Obama admin inks ‘game changer’ deals with biorefineries

Source: Annie Snider, E&E reporter • Posted: Monday, September 22, 2014

The Obama administration’s hard-fought effort to use military purchasing power to spur the creation of a commercial-scale biofuel industry took a major step forward this morning with the awarding of three new fuel contracts.

Together, the contracts are for the production of more than 100 million gallons per year of drop-in biofuels to be used in military jets and ships. The weighted average price of the fuel under the contracts is $3.45 a gallon, the administration said — roughly the price for conventional military fuels and far less than the $27 a gallon the Navy paid for 450,000 gallons of biofuels for use in exercises in 2012.

Navy Secretary Ray Mabus, who first conceived of the initiative, which pulls expertise and funding from the Departments of Defense, Energy and Agriculture, cast today’s announcement as a triumph for national security and for innovation.

“This initiative is in the spirit of adventure that motivates people to join the Navy and the Marines,” he said at a White House event this morning. “If you join the Navy or the Marine Corps, you don’t join it to stay home; you want to see what’s over the horizon, you want to see what comes next, you want to be a part of what the future is going to bring.”

Agriculture Secretary Tom Vilsack said the contracts, as well as $70 million in government funding each, are going to Fulcrum BioEnergy Inc. for production of 10 million gallons a year from municipal waste, Red Rock Biofuels LLC for 12 million gallons a year from woody biomass, and Emerald Biofuels LLC for 82 million gallons a year using waste fats. Production is scheduled to begin in 2016.

The agencies said the fuels would have lower life-cycle greenhouse gas emissions than conventional fuels. The $210 million in government funding is being matched by more than $700 million in private-sector funding secured by the three companies.

This morning’s announcement was not just a boon for biofuels companies and those who argue that they provide a national security benefit, but also a major political win for an effort that has faced challenges on multiple fronts since it was first conceived in 2011.

During 2012, Mabus came under sharp criticism from congressional Republicans for the initiative, as well as plans to demonstrate a “green fleet” — a carrier strike group running entirely on alternative fuels — during exercises in the Pacific Ocean. Opponents nearly stripped funding for the interagency effort in the fiscal 2013 defense authorization bill, but supporters of the program ultimately won out (E&ENews PM, Nov. 29, 2012).

Then, when sharp budget cuts hit the Department of Defense last year, Defense Secretary Chuck Hagel considered delaying the program (Greenwire, May 22, 2013). White House proponents won that argument, and last May, $20.1 million in government funding was awarded to four biofuels companies for planning and designing (Greenwire, June 21).

Supporters of the program who helped navigate it through the array of political minefields welcomed today’s announcement.

“Adopting advanced ‘drop-in’ biofuels will help the Department of Defense and the nation achieve its broader national security goals,” said Michael Breen, spokesman for the veterans renewable energy group Operation Free. “As the largest institutional consumer of fuel in the world, our military is dangerously vulnerable to the volatile global oil market. Domestically produced alternatives improve American energy security, help supply our military around the world and grow the economy here at home.”

In a call with reporters, Mabus said the 100 million gallons of biofuels are a key step toward his overall goal of meeting half the service’s energy needs with alternative sources by 2020.

“We’re exactly where we need to be,” he said. “This truly is a game-changer in terms of, this is going to make alternative fuels just the new normal.”