By Dietrich Knauth
Law360, New York (July 19, 2012, 9:48 PM EDT) — The U.S. Navy’s “Great Green Fleet,” a biofuel-powered aircraft carrier group that conducted training missions in the Pacific on Wednesday and Thursday, could help the Navy overcome congressional obstacles to its biofuel investments by showcasing the new fuels’ reliability, experts say.
Republican lawmakers have criticized the Navy for investing in expensive biofuels at a time of declining defense budgets, and both the U.S. House of Representatives and the Senate Armed Services Committee have passed proposals that would stop future purchases of alternative fuels if they carry a higher price tag than oil or gasoline. But several senators are pushing to reverse those restrictions before they become law, and the successful demonstration could help them make their case.
Sen. Mark Udall, D-Colo., said Thursday that he supports the Navy’s “smart investments in homegrown green technology” as a way to reduce the military’s reliance on foreign oil. Udall believes the Senate will eventually remove anti-biofuel provisions in its version of the 2013 National Defense Authorization Act, and a successful green fleet demonstration in the Pacific Rim can help convince opponents of biofuel investment.
“I have every confidence that the tests will show that domestically produced, renewable fuels have the capability to power our ships, aircraft and vehicles,” Udall said. “This is an exciting time, and this exercise will be remembered as a great step forward for our military and for American energy security.”
To fuel the green fleet demonstration, the Navy paid about $26 a gallon in December for 450,000 gallons of biofuel created from a blend of used cooking oil and algae, in the largest advanced biofuel purchase in U.S. history. Congressional critics of the Navy’s biofuel spending, including Rep. Randy Forbes, R-Va., and Sen. James Inhofe, R-Okla., who wrote the Senate amendment that would block biofuel buys, have focused on that $26 per gallon price tag, and Inhofe has criticized the military’s energy strategy as an excuse to support “liberal energy projects” at the expense of traditional firepower and combat readiness.
But Udall is not alone in seeking to roll back Inhofe’s amendment. He’s joined by fellow Armed Services Committee members Sens. Susan Collins, R-Maine, and Jeanne Shaheen, D-N.H., who wrote in an op-ed that the Navy’s biofuels could shield the U.S. Department of Defense from swings in oil prices, which is more efficient in the long run than investing all its funds into building more ships, planes and tanks.
“Every time a barrel of oil goes up $10, the Defense Department pays $1.3 billion more in fuel costs,” the senators said. “That’s roughly the equivalent of building a new destroyer — then sinking it in the middle of the ocean.”
The Pentagon said that price hikes for oil caused it to spend $3 billion more on energy costs than it had planned last year, money that will have to be diverted away from other priorities. Supporters of military biofuel say that its benefits are plain — alternative fuels could shield the Pentagon from energy price hikes, reduce dependence on foreign oil and support a new domestic energy industry.
The Truman National Security Project, which advocates for national security from a progressive political viewpoint, has lobbied members of Congress through ads featuring retired military leaders and through face-to-face meetings to support alternative fuels, including biofuel. Michael Wu, the group’s advocacy policy director, said Thursday that those meetings have left him encouraged that the Republican opposition to biofuels isn’t as solid as it is often portrayed.
“I think that more Republicans are likely to be supportive when the bill comes to the floor,” Wu said. “In reality, we’re much closer to ensuring that the military’s investments are maintained than maybe some of the coverage has indicated lately.”
The current fight over biofuels includes many more national security voices than previous congressional battles over alternative energy, including former military leaders who have firsthand experience grappling with the kind of budget tradeoffs necessary to pay for higher-than-expected fuel costs, Wu said. The green fleet’s fuel, while expensive, will come down in price once industry partners are able to establish economies of scale, and as an investment, it took up only 0.03 percent of the Navy’s budget, he added.
“The good news is that these fuels are becoming cost competitive incredibly quickly,” Wu said. “Advanced biofuels are getting cheaper more quickly than any other renewable source of power.”
Biofuel producers have said that the Pentagon’s planned purchases could help kick-start their industry by providing upfront investment and a long-term customer that will incentivize the building of larger refineries that can drive down costs through economies of scale.
“I think we need the jump start, but I think we can quickly get to a cost-effective price point,” said Riggs Eckelberry, CEO of OriginOil, which extracts gasoline from algae.
Eckelberry said that the Navy’s price tag for its the Great Green Fleet fuel contracts was not representative of biofuel’s already-declining cost because the Navy had chosen to buy a more expensive, high-quality fuel that has already been proven reliable. But OriginOil believes that it can sell biofuel at $2.28 per gallon, using existing technology, as long as it can leverage the economies of scale that would come with a 250-acre algae plantation.
Congress is right to push for lower prices, Eckelberry said, as long as there is a reasonable time frame for bringing costs down.
“[Congressional pressure] is good in its own way because it’s going to force the biofuel industry to stop making boutique fuels and start making mass biofuels that are cheaper,” Eckelberry said. Still, he added, “It’s unrealistic to say that it has to be done today, that’s just being obstructionist.”
While Navy leadership, including Navy Secretary Ray Mabus, has staunchly supported biofuels as a way to combat the military’s energy vulnerability, the demonstration also allowed sailors and pilots to experience the new fuel’s reliability for themselves.
Lt. Karen Smith, fuels officer for the guided-missile destroyer USS Chafee, said Thursday that the use of biofuels on Navy ships further enhances the overall readiness of the fleet by reducing the military’s dependence on foreign fossil fuels. The Chafee took on 250,000 gallons of the biofuel mix while participating in the Great Green Fleet demonstration.
“It gives the Navy a little bit more flexibility, and they know where it’s coming from,” Smith said. “Thinking about it economically, yes, it’s a little bit pricier on the front end, but everything new is. I think that, as time goes on, that cost will drive down. The added benefit of having that operational capability is a plus, and now it’s not left in foreign hands to decide what our fuel costs are.”
Published by Law360