Pentagon Moves Forward With Biofuel Boondoggle, A Byproduct Of The Obama Era

When then-Navy Secretary Ray Mabus went to the White House in 2014 to announce a major new initiative on biofuels, it was the culmination of years spent talking up the product as a way to make the fleet more secure and independent.

The Navy, along with two other Obama administration agencies, unveiled contracts with private companies to fund the construction of commercial biofuel refineries in the U.S.

The new facilities would turn animal fats, household garbage, and fallen timber from forest floors into more than 100 million gallons per year of military-grade fuel beginning around 2016, the White House said.

The alternative F-76 diesel and jet fuels would help power what Mabus dubbed the “Great Green Fleet” of Navy ships and aircraft, boost the domestic biofuels industry, and fight climate change.

Nearly four years later, the initiative has not produced a single drop of biofuel for the Navy or anyone else, at least not yet.

Mabus’ vision is, however, quietly moving forward under the Trump administration. The Pentagon has authorized $140 million to help build two biofuel refineries in recent months, a move that has agitated some top Republican lawmakers who have long opposed what they see as a waste of taxpayer money.

“I would be interested certainly in seeing if the government could get out of those contracts and certainly not spend additional money toward that end,” Rep. Mac Thornberry, R-Texas, the chairman of the House Armed Services Committee, told the Washington Examiner.

Fulcrum BioEnergy, a California company, was given access to $70 million in matching funds in October to build a refinery outside Reno, Nev., that will turn municipal waste into fuel, the Pentagon said.

In December, the department authorized another $70 million for a refinery project by Red Rock Biofuels in rural Oregon that aims to reduce the chances of forest fires by making biofuel from fallen trees and other potential tinder in forests.

“The biofuels contracts date back to 2013 and are still being executed due to legally binding contractual language,” said Adam Stump, a Pentagon spokesman.

The Nevada and Oregon plants are what is left of four original projects supported by the prior administration. Two other companies were given $10.8 million to design refineries, but those projects never panned out.

The money is being distributed through the Pentagon’s Defense Production Act program, which was created during the Korean War to stoke the defense industrial base.

It comes from the Navy and the departments of Energy and Agriculture as part of an Obama-era agreement to spend more than half a billion dollars to boost the biofuel industry, which Mabus and the administration deemed “essential” to sustain the military.

“I set out to change the energy culture of the Navy, revolutionizing what we used, how we used it, and how and where we got it,” Mabus said during a speech to the Environmental Defense Fund advocacy group in December. He was not available to comment for this story, according to a spokesman.

Mabus oversaw the testing of a Navy F/A-18 “Green Hornet” in 2010, which was the first supersonic jet to fly on a biofuel blend, and two years later, a demonstration showcasing Navy ships and aircraft operating on a biofuel blend during the multinational Rim of the Pacific exercise.

His efforts culminated in 2016 with the steaming of the Great Green Fleet, a blueprint for future fuel use. The strike group with the USS John C. Stennis aircraft carrier, which itself is nuclear-powered, was sent on a regular deployment to the Western Pacific using a biofuel blend.

But the nascent biofuels industry could supply only a small amount of fuel. So, as the Navy steamed around, Mabus and the administration set out to pump public funds into building it up.

Eric Pryor, the chief financial officer of Fulcrum BioEnergy, says the Reno biofuel plant will be a springboard to opening eight refineries across North America.

The Pentagon funding, he says, was crucial to closing a $175 million private bond offering in October that was backed by investors such as BP, United Airlines, and Waste Management.

“We’ve been able to put those pieces in place, and the Department of Defense grant was very helpful to us to get to that point that we are at today,” Pryor said. “We’re going to be creating a whole domestic manufacturing industry and infrastructure that will create jobs, and we know that is a priority for the Trump administration as well.”

The refinery will be operational in early 2020 and is expected to produce at least 10 million gallons per year of military-grade fuel, Pryor said.

The Red Rock project in Oregon, which just received state bond financing, is ready to begin construction and is also expected to achieve similar production, but the company did not return calls for comment.

The Navy uses more than 1 billion gallons of fuel per year and the entire Defense Department, the largest single consumer in the world, uses about 4 billion gallons.

Neither company is under any obligation or agreement to make or sell fuel to the military in the future. From the beginning, it was understood that the refineries would have to be cost-competitive with traditional petroleum-based fuels, said a former senior defense official, who asked to remain anonymous in order to discuss the negotiations that took place.

“Nobody is going to go and build one of these things knowing the other applications are very small unless they have a very steady customer, and the Department of Defense has been signalling that they would like to be that,” said Jim Lane, the editor and publisher of Biofuels Digest, a trade publication that has followed the projects for years.

Thornberry simply said, “No, period,” when asked whether the spending on construction of biofuel refineries was worthwhile.

“It is appropriate to make investments on innovations. If you make investments on better battery technology that can get your vehicles across the desert easier, faster, longer, I understand that. I don’t perceive that that is what’s going on here,” he said. “What’s going on here is a different kind of anti-fossil fuel agenda, which you can argue about from the environmental standpoint and all of those issues, but $140 million away from fixing planes and ships to promote that agenda is a bad result.”

The Defense Production Act funding is one of the few aspects of the Pentagon that does not fall under the authority of Thornberry’s House Armed Services Committee. Instead, the House Financial Services Committee and its chairman, Rep. Jeb Hensarling, R-Texas, has oversight.

“I think it would be helpful to get legal opinions about other options” instead of paying out the $140 million under the contracts for biofuel refinery construction work, Thornberry said. “I’ll definitely talk to Jeb about seeing what we can do together.”

Hensarling said he shares Thornberry’s concerns about the refinery projects.

“Our committee will be taking a serious look at this to ensure taxpayer dollars are protected and being allocated appropriately,” he told the Washington Examiner.

The Pentagon has already moved to cut spending that is not under an Obama-era contract.

One of the projects that received $5.7 million for design and engineering in 2013 was recently cut loose, or “de-scoped,” said Stump, the Pentagon spokesman. It had been given four extensions over 34 months but could still not secure outside funding to meet the cost-share required by the contract.

The cancellation “allows $125 million to be directed toward other Department of Defense critical mission requirements,” Stump said.

The Trump administration also just nixed another source of taxpayer funding designed by Mabus and the Obama administration to “prime the pump” for the companies as they produce military-grade biofuels for the Navy.

The Department of Agriculture’s Farm-to-Fleet program pledged $50 million in per-gallon subsidies beginning in 2013 to companies that use domestic feedstocks.

The program has awarded a California company, which is currently the only producer of military-grade biofuel, $7.7 million for the Great Green Fleet deployment in 2016 and $15 million for providing up to 60 million gallons of F-76 biofuel to the Navy this year.

The agency canceled Farm-to-Fleet on Feb. 1, saying it “has reassessed how to best use limited available funds and has determined that the [funding] is no longer a priority.”

However, USDA may still pay out significant funding for biofuels. Two earlier solicitations worth up to $29 million will still be considered, a USDA spokesman said.

Sen. Jim Inhofe, R-Okla., a longtime foe of the Obama initiatives, was not pleased about the ongoing refinery work, but he applauded the Trump administration for re-evaluating the biofuel contracts, moving to pay only those that were legally obligated.

“I’m disappointed that Obama-era initiatives that put a social agenda ahead of military readiness are still being given resources because of an outstanding contract,” said Inhofe, who is the most senior Republican on the Senate Armed Services Committee in Sen. John McCain’s absence.

Read rest at Washington Examiner