Is FutureFuel misleading investors on biofuels?

March 16, 2009

Touting its products to investors, biofuels manufacturer FutureFuel Corp. states in its annual Form 10-K report filed with the U.S. Securities and Exchange Commission that,

Biodiesel is a sustainable, renewable transportation fuel with a growing market in the United States and internationally. See http://www.emerging-markets.com/biodiesel/default.asp . As an
alternative to petrodiesel and other petroleum-based fuels, biodiesel has several advantages, including:

  • extending domestic diesel fuel supplies;
  • reducing dependence on foreign crude oil supplies;
  • expanding markets for domestic and international agricultural products;
  • reducing emissions of greenhouse gases and other gases that are regulated by the United States Environmental Protection Agency [Emphasis added] (see, e.g., http://www.cyberlipid.org/glycer/biodiesel.htm ); and
  • being usable by existing diesel engines while extending their useful lives (see, e.g., http://www.cyberlipid.org/glycer/biodiesel.htm ).

But with respect to biodiesel reducing greenhouse gas emissions, it’s quite possible that the claim is more fantasy than fact. You may remember this New York Times headline from February 2008:

Biofuels make greenhouse gases worse, scientists say

At the very least, there is controversy about the greenhouse gas footprint of biofuels, including FutureFuel’s biodiesel.

The federal securities laws are based on two pillars — a requirement of full and fair disclosure of material facts and a prohibition on fraudulent activity. FutureFuel’s unqualified touting of biodiesel seems to lack a basis in reality and would seem to be the very sort of thing that the federal securities law prohibit.

Or does the act of pleading green entitle one to a “Get Out of the Truth Free” card?

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