DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Congressional research reportApr 11, 2013

Ask Donna

What actually matters in this document.

Text

DOD Alternative Fuels:

Policy, Initiatives and Legislative Activity

(name redacted)

Analyst in Foreign Affairs

April 11, 2013

Congressional Research Service

7-....

www.crs.gov

R42859

CRS Report for Congress

Prepared for Members and Committees of Congress

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Summary

This report provides background information and identifies issues for Congress regarding

Department of Defense (DOD) alternative fuel initiatives, a subject of debate at congressional

hearings on DOD’s proposed FY2013 budget. The services (the Army, Navy, and Air Force) have

spent approximately $48 million to purchase alternative fuels, and the Navy has proposed a $170

million investment in biofuel production capacity. The services have also spent funds on testing,

certification and demonstrations of alternative fuels. By comparison, DOD purchases of

petroleum fuels totaled approximately $17.3 billion in FY2011.

DOD officials have said that any alternative fuels for DOD operational use must

•

be “drop-in;” that is, requiring no modification to existing engines, and

•

be cost-competitive with conventional petroleum fuels.

Other desirable characteristics include

•

production from a non-food crop feedstock; and

•

lifecycle greenhouse gas emissions less than or equal to conventional petroleum

fuels.

Each military service has different alternative fuel goals. The Army has the broad aim of

increasing the use of renewable energy, but has not adopted any specific alternative fuel goals.

The Air Force goals are to test and certify all aircraft and systems on a 50:50 alternative fuel

blend by 2012, and to be prepared to acquire 50% of the Air Force’s domestic aviation fuel as an

alternative fuel blend by 2016. The Navy’s goals are to deploy a “Great Green Fleet” strike group

of ships and aircraft running entirely on alternative fuel blends by 2016 and to meet 50% of the

Navy's total energy consumption from alternative sources by 2020. To meet this goal for its ships,

the Navy would need to replace approximately 8 million barrels of petroleum used in its ships

with unblended alternative fuels by 2020.

The Navy has also entered into a Memorandum of Understanding (MOU) with the Department of

Energy and the Department of Agriculture to promote the development of a domestic advanced

biofuel industry through the construction of domestic biofuel plants and refineries. Under the

Defense Production Act, the Navy and the Department of Energy plan to fund this initiative with

$340 million in federal funds for capital investment and production, with at least equal costsharing from industry. The Department of Agriculture intends to provide an additional $171

million through the Commodity Credit Corporation to support biofuel feedstocks.

Legislative debate in 2012 related to DOD’s alternative fuels efforts has focused on two areas: (1)

proposals in the National Defense Authorization Act for FY2013 (H.R. 4310, S. 3254) to maintain

or limit DOD’s ability to purchase alternative fuels and invest in biofuel production capability,

and (2) appropriations related to the joint Navy, Department of Energy, and Department of

Agriculture biofuel production initiative.

Additional areas for potential congressional oversight include the costs and benefits to DOD of

alternative fuels, as well as the coordination of alternative fuel initiatives within the services and

between DOD and other federal agencies.

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Contents

Introduction...................................................................................................................................... 1

DOD Alternative Fuels Policy ................................................................................................... 1

Policy Goals ........................................................................................................................ 2

Investments in Alternative Fuels ......................................................................................... 2

Service Goals for Use of Alternative Fuels ............................................................................... 3

DOD Alternative Fuel Purchases ..................................................................................................... 4

Alternative Fuels Testing and Evaluation ........................................................................................ 5

Army .......................................................................................................................................... 6

Air Force.................................................................................................................................... 6

Navy .......................................................................................................................................... 6

Navy Biofuel Production Under the Defense Production Act ......................................................... 6

Funding Opportunity Announcement ........................................................................................ 7

Legislative Activity in 2012 ............................................................................................................. 9

Restrictions on DOD’s Purchase or Production of Biofuels ...................................................... 9

DOD and DOE Appropriations for Biofuels Production Initiative ......................................... 10

Department of Defense Appropriations............................................................................. 10

Department of Energy Appropriations .............................................................................. 11

Questions for Congress .................................................................................................................. 11

Benefits and Costs of Alternative Fuels .................................................................................. 11

Navy Role in Developing Advanced Biofuels ......................................................................... 11

DOD Coordination of Service Alternative Fuel Initiatives ..................................................... 12

