Bixby Energy's make-or-break test of coal-to-gas process set for China

Bixby Energy Systems, a Minnesota company with technology to convert coal to natural gas, says it will fire up its first commercial unit in China by early July -- a test that could determine the firm's future.

Board Chairman Gil Gutknecht said Friday that the test of the Bixby process at a Chinese glass factory unit will show whether the technology works.

"We are optimistic," the former congressman from Rochester said in an interview. "We have got an awful lot of people who are very interested in this technology."

It may be the last chance to save a company whose former chief executive quit last month, ending litigation by Gutknecht and others alleging gross mismanagement. Gutknecht, an investor and director, ended up at the helm.

Federal agencies, including the U.S. Securities and Exchange Commission, still are investigating Bixby's former executives, and the company is cooperating with requests for information, Gutknecht said.

Dennis DeSender, who helped Bixby raise $60 million from investors even though he had fraud convictions, is scheduled to be sentenced in federal court on June 29 for tax evasion. Former CEO Bob Walker and former corporate counsel Peder Davisson, who also resigned, have not been charged.

Bixby, based in Ramsey, began in 2001 as a maker of corn-burning stoves, but switched to coal conversion in 2008. The Bixby process uses technology developed by Sherman Aaron of Wilksboro, N.C., who is no longer involved in its development because of pending litigation with Bixby over licensing and manufacturing.

Gutknecht said Bixby will be sending engineers to China in the next two weeks for the testing, which could be completed by July 4. Four coal-gas units have been completed, and a fifth is under construction -- all for customers in China.

Aaron, in an interview, said he hasn't been asked to assist with the launch and expressed concern that the first commercial unit may not work because of modifications to his design.

"Good luck to them," said Aaron, who contends that Bixby sued him to gain control of the technology and the manufacturing rights. "The sad part about it is if they hadn't gotten so greedy up front, all five of those units would be built and in operation right now."

In a letter to shareholders this week, Gutknecht and two other board members announced that Bixby will license the technology to a partner company marketing the technology in China and that company intends to construct future units there.

Turning coal into gas isn't new. From the late 19th century until the middle of the last century, "city gas" was produced through controlled partial combustion of coal, and piped to streetlights and homes in many U.S. cities. The industry disappeared as natural gas pipelines spread.

China, which is rich in coal, is interested in Bixby's updated version of the technology, Gutknecht said. The buyer of the unit to be tested is a mine owner, he added.

Aaron said his process heats natural gas in an oxygen-free chamber to force volatile gases out of the coal. The process doesn't release pollutants, and leaves a carbon product that can be sold, he said.

Bixby, which was described as insolvent in court papers, is operating with capital from its marketing partner in China, but money is so tight that plans to hire a turnaround firm have been dropped.

Gutknecht said Bixby this year will hold its first shareholder meeting in five years, and will announce details soon.

While many shareholders remained loyal to the company's former CEO, others have adopted a wait-and-see attitude about the new leadership and direction.

"I am not quite sure that it's good, and I'm not sure it is bad," said Gary O'Keefe, a real estate agent in Spring Lake Park who owns Bixby stock.

David Shaffer • 612-673-7090