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Navy Biofuel Deal is 'Cost Prohibitive,' 'Another Solyndra,’ Critics Say

(CNSNews.com) – The Obama administration’s deal to buy 450,000 gallons of biofuel for Navy jets comes at a cost of up to nine times higher than regular fuel, a spokesman for Sen. James Inhofe (R-Okla.) said, coming at a time when the U.S. military is already facing deep budget cuts.

Inhofe, a member of the Senate Armed Services Committee and former chairman of the Senate Environment and Public Works Committee, has supported biofuel projects in the past, but has problems with a program the U.S. Department of Agriculture and Department of the Navy announced earlier this month – one that would pay $26 per gallon for a special biofuel for Navy jets; $16 per gallon when mixed with regular jet fuel.

“Sen. Inhofe’s concern in this particular case as it deals with the Department of Defense is that the alternative is cost prohibitive,” Inhofe spokesman Jared Young told CNSNews.com. “Of late, our nation’s military has had to endure $500 billion in budget cuts, and if the sequestration happens as a result of the super committee’s failure to reach a deal, it would mean an additional $500 billion in cuts to our nation’s military.”

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 and Tyson Foods.

Solazyme previously received $21.7 million from the American Recovery and Reinvestment Act, better known as the stimulus, to build a “biorefinery.” T.J. Glauthier is listed on the Solazyme website as a strategic advisor for the company. Glauthier served on President Obama’s White House transition team, where he focused on energy issues for the recovery act, according to the Solazyme website.

“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,” Young continued in a written statement. “In addition, the alternative fuel is less available on the front lines, making its use more restrictive.”

Another energy analyst said it could turn into another fiscal boondoggle, similar to the $535 million Energy Department loan to the solar panel firm Solyndra, a company that went bankrupt before being raided by the FBI.

“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,” Dan Simmons, director of state and regulatory affairs at the Institute for Energy Research, a free-market energy think tank, told CNSNews.com. “They don’t meet the market test. Unless they have radical changes in technology, they’re not going to meet it anytime soon.”

On Dec. 5, U.S. Agriculture Secretary Tom Vilsack and Navy Secretary Ray Mabus announced that the Defense Logistics Agency had signed contracts to buy 450,000 gallons of biofuel – the largest purchase of biofuel by the federal government in history.

That is still a fraction of the 1.26 billion gallons of fuel the Navy fleet uses each year. But, according to the joint news release, “it accelerates the development and demonstration of a homegrown fuel source that can reduce America’s, and our military’s, dependence on foreign oil.”

“The Navy has always led the nation in transforming the way we use energy, not because it is popular, but because it makes us better war fighters,” Mabus said in a written statement. “This unprecedented fuel purchase demonstrates the Obama administration’s commitment to seeking energy security and energy independence by diversifying our energy supply.”

The biofuel, made from a blend of used cooking oil, will be mixed with aviation gas or marine diesel fuel for use in the “Green Strike Group” demonstration, according to the departments’ release. It is a “drop-in fuel,” which means that no modifications to the engines are required to burn the fuel. To prepare for the demonstration, the Navy completed testing of all aircraft, including F/A-18, blue Angels and the V-22 Osprey. It also tested the RCB-X, a command boat.

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, said Simmons of the Institute for Energy Research.

“This is one of the underreported aspects. It isn’t just $16 per gallon,” Simmons said. “It was actually $26 a gallon for the biofuel, but they mixed it with more moderately priced fuel. If you do the math that comes out to $1,000 a barrel for that fuel, which is just incredibly expensive.”

He cited the federal government’s own numbers that show the United States has 1.4 trillion barrels of oil waiting to be explored. That’s enough to last 200 years, he said. Thus, he argues, dependency on foreign oil is not the problem, rather it’s an unwillingness to open up more areas for drilling.

He added, “Right now gas prices are the highest ever at Christmas time, and at the same time we have the Navy out spending $26 a gallon for jet fuel, for jet fuel. Jet’s burn fuel like crazy. It’s a travesty.”

As part of his energy security goals, outlined in March 2011 in the “Blueprint for a Secure Energy Future,” President Barack Obama ordered the departments of Agriculture, Energy and the Navy to advance “drop-in” biofuel substitutes for diesel and jet fuel.

“This is not work we can afford to put off for another day,” Ag Secretary Vilsack said in a written statement,

In August, the administration announced their intentions to spend $510 million during the next three years to buy advanced drop-in biofuel for military transportation. In lieu of congressional authorization to spend that much, the administration used existing authority for this initiative without congressional authorization. The purchase is part of the Obama administration’s “We Can’t Wait,” initiative, which involves bypassing Congress when possible.

“There’s no evidence that biofuels are going to be cost effective anytime soon. During the Bush administration, President Bush pushed for making a certain amount of biofuel (to be) used every year. Last year, there was not a drop of advanced biofuel that was mixed with transportation fuel,” Simmons said.

“The reason is that it’s just not economical, that’s the reality,” he added.. “This isn’t a Republican-Democrat thing. President Bush was pushing for it. What it is, is really a price thing. As much as we might think that biofuels may or may not be the future, right now they are not the present, and are wildly expensive.”

Inhofe supports “drop-in” fuels, so long as they are not cost prohibitive, his spokesman said.

“Earlier this year, he authored the Fuel Feedstock Freedom Act, which would in part create a new feedstock-neutral definition to encourage the use of items such as algae, while promoting the production of drop-in fuels, which are both engine friendly, achieve similar mileage per gallon as conventional fuel and can be readily blended and transported in the nation’s existing distribution infrastructure,” Young said.

The Navy did not provide comment for this story.