By Steven Mufson

The Washington Post

About 16 months ago, a Florida-based biofuel company called Algenol noticed that its Internet service was slowing down. In checking that out, Jack Voth, Algenol’s information technology chief, stumbled on something odd: a telnet connection to its videoconference camera from an Internet Protocol address in China, a country where Algenol has never sought to do business.

That was only the beginning. Ever since, Algenol has been on high alert for what Voth describes as “nefarious activity;” the company estimates that hackers have attempted to break into its computers 39 million times in four months this year, triple the level of a year earlier.

The most serious of these were more than 63,000 attempts that came directly from China, including 6,653 attempts over 15 months from IP addresses and servers that Algenol says are the same as the Peoples’ Liberation Army addresses identified in a public report by Mandiant, a leading computer security firm.

Another Internet trail led Algenol to Aliyun Computing, the cloud computing subsidiary of Alibaba, one of the most powerful online commerce and retail giants in China. Interest in the company is running high because it is set to launch what may turn out to be the largest initial stock offering in U.S. history. Alibaba says Algenol mischaracterized ordinary Internet traffic as attacks.

What makes a small company in Florida so interesting to cyberspies? Algae.

It’s not usually the stuff of trade secrets, but Algenol, a company with about 125 employees, is developing technology that converts algae biomass into transportation fuels, including biodiesel and gasoline — all while consuming the greenhouse gas carbon dioxide rather than producing it. Algenol’s work would interest anyone who wants to curb climate change. As the Chinese government tries to limit the hazardous pollution that has upset its citizens, it has set out to increase biofuel production tenfold.

That might be enough incentive for Chinese cyberspies.

“This is not at all unusual. China has made the decision to focus on alternative energy as a topic of industrial espionage,” said James Andrew Lewis, a cybersecurity expert at the Center for Strategic and International Studies.

He said the Chinese government and state-owned enterprises have targeted trade secrets for soap, house paint and wooden furniture. “It doesn’t have to be about national security,” Lewis said.

Algenol isn’t alone in its battle against Chinese computer attacks. In May, the Justice Department indicted five members of the Chinese military on charges of hacking into computers and stealing trade secrets from leading steel, nuclear-power and solar-power firms. China denied the charges. Foreign Ministry spokesman Qin Gang said in a statement that they were “purely ungrounded and absurd,” adding that the United States had “fabricated facts” in the indictment.

Algenol chief executive Paul Woods says little has changed following the indictments and expressed frustration about the rising tide of attacks. Hacking attacks come from many countries, he says, but most are efforts to steal credit-card information. Chinese hackers, by contrast, tend to target trade secrets and unique technology.

“What are you going to do? Sue them in a Chinese court? You have no recourse,” said Woods, adding that the Justice Department indictments would not touch the alleged culprits or change behavior and were “a joke.”

Algenol, which hasn’t built a large-scale plant, has spent hundreds of thousands of dollars on technology to protect its computers, but the volume of attacks — not only from China, but also from the United States, Germany, Russia and Taiwan — has made it impossible to track all the sources and log complaints with them.

Just sorting out the connection between the attacks and Alibaba quickly turned Byzantine.

Alibaba rejected Algenol’s characterization of the attacks. Even so, the company — after learning about Algenol’s complaint through The Washington Post — took action to shut down traffic from one server that had been hijacked by unknown users to break into other computer systems.

Algenol executives said they weren’t accusing Alibaba itself of trying to pilfer its technology, but both companies said that stopping such behavior was part of Alibaba’s responsibility.

Algenol’s real expertise isn’t its computer technology. It lies in a field in Fort Myers, Florida, where the company is letting thousands of plastic bags of algae bake in the sun. The company pumps carbon dioxide and some brackish water into the bags and produces four transportation fuels — ethanol, gasoline, diesel and jet fuel. Woods says it can do this for about $1.27 a gallon thanks to proprietary techniques.

The process works in two steps, first producing ethanol from the algae and then converting the spent algae biomass into biodiesel, gasoline and jet fuel. It resembles an idea Woods dabbled in as a biology student at the University of Western Ontario.

The Canadian-born Woods, who retired to Florida after making a fortune in the natural gas distribution business, and a Mexican businessman initially invested $70 million in the venture a few years ago after the price of oil surged past $50 a barrel. In 2009, the Energy Department tapped money under the economic stimulus program and gave Algenol a $25 million grant. India’s Reliance Industries later invested more.

The process has also drawn intense interest from both environmentalists and businesses worried about limiting greenhouse gases. Algae absorbs carbon dioxide instead of emitting it, and Algenol says it can convert more than 85 percent of the carbon dioxide it uses in the process into fuel.

China has made the search for commercial biofuels a priority.

“With rapid economic development, energy consumption in China has tripled in the past 20 years,” wrote a group of six Chinese biochemical engineers, four of whom work at the Institute of Process Engineering at the Chinese Academy of Sciences.

“The search for new green energy as substitutes for nonrenewable energy resources has become an urgent task,” they wrote in an overview of existing literature in the October 2011 issue of Applied Energy, a publication of the Dutch giant Elseviers.