Coordination of Alternative Fuel Initiatives between DOD and Other Federal

Agencies ............................................................................................................................... 12

Tables

Table 1. Alternative Fuels Purchases by Service, 2007-November 2012 ........................................ 4

Table 2. Alternative Fuel Purchases by Fuel Type, 2007-November 2012 ...................................... 5

Table 3. Funding Sources for the Navy, DOE and USDA Biofuel Production Initiative ................ 9

Table A-1. DOD Alternative Fuel Contracts, 2007-November 2012 ............................................. 13

Appendixes

Appendix A. DOD Alternative Fuel Contracts to Date.................................................................. 13

Appendix B. Recent Legislative Action ........................................................................................ 15

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Contacts

Author Contact Information........................................................................................................... 20

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Introduction

This report provides background information and identifies issues for Congress regarding Department of

Defense (DOD) alternative fuel initiatives, an issue of considerable attention during hearings in 2012 on

DOD’s FY2013 budget. Ongoing alternative fuel efforts of the DOD and the military services include

purchases of alternative fuels for testing and evaluation, as well as the certification of alternative fuels for

use in service fleets. In addition, the Navy, in coordination with the Department of Energy and the

Department of Agriculture, intends to spur domestic advanced biofuel production at a commercial scale

using the authority of the Defense Production Act. The services (Army, Navy, and Air Force) have spent

approximately $48 million on alternative fuels, and the Navy has proposed a $170 million investment in

biofuel production capacity. The services have also spent funds on testing, certification and

demonstrations of alternative fuels. By comparison, DOD purchases of petroleum fuels totaled

approximately $17.3 billion in FY2011.

This report provides a brief overview of DOD alternative fuels policy and data on DOD’s alternative fuels

purchases to date, as well as the status of testing platforms on alternative fuel blends and the certification

of those blends for fleet-wide use within the services. This report also discusses the current status of the

Navy’s biofuel production initiative under the Defense Production Act, in conjunction with the

Department of Energy and Agriculture, including appropriated funding. It also provides the status of

recent legislative actions related to DOD alternative fuels efforts.

For further discussion of the Navy’s biofuel production efforts under the Defense Production Act,

including previous defense-related fuel programs and the statutory authority of the DPA for energy

initiatives, please see CRS Report R42568, The Navy Biofuel Initiative Under the Defense Production

Act, by (name redacted) et al. For a comprehens ive overview of the Department of Defense’s

operational energy efforts, including biofuels, please see CRS Report R42558, Department of Defense

Energy Initiatives: Background and Issues for Congress.

DOD Alternative Fuels Policy

Section 314 of the FY2012 National Defense Authorization Act1 gave responsibility for and oversight of

DOD’s alternative fuels initiatives and policy to the Assistant Secretary of Defense for Operational

Energy Plans and Programs.2 Previously, there was no specific responsibility or oversight of alternative

fuel policy and initiatives at the DOD-wide level. The statute requires that the Assistant Secretary of

Defense for Operational Plans and Programs

•

lead DOD’s alternative fuel activities;

•

oversee DOD’s alternative fuel investments;

•

make recommendations regarding the development of alternative fuels by the military

departments and the Office of the Secretary of Defense;

P.L. 112-81

§902 of the FY2009 Duncan Hunter National Defense Authorization Act established the position of Director of Operational

Energy Plans and Programs (OEPP). The FY2011 Ike Skelton National Defense Authorization Act redesignated the position as

an Assistant Secretary of Defense. The position is now codified at 10 U.S.C. 138c

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

•

issue guidelines and prescribe policy to streamline alternative fuels investments across

DOD; and

•

encourage collaboration and leverage the investments in alternative fuel development

made by the Department of Energy, the Department of Agriculture, and other federal

agencies to the benefit of DOD.

Policy Goals

On July 5, 2012, Assistant Secretary of Defense for Operational Energy Plans and Programs Sharon

Burke issued a memorandum articulating the goals of DOD alternative fuels policy, which are to “ensure

operational military readiness, improve battlespace effectiveness,” and increase “the ability to use

multiple, reliable fuel sources.” Specific considerations for DOD investments in alternative fuels

initiatives include “increased resilience against strategic supply disruptions; dampened effect[s] of

petroleum price volatility, increased fuel options for operational commanders and ultimately increased

expeditionary effectiveness.”3

Pursuant to these goals, DOD officials have said that any alternative fuels for DOD operational use must:

•

be “drop-in,” that is, requiring no modification to existing engines;

•

be cost-competitive with conventional petroleum fuels;

•

be available in sufficient quantities.

