Floating US Biofuels: Should the Navy Support a New Industry?

19 january 2013

 

New Hampshire, USA — Touting the biofuels industry as the nation’s road to gain energy independence, the U.S. military wants to help move it forward. But government committees have proposed bills to block investment, arguing that it is too expensive and risky. Is the military the industry’s only hope for scale?

These days, it’s common to see a household with at least one car in its driveway. That same house is also likely to hold a personal computer. And the inhabitants of the home are just as likely to own a smart phone. But just one decade ago, most consumers could not have dreamed of owning these possessions. How did these innovations come to fruition? Each of these industries — automobile, computer, phone — went through periods of research and development, consolidation, and scale to become affordable and attractive to the major public market. The renewables industry is going through this same process — and the biofuels market is no exception.

But to become large-scale and cost-competitive with fossil fuel, the biofuels industry must continue to travel through a major research and development phase — a phase which also requires major investment. This is where the United States military — and controversy — enters the picture.

The history

The U.S. military, the Navy in particular, has been a major supporter for the advancement of the biofuels industry. In fact, the Navy has pledged to get 50 per cent of its operational requirements for liquid fuels from alternative, non-fossil sources by 2020 — an ambitious goal for such a young biofuels industry. But the military is passionate about the initiative and has taken major strides to bring it to fruition, claiming that its major priority is to achieve energy independence.

“We’re pursuing alternative energy because our reliance on foreign oil is a very significant and well-recognized military vulnerability,” said Secretary of the Navy General Ray Mabus. “Energy security has got to be at the top of our agenda. The ability to use fuels other than oil and gas is absolutely critical. It will increase our flexibility, it will increase competition, and it will reduce the service’s vulnerability to rapid and unforeseen changes in the price of oil.”

The controversy

In December 2011, the Navy purchased 450,000 U.S. gallons (1.7 million litres) of cooking oil- and algae-based drop-in biofuels for jets and vessels to be used by the Great Green Fleet at the biennial Rim of the Pacific (RIMPAC) demonstration, the world’s largest international maritime exercise, during summer 2012 off Hawaii. Dynamic Fuels produced the cooking oil-based fuel and Solazyme provided the algae-based product — each has been developed as a direct replacement for conventional fuels in engines without any modifications.

These biofuels were mixed in a 50/50 blend with traditional fuel, which cost around $15 per gallon. The Navy intends to achieve full-scale deployment of this type of blend by 2016.

But just one month before RIMPAC, the biofuels industry and the military encountered a possible roadblock. The House and Senate Armed Services Committee issued its report on next year’s Pentagon budget with Pentagon Budget Bill, HR 4310, which included a measure to exclude the development and purchase of biofuels that cost more than traditional fossil fuels.

The exclusions, however, do not eliminate all alternative fuels. The Committees recommend the Defense Department’s exemption from previous restrictions that prevent federal agencies from buying fuels that are more polluting than conventional fossil fuels. This would allow the military to use the Fischer-Tropsch method, which generates gas to liquid fuel from coal and natural gas — and also emits more carbon than burning refined crude oil.

With a shrinking defense budget, the committees believe that the military should focus on creating more vessels, supplies, and other necessities, rather than pushing money into a new, risky and expensive industry.

“I understand that alternative fuels may help our guys in the field, but wouldn’t you agree that the thing they’d be more concerned about is having more ships, more planes, more prepositioned stocks,” said Representative Randy Forbes during a hearing with Mabus. “Shouldn’t we refocus our priorities and make those things our priorities instead of advancing a biofuels market?”

The bill passed through the Senate Armed Services Committee with a 13-12 vote and the House with a 299-120 vote, creating a backlash throughout the government and biofuels industry.

Agriculture Secretary Tom Vilsack expressed his frustration with the decision during a conference call: “It’s beyond me why we wouldn’t help this industry that will create higher farm income, more jobs in rural America, reduce the costs for consumers, satisfy commercial airlines and make our military less reliant on a foreign supply of energy,” he said. “It is just astounding that people don’t understand that.”

Vilsack explained that the future of the biofuels industry is closely tied with the military, especially the Navy, and investments today will help bring down costs in the future — and costs have already come down. The Navy purchased biofuels in October 2010 at $42.40 per gallon, but paid $26.67 per gallon for the RIMPAC exercise, which then cost $15 per gallon when blended with traditional fuel.

Though the Committee’s goal is to reduce overall costs and purchase the current lowest-priced fuels, military officials argue that with each one dollar increase in the price of a barrel of oil, it costs the Navy about $30 million. In 2012, the Navy was presented with a nearly $2 billion bill for additional fuel costs, which was paid by moving funds from Afghanistan — officials say that this is not sustainable and can be detrimental to the military.

“If we do not do something to tap down these price spikes, there are only a couple places that we have money to get for additional fuel costs,” said Mabus. “One is operations, which means we steam less, we fly less, we train less. The other is to take platforms, ships or airplanes away. I don’t want to have to make that choice.”

A coalition of 13 aviation groups have also banded together to protest the Committee”s decision, claiming in a letter to the Senate that the bill would severely damage the advancement of the biofuels industry and hinder American energy independence.