## USDA, DOE and US Navy to invest up to $510M over next 3 years to build out drop-in biofuel production capacity for military and commercial transportation ##### 16 August 2011 US President Barack Obama announced that the US Departments of Agriculture, Energy and Navy will jointly invest up to$510 million ($170 million each) during the next three years in partnership with the private sector to produce advanced drop-in aviation and marine biofuels to power military and commercial transportation. The joint plan requires substantial cost share from private industry of at least a one-to-one match. To accelerate the production of bio-based jet and diesel fuel for military and commercial purposes, the three Departments developed a plan jointly to construct or to retrofit multiple domestic commercial or pre-commercial scale advanced drop-in biofuel plants and refineries with the following characteristics: • Capability to produce ready drop-in replacement advanced biofuels meeting military specifications at a price competitive with petroleum; • Geographically diverse locations for ready market access; and • No significant impact on the supply of agricultural commodities for the production of food. The United States spends more than$300 billion on imported crude oil per year, the three Departments noted in their Memorandum of Understanding (MoU) on the joint initiative. Advanced biomass-derived transportation fuels that use a domestic, renewable feedstock provide a secure alternative that reduces the risks associated with petroleum dependence, they said.

Enhanced reliability of fuel supplies through diversification to advanced drop-in biofuels is also essential to sustain the U.S. military’s missions capabilities, which are at risk due to potential disruptions of crude oil supplies. Accordingly, the DON [Department of the Navy] has adopted a goal of, by 2020, replacing one-half of conventional petroleum-based fuel use with domestically sustainable fuel alternatives. Only a handful of production facilities for renewable jet fuel and diesel will operate in the foreseeable future. Current processes for producing advanced drop-in biofuels are expensive, and the resulting high cost of the end product continues to limit demand. Military and civilian end users of fuel have clear strategic incentives to adopt renewable drop-in fuels, but adoption is only possible when those fuels become cost-competitive.

Given the current economic environment, significant start-up risks, and competitive barriers posed by the firmly established crude oil markets, industry will not assume all of the uncertainty and risk associated with providing a commercially viable production capability for advanced drop-in biofuels. Therefore, it is necessary that the Federal Government cooperates with industry to create a strong demand signal and to make targeted investments to achieve the necessary production capacity required for a robust domestic advanced drop-in biofuels industry. Without these efforts, the Parties believe adequate production capability would not otherwise be established in a timely manner.

—Memorandum of Understanding

America’s long-term national security depends upon a commercially viable domestic biofuels market that will benefit taxpayers while simultaneously giving Sailors and Marines tactical and strategic advantages. Today’s announcement not only leverages our home grown fuel sources to support our national security, but it also helps advance the biofuels market, which ultimately brings down the cost of biofuels for everyone.

—Navy Secretary Ray Mabus

The initiative responds to a directive from the President in March as part of his Blueprint for A Secure Energy Future. The biofuels initiative is being steered by the White House Biofuels Interagency Work Group and Rural Council, both of which are enabling greater cross-agency collaboration.

In June, President Obama signed an Executive Order establishing the first White House Rural Council. Administration officials have been working to coordinate programs across the government and encourage public-private partnerships to improve economic conditions and create jobs in rural communities.

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