Other desirable characteristics include

•

production from a non-food crop feedstock; and

•

lifecycle greenhouse gas emissions less than or equal to conventional petroleum fuels.4

Investments in Alternative Fuels

By statute,5 DOD investments in alternative fuel activities must be certified as part of the annual

operational energy budget certification process. The Assistant Secretary of Defense for Operational

Energy Plans and Programs must review the services’ proposed budgets, and certify whether these

budgets are adequate to implement the operational energy strategy.6 The annual operational energy report7

must now incorporate alternative fuels initiatives, including descriptions, funding, and expenditures. Per

the July 5, 2012, memorandum, future investments in alternative fuels will be subject to a “rigorous,

Office of the Assistant Secretary of Defense, Operational Energy Plans and Programs. “Alternative Fuels Policy for Operational

Platforms,” July 5, 2012. http://energy.defense.gov/2012-7-5_DoD_Alternative_Fuels_Policy_for_Operational_Platforms.pdf.

For more information about how lifecycle greenhouse gas emissions of fuels are calculated, please see CRS Report R40460,

Calculation of Lifecycle Greenhouse Gas Emissions for the Renewable Fuel Standard (RFS), by (name redacted) and (name

redacted).

As required by §526 of the Energy Independence and Security Act (EISA) of 2007, P.L. 110-140 for purchases specifically of

alternative fuels.

§314 of the FY2012 National Defense Authorization Act, P.L. 112-81.

Created by §902 of the FY2009 National Defense Authorization Act, P.L. 110-417. For more details about the operational

energy budget certification process, please see CRS Report R42558, Department of Defense Energy Initiatives: Background and

Issues for Congress, by (name redacted), (name redacted), and (name redacted).

Required by §331 of the FY2009 National Defense Authorization Act, P.L. 110-417.

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

merit-based evaluation.” DOD alternative fuels development initiatives will generally follow three

phases:

Phase 1: Certification: A cross-services fuels working group is required to submit an annual plan that

identifies promising alternative fuels and coordinates certification efforts by the services.

Phase 2: Field Demonstration: The services may propose a field demonstration of a new fuel.

Depending on the funding source the proposal will be reviewed by the Office of the Assistant Secretary of

Defense for Operational Energy Plans and Programs during the annual operational energy budget

certification process, or jointly by that office and the Office of the Undersecretary of Defense

(Comptroller) and the Office of the Assistant Secretary of Defense (Logistics and Materiel Readiness).

Phase 3: Ongoing Purchases: For purchases of operational quantities of fuels, alternative fuels will

compete with petroleum products, and awards will be based on “the ability to meet requirements at best

value to the government, including cost.”8

Service Goals for Use of Alternative Fuels

Each of the military services has set goals regarding alternative fuels.

The Army has not adopted any specific alternative fuel goals. However, the Army does have the broad

goal of increasing the use of renewable/alternative energy, set out in the Army Energy Security

Implementation Strategy. The Army’s Tactical Fuel and Energy Implementation Plan study, released in

2010, recommended the following goals in order to meet this aim of increased renewable/alternative

energy: by 2028, at least 25% of energy used for tactical level power generation derived from alternative

and renewable sources, and by 2028, 50% of the fuel requirement in the training base for the tactical

mobility fleet (surface and air) met by alternative fuel blends.9

The Air Force has set a goal of being prepared to “cost-competitively acquire 50% of the Air Force’s

domestic aviation fuel requirements via an alternative fuel blend in which the alternative component is

derived from domestic sources produced in a manner that is greener than fuels produced from

conventional petroleum” by 2016.10 In order to be prepared to use alternative fuels, should they become

cost competitive, the Air Force has an additional goal of testing and certifying all aircraft and systems on

a 50:50 alternative fuel blend11 by 2012.12 (See the Air Force portion of the section “Alternative Fuels

Testing and Evaluation” for more details.)

Office of the Assistant Secretary of Defense, Operational Energy Plans and Programs. “Alternative Fuels Policy for Operational

Platforms,” July 5, 2012.

