Navy Biofuel Contract: Another Solyndra?

By | January 19, 2012

At a time when the military budget is under attack and is being cut, the Department of Agriculture and Department of the Navy announced earlier this month (December, 2011) that the Navy bought 450,000 gallons of biofuel at $26 per gallon, $16 per gallon if the biofuel is mixed with regular jet fuel. That is up to nine times the cost of regular jet fuel. In August, 2011, the Obama administration announced their intentions to spend $510 million during the next three years to buy advanced “drop-in” biofuel for military transportation. The purchase is part of the Obama administration’s “We Can’t Wait” initiative, which involves bypassing Congress when possible. And all of this comes as Obama cancels the Keystone XL oil pipeline that would facilitate access to the estimated 1.7 trillion barrels of oil in North America.

And as is becoming quite frequent while Obama is in office, cronyism plays a part. The Navy entered the contract with Louisiana-based Dynamic Fuels for $12 million for aviation fuel. Dynamic Fuels is a partnership of three firms, Solazyme, Syntroleum (a 50/50 venture with Tyson Foods), and Tyson Foods. Solazyme received $21.7 million from the American Recovery and Reinvestment Act (the stimulus) to build a “biorefinery.” T.J. Glauthier a principle at Solazyme, served on President Obama’s White House transition team, where he focused on energy issues for the recovery act.

The biofuels will all be used this summer off the coast of Hawaii. There, supersonic F/A-18 jets, powered by fuels fermented from algae, will launch from the deck of an aircraft carrier. A 9,000-ton destroyer and a cruiser, using fuel made from fats and greases, will join the aircraft carrier on a voyage across the Pacific. The aircraft carrier itself is nuclear powered. It will be the first demonstration of the so-called “Great Green Fleet” – an entire aircraft-carrier strike group relying on alternative energy sources.

Jared Youing, a spokesman for Senator James Inhofe (R-OK), who has supported biofuel projects in the past, said, “The Department of Defense should not purchase alternative fuels that are priced 9 time higher than conventional fuels – $26.75 per gallon to approximately $2.85 per gallon – because those extra costs will further eat away at other necessary budget items such as operations, maintenance, training, and modernization. In addition, the alternative fuel is less available on the front lines, making its use more restrictive.”

“It’s another Solyndra situation in that they’re trying to keep some of these businesses afloat when the economics just don’t make sense right now. Give them a few million and they will be able to continue to exist,” said Dan Simmons, director of state and regulatory affairs at the Institute for Energy Research. He continued, “Mixing the biofuel with conventional fuel will help keep the price to less than what it could be, say $16 per gallon, but that’s still expensive.”

As part of his energy security goals of March, 2011 in the “Blueprint for a Secure Energy Future,” President Obama ordered the departments of Agriculture, Energy and the Navy to advance “drop-in” biofuel substitutes for diesel and jet fuel so the military will not be dependent upon foreign oil. “Drop-in” fuels do not require any engine modifications in order to be used. But the United States has 1.4 trillion barrels of oil waiting to be exploited, enough to last the military (and civilians) for 200 years. Dependency on foreign oil is not the problem, rather it’s an unwillingness to open up more areas for drilling.

If the US governments stopped subsidizing biofuels, their artificial “profitability” would disappear overnight. Price-wise, they can’t compete with fossil fuels. Subsidizing them while they can’t compete is not a method with any record of success for encouraging price efficiency. What it does instead is create public dependencies (with the American taxpayer footing the bill) and a tremendous opportunities for cronyism.

November, 2012, just can’t get here soon enough.

But that’s just my opinion.

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