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Obama Admin. Announces $510 Million Biofuels Initiative

August 17, 2011
By: Jim Wiesemeyer, Pro Farmer Washington Consultant

via a special arrangement with Informa Economics, Inc.

U.S. Navy will serve as guaranteed market

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

The Obama administration announced it will invest up to $510 million over the next three years to help finance advanced biofuels production, with the US Navy serving as a guaranteed market. The administration said Tuesday’s agreement will jumpstart the country’s biofuels industry, creating new jobs in farm states.

The biofuels initiative is being steered by the White House Biofuels Interagency Work Group and Rural Council.

Navy Secretary Ray Mabus said the plan will improve national security by making the country’s military less dependent on oil from volatile nations. "Having energy independence for the US is one of the most important things we can do from a military standpoint," Mabus said.

The heads of USDA, the Energy Department, and the Navy said the goal of the plan is to encourage production of advanced biofuels, made from cellulosic feedstocks such as grass and straw, that could be used by the Navy as ship diesel fuel and jet fuel without needing new engines to accommodate the fuels.

Each of the three segments of the administration would contribute up to $170 million to assist in constructing biofuel plants or retrofitting existing plants, the officials said. The government will put out a competitive solicitation seeking at least a one-for-one match of private dollars to federal dollars, according to Energy Secretary Steven Chu and USDA Secretary Tom Vilsack.

The feedstocks selected would have "no significant impact on food crops," Vilsack said, alluding to the criticism of conventional ethanol that it diverts crops from human consumption. He added that the administration wants to see several different feedstocks used. The goal also is to develop biofuels with prices competitive with petroleum, Vilsack said.

Vilsack said the program would help construct and to retrofit a number of domestic and commercial and pre-commercial scale advanced drop-in biofuel plants and refineries. "Each of which will have the following characteristics: The capacity and capability to produce ready drop-in replacement advanced biofuels which will meet military specifications at a price that is competitive with petroleum," Vilsack said. He added that these plants must be located where there is ready market access and must not impact the supply of food.

Where will the money come from?

Vilsack said USDA's share of the funding for the new program will come from the department's Commodity Credit Corp. (CCC) program. That program and the Biomass Crop Assistance Program provide payments to biomass crop producers. "This isn't about new spending," he insisted. "We have to spend less, but we have to invest wisely. And I think you're going to find that the initiatives we're talking about are not necessarily about new spending, but by directing that spending and focusing it and leveraging it with additional resources."

Chu, noting that the Energy Department already provides support for 29 biorefinery projects, said he expects continued funding for such types of projects.

Mabus said the Navy would be "repurposing" funds for the new program.

Facts and figures. The U.S. Defense Department (DOD) is a one of the world's largest consumers of fuel, representing close to 2 percent of annual US petroleum use. In 2008, DOD purchased $16 billion worth of fuel, using 119 million barrels of petroleum. Together, with the private commercial airline industry, DOD uses 1.5 million barrels (63 million gallons) of jet fuel per day.

The Biotechnology Industry Organization issued a statement applauding the new program. But Paul Winters, a spokesman for the industry group, added that the willingness of companies to make the investments may not be known until the government puts out its solicitation and the time comes for bids late this year. There still will be investment risks, Winters said, but "having a guaranteed market in the military would mitigate some of the risk."

Comments: Obviously the use of CCC gets around the biggest question on any initiative in Washington -- how will it be paid for. And the Energy Dept. discovery relative to switchgrass and biofuels production could be a key in the process of meeting the goal that has long been elusive -- cellulosic ethanol production that goes beyond the lab and is commercially viable.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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