AR 5-5 Study, “Tactical Fuel and Energy Implementation Plan,” prepared on behalf of the U.S. Army Sustainment Center for

Excellence by Expeditionary Logistics, Inc. and sponsored by the U.S. Army Combined Arms Support Command. September 24,

2010. Available at http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA529051

Air Force HQ. “Air Force Energy Plan 2030.”

A 50:50 alternative fuel blend is fuel that consists of 50% conventional (i.e., petroleum-based) fuel and 50% alternative (i.e.,

non-petroleum-based) fuel.

U.S. Air Force Briefing, “Air Force Energy Consumption,” March 6, 2012. The original target date for completing testing and

certifying had been 2011. U.S. Air Force, “Air Force Energy Plan 2010,” December 9, 2009, p. 8.

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

The Navy has set more ambitious goals related to alternative fuels, as part of the Navy’s five energy

goals.13 One goal is to deploy a “Great Green Fleet” strike group of ships and aircraft running entirely on

alternative fuel blends by 2016. This “Great Green Fleet,” demonstrated during the July 2012 RIMPAC

naval exercises, is a carrier strike group composed of nuclear-powered ships, ships running on a biofuel

blend, and aircraft flying on a biofuel blend.

A second Navy goal is meeting 50% of the Navy's total energy consumption from alternative sources by

2020. To meet this goal for the Navy’s use of energy afloat, the Navy plans to reduce its liquid fuel usage

afloat to 38 million barrels of oil equivalent per year. Nuclear power is projected to provide 11 million

barrels of oil equivalent in 2020. Therefore, to meet the goal of 50% alternative energy (18 million barrels

of oil equivalent in 2020), approximately 8 million barrels of petroleum used afloat would need to be

replaced by unblended alternative fuels by 2020.

DOD Alternative Fuel Purchases

Since 2007, DLA Energy has procured approximately 1.9 million gallons of various types of alternative

fuels on behalf of the Army, Navy, and Air Force using funds provided by the services. DOD purchases of

alternative fuels in order to test engine performance and certify alternative fuels for use in service fleets

have totaled about $48 million to date. Table 1 provides an overview of each service’s alternative fuels

purchases from 2007 through the present.

Table 1. Alternative Fuels Purchases by Service, 2007-November 2012

Service

Total Gallons Purchased

Total Cost

Average Cost Per Gallon

Army

49,950

$1,632,120

$ 37.14

Navy

676,500

$20,618,450

$ 30.15

Air Force

1,166,000

$25,719,650

$ 22.06

Total

1,888,450

$47,970,220

$ 25.43

Source: Data from DLA-E, November 9, 2012.

Notes: The average cost per gallon was calculated by dividing the total spending of each service on alternative fuels by

number of gallons purchased. Values are not adjusted for inflation.

As of November 26, 2012, the Navy has not exercised its two options to purchase an additional 50,000 gallons of DSH

fuel at a cost of $25.73 per gallon from Amyris, for a total cost of $1,286,500.

The services have purchased various types of alternative fuels, including Fischer-Tropsch fuels14 derived

from coal and natural gas, and three types of biofuels (hydrotreated jet and diesel biofuels,15 alcohol-to-jet

fuels, and direct-sugar-to-hydrocarbons fuels).16 All services have purchased various types of hydrotreated

The Department of the Navy. “The Department of the Navy’s Energy Goals.” http://www.navy.mil/features/

Navy_EnergySecurity.pdf

The Fischer-Tropsch process is a series of chemical reactions can be used to create liquid fuels from coal, natural gas, or

biomass feedstocks.

Hydrotreated jet and diesel biofuels are the more common terms for HEFA (Hydroprocessed Esters, waste oil feedstocks and

Fatty Acids) fuels. These fuels can be created from feedstocks that produce natural oils, such as algae, jatropha and camelina, or

from waste animal fats.

For discussion of different types of alternative fuels, please see CRS Report R41460, Cellulosic Ethanol: Feedstocks,

Conversion Technologies, Economics, and Policy Options, by (name redacted); CRS Report R41282,Agriculture-Based Biofuels:

(continued...)

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

jet and diesel biofuels. The Air Force has also purchased alcohol-to-jet fuels derived from both petroleum

and biomass feedstocks. The Navy has purchased some direct-sugar-to-hydrocarbons fuel, derived from

bio-based feedstocks. The Air Force has also purchased fuels created via the Fischer-Tropsch process

from coal and natural gas. Table 2 provides an overview of DOD alternative fuel purchases by fuel type.

