Biofuel Bill

Montana's two Democrat senators have introduced a stand-alone bill that would give the Defense Department long-term contracting authority to purchase aviation biofuels and synthetic fuels -- something the Pentagon has sought and the biotechnology industry is hailing as a way to provide financial certainty to investors backing biofuels production, sister publication Defense Environment Alert reports today:

The bill, S. 3807, was introduced by Sens. Max Baucus and Jon Tester Sept. 20. The bill would give DOD authority to enter into contracts for up to 20 years to purchase liquid synthetic or biomass-derived aviation fuels or fuel blends that are domestically produced, do not interfere with food stocks, and meet EPA renewable fuel standards, according to the legislation. Current law generally limits DOD to signing five-year contracts with one-year extension options.

DOD has been seeking to lengthen contract terms in order to propel private investments in renewable and alternative fuels for mobile uses. Earlier this year, the White House approved a DOD proposal to seek legislation in the fiscal year 2011 defense authorization bill that would allow for longer contracting authorities as a way to boost private sector investments in renewable and alternative fuels. But House lawmakers in their passage of the defense bill declined to fulfill the request, instead directing DOD to produce a report on whether existing contracting authorities are adequate. The Senate has not yet completed work on its version of the defense bill, with plans to take up the bill on the floor again after the November elections.

Long-term contracting authority would allow developers of alternative and renewable fuels to point to long-term contracts with DOD as a way to persuade financial institutions to support loans for developing facilities to produce the fuels. Brent Erickson, with the Biotechnology Industry Organization, said in a Sept. 23 press statement that such a measure could provide the needed certainty for leading companies and investors to provide capital for large-scale biofuel production. While advanced biofuel producers are already working with the military to test their fuels for aviation and other uses, "efforts to commercialize advanced biofuels have been hampered during the recent recession by lack of access to institutional funding," he said.

Sources with the Coal-to-Liquids Coalition could not be reached for comment on how the bill might aid coal-to-liquids (CTL) production. CTL has been controversial among environmentalists and some lawmakers because CTL emits significantly more lifecycle greenhouse gas emissions than fuels from petroleum if carbon capture technology is not used.

It was unclear at press time whether the bill, if passed, could revive a plan abandoned by the Air Force in 2009 to site a CTL fuel production facility at Malmstrom Air Force Base in Montana. A spokeswoman for Baucus' office did not respond by press time to questions on the issue.

The Air Force cited operational concerns and worries over security when it backed out of the plan. The project, the brainchild of Bush-era officials who have since left the Air Force, had been under review for some time, but it courted controversy because of the questionable environmental credentials of CTL fuels and possible related legal difficulties stemming from a requirement in a 2007 energy law that bans the federal government from using fuels with lifecycle greenhouse gas emissions higher than those of conventional petroleum.

InsideDefense.com reported in July about a new study by retired admirals and generals that urged the Pentagon to play a leading role in the development and testing of clean energy technology and forge a new partnership with the Energy Department -- just as the two departments are poised to announce tighter ties:

The report, titled "Powering America's Economy: Energy Innovation at the Crossroads of National Security Challenges," states that the Defense Department's size, energy consumption and innovation track record would enable it to "provide the testing ground and the economies of scale necessary to begin the innovation that could ultimately change the course of the country."

The study is slated for release by the CNA Military Advisory Board July 27, hours before Navy Secretary Ray Mabus and Energy Secretary Daniel Poneman and other senior administration officials are scheduled to participate in a White House forum on clean energy and energy security. The same day, DOD and DOE will also sign a memorandum of understanding on these issues, an industry source said.

The CNA study calls on the defense and energy secretaries to ensure the departments closely align their research and development work, funding and "intellectual capital."