Obama admin offers funding for biofuels initiative opposed by Hill Republicans

Source: Annie Snider, E&E reporter • Posted: Thursday, July 5, 2012

The Obama administration is pressing forward with its controversial defense biofuels program, announcing $62 million in government funding opportunities today, even as legislation to block the initiative works its way through Congress.

The opportunities are the first major ones to be put forward as part of a $510 million joint effort among the departments of Energy, Agriculture and the Navy aimed at building a domestic, commercial-scale biofuels market using a defense procurement law.

Under a funding opportunity announcement, companies can compete for a share of $30 million in federal funds to help ramp up to commercial-scale production. Industry must match that investment on at least a 1-to-1 basis. Companies that participate in that phase will then be eligible for the next, which includes as many as three separate awards of $70 million to begin production, according to the announcement.

Also today, the Department of Energy unveiled plans to make $32 million in new investments in early-stage biofuels research. Those include $20 million to support pilot-scale and demonstration-scale biofuel refineries, as well as $12 million for research projects focused on developing bio-based transportation fuels and synthetic biological products.

The announcements come amid a firestorm on Capitol Hill over the military’s portion of the programs.

The House moved to block the Navy’s part of the effort in May, including a provision in its 2013 defense authorization bill that would prevent the Navy from purchasing commercial quantities of biofuels that is at a higher price than traditional petroleum (E&ENews PM, May 18). Although Navy officials have said they will not make operational purchases until the fuels are cost competitive, they say that the provision could interfere with research, development and demonstration efforts including the interagency program

And just before Memorial Day, the Senate’s version of the defense bill emerged from committee with two provisions aimed at blocking the biofuels initiative. The upper chamber could begin debate on the bill as soon as this month, but Sen. Mark Udall (D-Colo.) and others have vowed a floor fight aimed at stripping the provisions (E&E Daily, May 25).

Regardless of the outcome of the legislative battles, their existence alone is making industry nervous. Paul Winters, spokesman for the Biotechnology Industry Organization, said that he has seen some of his member companies conclude that the program is too uncertain to put the effort into competing for it.

“There are other ways for large companies to invest their capital if they think this program is not going to provide an opportunity for the foreseeable future,” Winters said. He also noted that the uncertainty around the program makes it more difficult for firms to win the private investment that they would need to put up.

But Navy Secretary Ray Mabus maintained an optimistic tone this morning, stressing that it is still early in the legislative process and noting that the new funding opportunities are already funded and authorized by last year’s defense bills.

As he does frequently, Mabus also emphasized the military’s history of making such investments. During World War II, he said, Congress authorized what would today be $370 million in building synthetic fuel demonstration plants, paying significantly more per barrel than the going rate.

“We don’t want to be in the position of having to trade readiness for fuel,” he said. “That’s simply a trade that’s unacceptable and that’s a vulnerability we have to address, and this will help address it.”