one thing, public skepticism about all things genetically modified, from food to pet goldfish, may make it difficult for these companies to gain regulatory approval for their products. In a 2006 Pew Initiative study, almost a third of respondents said they viewed genetically modified products as unsafe. "The cry right now is for anything to replace petroleum, but $95 crude is masking a lot of the issues," says Martin Tobias, a biodiesel expert and venture capitalist at Ignition Partners. "It's going to be 10 times harder to get something like this available and accepted than if you were using a naturally occurring organism. Think how difficult it is to get genetically engineered drugs approved."
Then there's the multimillion-dollar question of how to translate a beaker of success to global scale. No one has ever made genetically engineered fuel in industrial quantities, so no one knows what's going to happen when companies try to grow their bacteria in vats the size of trailers. Startups producing biodiesel from algae—which are closely related to bacteria—have encountered difficulties when trying to scale up; in large numbers, the organisms sometimes crowd one another out and emit toxic waste that halts the production process. "Even if you can do this in a test tube, getting the same kind of quality on a large scale could be an issue," says Tom Todaro, CEO of Targeted Growth, a company that's aiming to increase the efficiency of biodiesel production. "People fail to understand how big the oil and gas industry is—just how much fuel you have to be able to produce in a day to compete."
Church admits the challenges are daunting; he isn't picturing bacteria-fuel pumps at every Mobil station just yet. "We know we'll be competing with hydrogen, ethanol, and electric cars," he says. But in unguarded moments, he dares to dream: "If this works out, much of the current motivation for switching away from hydrocarbons might vanish." Why seek an alternative to petroleum, he figures, when a microscopic army of trillions can churn it out for you 24-7?
A version of this article appeared in the February 2008 issue of Fast Company magazine.