Search Penny Hill Press

Tuesday, July 17, 2012

The Navy Biofuel Initiative Under the Defense Production Act

Anthony Andrews
Specialist in Energy and Defense Policy

Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources Policy

Jared T. Brown
Analyst in Emergency Management and Homeland Security Policy

Daniel H. Else
Specialist in National Defense

The Secretaries of Energy, Agriculture, and the Navy have entered into a Memorandum of Understanding (MOU) to “assist the development and support of a sustainable commercial biofuels industry.” The objective of the MOU is the construction or retrofitting of multiple domestic commercial or pre-commercial scale advanced drop-in biofuel plants and refineries. The MOU would support the Navy’s goal of deploying a “Green Strike Group” by the end of 2012, and “Great Green Fleet” by 2016 fueled in part with a 50/50 blend of hydrotreated renewable jet fuel (biofuel). The Navy proposes to use authority under the Defense Production Act of 1950 (DPA) to develop a domestic industrial capacity to supply biofuel. In its FY2013 Congressional Budget Request, the Department of Energy (DOE) requested authority to transfer funds to the DPA Fund, offering the justification that it will support the MOU with the technical expertise to move pilot-scale demonstration projects to larger-scale production in support of the Navy’s Green Fleet Goal. Agriculture, Energy, and the Navy expect to fund this initiative at $510 million in aggregate over three years.

In the past, Congress has found it in the interest of national defense preparedness for government to assure that a domestic industrial capacity exists to produce fuel. Congress set aside the (now depleted) Naval Oil Reserves and Oil Shale Reserves to provide for the Navy’s fuel requirements. Congress later promoted alternative fuel from coal through the U.S. Synthetic Liquid Fuels Act of 1944 to aid the execution of World War II, and to conserve and increase national oil resources. The act authorized the Secretary of the Interior to construct, maintain, and operate plants producing synthetic liquid fuel from coal, oil shale, and agricultural and forestry products. During the Korean War, the DPA authorized the President to have liquid fuels processed and refined for government use or resale, and to make improvements to government- or privately-owned facilities engaged in processing and refining liquid fuels when it would aid the national defense. In 1980, Congress amended the DPA to authorize the President’s purchase of synthetic fuels for national defense. Most recently, the Energy Policy Act of 2005 directed the Secretary of Energy, in cooperation with the Secretaries of the Interior and Defense, to develop a program to accelerate the commercial development of strategic unconventional fuels, including but not limited to oil shale and tar sands resources within the United States. Except for exploiting the Naval Oil Reserve, policies that directed alternative fuel development for national defense interests have had to challenge newly discovered petroleum resources that presented clear economic advantages over alternative fuels.

Domestic crude oil production in the United States has increased over the past few years, reversing a decline that began in 1986. The United States is now a net exporter of refined petroleum products. Over the next 10 years, continued development of unconventional oil resources, in combination with the ongoing development of offshore resources in the Gulf of Mexico may push domestic crude oil production to a level not seen since 1994, according to the U.S. Energy Information Administration.

An important policy question for Congress may be whether a domestic biofuel industry is necessary for national defense, and whether proceeding under the authority of the DPA offers the necessary stimulus. A domestic biofuel industry may satisfy concerns for a secure, domestic, alternative fuel source independent of unstable foreign petroleum suppliers. However, adding biofuel to the military’s supply chain does not relieve logistical issues with delivering fuel to forward operating areas, where fuel supply issues have been more about vulnerability than availability.

Date of Report: June 22, 2012
Number of Pages: 22
Order Number: R42568
Price: $29.95

Document available via e-mail as a pdf file or in paper form.

To Order:

R42568.pdf  to use the SECURE SHOPPING CART


Phone 301-253-0881

For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Follow us on TWITTER at or #CRSreports