By Jared Serbu
Reporter
Federal News Radio

Three large agencies issued a message to the U.S. biofuels industry Tuesday: We’re from the government, we’re here to help, and we have a half billion dollars.

The Navy, along with the Agriculture and Energy Departments want to build a domestic alternative-energy industry that can stand on its own two feet. And once that industry is up and running, the Navy says it is willing to commit itself to being a large, long-term customer.

The three agencies updated their biofuel plans Tuesday in a nine-page request for information. They have collectively identified $510 million in federal funds that they are willing to put up to help get the industry off the ground.

The agencies intend to spend the money under a provision of the Defense Production Act, a Cold War-era law that lets the government pump funds into private industries that it deems to be critical to military operations.

But Navy Secretary Ray Mabus said industry would have to put some capital on the line as well.

“It would have to matched at least one-to-one by the private sector,” he said. “Part of our request for information is financial. How much matching funding would a company or group or financial entity be proposing to use?”

Under Title III of the Defense Production Act, any new production capacity created by the kind of public-private partnership the Navy envisions must not outstrip the demand in the marketplace. Said another way, the new biofuels industry base the agencies want to build can’t be allowed to produce more of its own government-subsidized product than the nation’s economy can buy, lest it become dependent on ongoing subsidies for its survival.

That warning note aside, Mabus said the government has wide latitude with how it allocates the $510 million. “It can be used for capital expenditures, it can be used for feedstock, it can be used for stabilization, it can be used for a whole range of things,” he said. “The entire goal is to establish a viable private industry. This government assistance is to get the industry started, but then it could stand on its own two feet.”

Once the industry reaches that point, Mabus said the Navy would be a guaranteed customer. The department is willing to sign contracts of at least five years with companies that can supply the new fuels — fuels the Navy Department will need if it is to achieve its goal of getting 50 percent of its energy from non-fossil sources by 2020.

The fuels would have to be drop-in replacements for the petroleum products the Navy and Marine Corps are using now, and the services envision running ships and aircraft on a 50-50 blend of biofuels and traditional fossil fuels. The Navy has already demonstrated the concept with several aircraft, including an F-18 fighter, an MV-22 Osprey and, just this week, a T-45 training jet.

One other requirement: The total greenhouse gases emitted through both the production and the burning of the fuel can’t be greater than what’s produced from today’s fossil fuels.

According to the RFI, the fuels the Navy wants would be replacements for JP-5 and JP-8 jet fuel, as well as F-76 fuel, a military grade fuel similar to diesel which is used to power engines and turbines aboard the non-nuclear ships in its fleet. The RFI places special emphasis on the state of Hawaii, where it says the Navy has a particular interest in alternative fuels.

Mabus said the department wants to see at least one biofuel refinery in the Aloha state.

“That’s for a couple of reasons. One is for geographical diversity. A second that Hawaii is the most dependent on imported oil of any state in the union,” he said.

The RFI is open for 30 days. The Navy, Agriculture and Energy want to see responses back by the end of September. Mabus said it’s industry’s first chance to engage with the Navy on its alternative energy plans, but it’s just the start of what will be a very long process.

“We are fully engaging now with industry, with the biofuels industry, with the financial industry, with agriculture, to take the steps that are necessary and learning from them what they see as the next steps to create a nationwide, competitive, advanced biofuels industry.”

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