There’s the Beef
It was nearly a year ago that I asked the White House in the November issue of this magazine, “Where’s the beef?” Well, this August all of us got a “whopper” of an answer as the Obama Administration announced that the U.S. Departments of Agriculture, Energy and Navy will invest up to $510 million during the next three years to produce advanced drop-in aviation and marine biofuels to power military and commercial transportation. The new initiative is part of President Obama’s Blueprint for a Secure Energy Future, the Administration’s framework for reducing dependence on foreign oil. As the U.S. writes a check for nearly $1 billion to foreign countries to pay for oil every day—that’s right, $365 billion each year—drop-in biofuels could replace or supplement existing gasoline, diesel and jet fuels, and have a significant impact on America’s balance of payments by reducing our dependence on foreign oil.
I have expressed before that I believe the administration’s investment in commercializing advanced biofuels is a matter of national security. Here are the facts. The U.S. Defense Department is a one of the world’s largest consumers of fuel, representing close to 2 percent of annual U.S. petroleum use. In 2008, DOD purchased $16 billion worth of fuel, using 119 million barrels (nearly 5 billion gallons) of petroleum. Together, with the private commercial airline industry, DOD uses 1.5 million barrels (63 million gallons) of jet fuel per day. Armed with just these few facts, you can see that our nation’s defense is at the mercy of the market just as much as we are when we pull up to the pump.
The departments subsequently issued a request for information (RFI) laying out the administration’s goals, assumptions, and tools and requesting specific ideas from industry on how to leverage private capital markets to establish a commercially viable drop-in biofuels industry. The RFI specifically enumerates a number of relevant considerations in terms of their awarding support to a particular project. Some of these include: the DPA is concerned with only domestic sources. Foreign capabilities will not be considered; a drop-in replacement fuel requires no change in systems configuration, engine architecture, fuel infrastructure or fuel handling; the maturity of specific technologies and biorefining operations that could be deployed to achieve commercial-scale production; recognition that 50 percent (1-to-1) is the minimum level of industry cost sharing that the government will entertain. There are many other points that are specifically itemized, which can be found at http://bit.ly/rojNJk.
As you can see from the RFI document requirements, the administration ultimately wants to build or retrofit several domestic commercial- or precommercial-scale advanced drop-in biofuel refineries to produce military spec fuels located throughout the U.S. for ready market access. They should also have no significant impact on the supply of agricultural commodities for the production of food.
USDA Secretary Tom Vilsack said the day of the announcement,“By building a national biofuels industry, we are creating construction jobs, refinery jobs and economic opportunity in rural communities throughout the country. As importantly, every gallon of biofuel consumed near where it is produced cuts transportation costs and, for the military, improves energy security.”
He is preaching to the choir to those of you reading this column, but it’s an important stake in the ground for the future and to garner greater support from Democrats and Republicans alike.
The president added, “Supporting biofuels cannot be the role of government alone. That’s why we’re partnering with the private sector to speed development of next-generation biofuels that will help us continue to take steps towards energy independence and strengthen communities across our country.”
The joint plan calls for the three departments to invest a total of up to $510 million, with a cost share from private industry of at least a one-to-one match for a total of more than $1 billion of investment. The USDA will work on securing feedstocks while the DOE will look for the right technologies. The Navy, which, as you know, is readying its Great Green Fleet, will be the customer. Fuel produced from the initiative also will be used by the private sector. But the government is emphasizing the needs of the military to have a strong source of domestic fuels.
The administration should be commended for continuing to demonstrate great foresight as it makes smarter investments in drop-in advanced biofuels, investments that will ultimately strengthen America’s economic and national security. The president’s leadership in renewable energy will help in commercializing advanced biofuels and successfully deliver ready-to-use replacement fuels for jetfighters, battleships, as well as commercial airliners and cars on the road today.
The outstanding question for the package is the ability to fund the full $510 million. It appears at this point the Navy and the USDA have the money in place for the first phases of the project. The DOE, I am told, has put in $6 million and plans to anti up its share of a $170 million in year three. All of this will require those of us who believe in the program to call on Congress to support this approach and fully fund it moving forward. Not an easy task in the current environment, but one that is essential for us to move the industry forward at this time.
So ladies and gentlemen, get your pens and keyboards ready to write those trusty folks in Congress in support of this effort. We will need your emails, cards and letters, and visits back home when your members return, to reinforce the importance of building the advanced biofuels industry of the future, right here in the U.S.
Author: Michael McAdams
President, Advanced Biofuels Association