Tuesday Hearing Could Affect DOD Biofuels Program

NOTE: Senate Armed Services Readiness Subcommittee Markup Tuesday, May 22, 11 a.m. Dirksen Office Bldg., Ground Floor, Room 50 – open press

NOTE: Senate Armed Services Readiness Subcommittee Markup Tuesday, May 22, 11 a.m. Dirksen Office Bldg., Ground Floor, Room 50 – open press

U.S. ENERGY SECURITY EFFORTS UNDER ATTACK IN ANNUAL DEFENSE BUDGET BILLS

House Defense Bill Undermines Public-Private Initiative to Develop Domestic Alternative Energy Sources to Reduce Reliance on Foreign Oil

Pew’s Director of Clean Energy, Phyllis Cuttino, is available to offer comment and perspective. Please let us know if you would like to talk with her!
SUMMARY:
The House on Friday approved a $642 billion annual Defense authorization bill, 299-120. Included in the bill are harmful provisions that would undermine efforts to reduce the military’s dependence on the volatile global oil market. The language (authored by Rep. Conaway (R-TX) would prohibit the DOD from pursuing its public-private initiative to develop a cost-competitive commercial supply of advanced biofuels. It would also repeal a law that stipulates if the DOD buys alternative fuels, those fuels cannot emit more carbon than conventional petroleum.

The DOD spends more than $11 billion each year on oil. For every $10 increase in the price of a barrel, that costs the DOD another $1.4 billion. For the airlines, fuel is the largest part of their annual budgets.
The DOD (particularly the Navy and Air Force) have successfully tested and certified the use of these “drop-in” advanced biofuels in close to the entire legacy fleet. Drop-in biofuels require no changes to current engine technologies and provide the same power and torque as traditional fuels. These biofuels would be domestically produced from non-feed foodstocks such as camelina, switchgrass and algae. Commercial airlines such as United, Alaska Airlines and Continental have also flown commercial domestic flights on advanced biofuels.

The public-private initiative, which would require a $70 million commitment in the FY 2013 DOD budget, is strongly supported by the advanced biofuels manufacturers, commercial airlines, the American Farm Bureau, veterans organizations and the DOD.

The Senate Armed Services Committee takes up their version of the FY 2013 National Defense Authorization Act (NDAA) this week. Although Chairman Levin supports DOD’s efforts to reduce its dependence on the volatile oil market, harmful amendments similar to the House provisions could occur during Committee consideration this week (Tues-Friday) or during floor debate later this year. Senator Inhofe (R-Okla.), a senior member of the committee, vowed to push amendments.

BACKGROUND:
Memorandum of Understanding (MOU), Public-Private Initiative:
The DOD, USDA and DOE last year signed an agreement, an MOU, to collaborate with the private sector to develop a cost-competitive commercial supply of advanced biofuels for the DOD and airlines industry to reduce their and the nation’s dependence on costly foreign oil.
The current challenge with using advanced biofuels is that it is not yet produced in large supply even though the DOD and airlines have had strong success in using the advanced biofuels as “drop-in” fuels in multiple pilot projects in recent years.
The DOD has asked Congress to fund $70 million of this public-private initiative that will serve as the seed money to build or retrofit refineries to produce the domestic advanced biofuel. $40 million has been requested by the Department of Energy. In order for the MOU to work, the private sector must at least match the government’s total $570 million investment (USDA will provide $170 million).
The House Armed Services Committee earlier this month passed an amendment to the 2013 NDAA bill that would ban the DOD from buying biofuels. Amendment supporters argued (Rep. Michael Conaway (R-TX)), with the argument that the price of advanced biofuels is too high to fuel military fleets.
Here’s why that thinking is flawed: the DOD has no plans to buy advanced biofuels to fuel their fleets. They won’t use alternative fuel for their fleets UNLESS there is a cost-competitive supply available. They’ve only TESTED the use of advanced biofuels as a “drop-in,” ready-made fuel for their current engines, and they have worked.

The next step is developing a commercial supply as quickly as possible. That’s what the MOU aims to do. The agencies provide seed money ($70 million from the DPA — the rest of the $510 mil from DOE and USDA) that the private sector must at least match.
There is no short term solution to reducing our dependence on foreign oil. Without the DOD’s commitment, it will be much harder and take much longer for the private sector to build these refineries on their own because investors want to make sure that there is a long-term future and demand for it before they invest in it.
Again, this funding would serve as a catalyst to the development of a commercial supply of domestic alternative fuels. It would help create new American jobs and reduce our nation’s dependence on foreign oil and a volatile global oil market.
Section 526 Repeal:

The House Armed Services Committee also passed a Conaway amendment that repeals Section 526 of the Energy Independence and Security Act of 2007, which says if federal agencies (including DOD) uses alternative fuels, they must not emit more greenhouse gases than conventional petroleum. This is not a new attempt to repeal Sec. 526. Numerous attempts occurred during the FY 2012 authorization and appropriations bills last year, but those harmful provisions were removed from the final bills that were enacted.

DOD is the largest institutional energy consumer, and Section 526 has been a key tool in its efforts to reduce its reliance on foreign oil and find alternatives in order to address oil price shocks, security of supply and dependence on foreign oil. Repeal of Section 526 would counter its progress.
The military cannot develop these fuels on its own—it needs the help of the private sector. In for businesses to attract the private financing they need to bring these fuels to scale, they need certainty. Section 526 provides the legislative certainty that the Defense Department will serve as an early adopter and prime customer for these fuels. Without Section 526, the burgeoning advanced biofuels industry in America will be put at risk.

SOURCES:

  • Pew Project on National Security, Energy and Climate
  • American Biofuels Association
  • A4A: Airline association
  • American Farm Bureau
  • Senator Mark Udall (D-CO): Senate leader of the advanced biofuels effort; Member of the Senate Armed Services Committee, Member of the Senate Energy and Natural Resources Committee.
  • Senator Jeff Bingaman (D-NM): Chairman of the Senate Energy and Natural Resources Committee, Leader of advanced biofuels effort.

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