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USDA, Navy and DOE Show Renewable Fuels Support By Becoming Investors

The U.S. DOE, the U.S. Navy and the USDA want to establish a biomass-based value chain capable of producing drop-in biofuels, and they are willing to spend the money to do so.
By Luke Geiver | July 02, 2012

The historic collaboration by the U.S. DOE, the U.S. Navy and the USDA to establish a biomass-based value chain capable of producing drop-in biofuels via $130 million in funding,  is a major boon to the advanced biofuels production industry. But, neither the unique federal agency team approach nor the simple fact that a few lucky applicants will be awarded that funding shows the significance of the offering. The available funding will not be given through a loan guarantee program or a tax credit. As Mark Riedy, partner for Mintz Levin PC, told me, this is investment money.

Don’t be distracted by the complexities of the funding protocol, one that will take place through a two-phase process. Applicants who aren’t accepted in phase one will not be eligible for phase two. The funding for phase one is guaranteed for 2012, but not for 2013. Applications are due by the middle of August, should not exceed the page limit noted in the directions, and, as Riedy says, should only be submitted by serious players.

Forget (at least until its time to apply) all of that, because the nature of this funding opportunity shows the support this industry has. This funding opportunity isn’t based on a federal agency’s willingness to vouch or cover for an advanced biofuels production company seeking a bank loan (loan guarantee), and this isn’t about a federal agency giving out a tax break. This is about a federal agency, the U.S. Air Force in this case, proving its support, want, and outright need for drop-in renewable fuels by doing the number one thing any organization or person can do: spend its own money.

The winners will be announced in March 2013. The funding doesn’t have to be awarded, but rest assured. Riedy says that this is going to happen, and that the Air Force intends to show its support for renewable fuels production. “They intend,” he told me, “to spend money.”

 

3 Responses

  1. Cliff Claven

    2012-07-02

    1

    The Department of Energy has already spent more than $600 Million on biorefineries since 2010. Now the Administration is using the Department of Defense to funnel more subsidies. These refineries go out of business (or never start) as soon as the free money dries up. Google "ethanol bankruptcy" and the endless list will water your eyes. There are failed biorefineries for sale all over the country, yet a government $16 Trillion in the hole is spending taxpayer money to build more. Biofuels are not just bad economics, they are bad thermodynamics. Dead end.

  2. Anti Clavin

    2012-07-03

    2

    Cliff, if you're so concerned about the national debt, why not put this $130M in perspective by discussing the more than $2B in annual tax incentives to the oil industry? The intangible drilling costs (IDCs) and percentage depletion allowance tax credits were initially offered back in 1916 and 1926 to the fragile but strategically important oil industry to get it off the ground. Your so-called "bad economics" of providing government support to emerging industries has created several perennial Fortune 10 companies, including this year's most profitable, ExxonMobil. The top 3 oil companies (XON, CVX, COP) collectively account for nearly $1 trillion in revenues and $80B in profits. These oil & gas companies have returned the government's investment more than a hundred-fold in tax revenues and jobs. That said, is it better economics to let taxpayers continue to support an oil & gas industry that is firmly established and needs no assistance? Furthermore, would you rather that a large percentage of military and domestic energy and chemicals spending go to support anti-American foreign regimes? The DoD correctly recognizes that the biorefining industry is of strategic importance to the security and future of our country. References: 1. http://online.wsj.com/article/SB10001424052748703421204576329411490520134.html 2. http://www.oilandgasjointventures.com/tax-benefits.html 3. http://www.fas.org/sgp/crs/misc/RL33578.pdf 4. http://money.cnn.com/magazines/fortune/fortune500/2012/full_list

  3. Buffalo Theory

    2012-07-03

    3

    @Cliff, how much extra taxpayer money is going to fund our increased deployment in the Strait of Hormuz, to protect our access to oil? How much more will it cost, in materiel and blood, if we get entangled in a fight with Iran? What will it do to our economy if the Strait is cutoff and the price of oil spikes? Our trade deficit is $50 billion per month, with nearly half of that for petroleum (http://www.census.gov/foreign-trade/Press-Release/current_press_release/exh9.txt). How do you think we finance that $20+ billion per month trade gap?

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