Table 2. Alternative Fuel Purchases by Fuel Type, 2007-November 2012

Average cost

per gallon

Total

Spending

Fuel Type

Gallons

Hydrotreated Renewable Jet (HRJ)/Hydrotreated Renewable Diesel (HRD)

both Hydroprocessed Esters and Fatty Acids (HEFA) fuels

1,085,450

$38.26

$41,534,620

Fischer-Tropsch (FT)

730,000

$3.76

$2,745,650

Alcohol-to-Jet (ATJ)

56,000

$59.00

$3,304,000

Direct Sugar to Hydrocarbon (DSH)

15,000

$25.73

$385,950

Total

1,606,450

$47,970,220

Source: DLA-E, November 9, 2012.

Notes: It is difficult to compare the costs per gallon of various purchases, even within the same type of fuel, as purchases

may use different feedstocks or production pathways. Additionally, the contracts may include R&D costs in addition to the

production costs of the fuel.

Section 526 of the Energy Independence and Security Act of 200717 prohibits federal agencies, including

DOD, from entering into contracts for alternative fuels that have lifecycle greenhouse gas emissions

greater than or equal to the emissions from the equivalent conventional petroleum fuel, except for

research or testing purposes. This provision would exclude coal-to-liquid fuels, which have lifecycle

greenhouse gas emissions of approximately 2.5 times those of petroleum fuels, from purchases of

alternative fuels. DOD’s position is that EISA section 526 does not apply to fuel purchases where the

source of the fuel is not specified in the contract, and therefore does not apply to DLA-E’s purchases of

bulk fuel in operational quantities.18

An overview of DOD’s alternative fuel purchases to date is in Table A-1 in Appendix A.

Alternative Fuels Testing and Evaluation

As part of their alternative fuels initiatives, the Army, Navy, and Air Force have been testing various

alternative fuel blends in their equipment, for the potential certification of alternative fuels for fleet-wide

use.

(...continued)

Overview and Emerging Issues, by (name redacted); or CRS Report R42122,Algae’s Potential as a Transportation Biofuel, by

(name redacted).

P.L. 110-140.

Per a letter from ASD(OEPP) Sharon Burke to Sen. Levin, Chairman of the Senate Armed Services Committee, December 2,

2011.

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Army

The Army is currently testing 50:50 blends of Fischer-Tropsch synthetic paraffinic kerosene and

hydrotreated renewable jet with JP-8 for use in all Army ground systems and field generators, with the

goal of certifying these fuels by 2014.19 The Army is also working to obtain Air Force certification for H60 Black Hawk helicopters to fly on the 50:50 FT-SPK: JP-8 blend.

As part of the Army’s 2009 Army Energy Security Implementation Strategy, the Army intends to

complete testing of tactical ground equipment systems for which alternative or renewable fuels and

synthetic fuel blend evaluations are completed by the end of FY2014. For Army engine and aviation

systems for which alternative or renewable fuels and synthetic fuel blend evaluations are completed, the

Army intends to complete 50% of testing by the end of FY2014 and 100% by the end of FY2016.20

Air Force

The Air Force has certified Fischer-Tropsch fuel blends for use in its manned and unmanned fleets.

Testing has been completed on biofuels, such as the HEFA fuels described above, and fleet-wide

certification is expected shortly. The Air Force has also begun testing alcohol-to-jet fuels, with the

inaugural flight of an A-10 Thunderbolt II jet on an ATJ-conventional fuel blend on June 28, 2012.

According to the Air Force, this test flight was the first flight powered by an ATJ-conventional fuel

blend.21

Navy

In April 2010, the “Green Hornet” F/A-18 was the first Navy jet to fly on a biofuel blend. The Navy has

tested HEFA 50:50 biofuel blends (also known as hydrotreated renewable jet [HRJ]) for use in all manned

and unmanned aircraft. Testing of 50:50 HEFA fuel blends for ships (also known as HRD, or hydrotreated

renewable diesel) is complete except for one type of diesel generator. The Navy anticipates certification

for all HEFA fuels in early 2013. Testing and certification of Fischer-Tropsch fuels is expected to be

completed by the end of 2013. Testing of other alternative fuels, such as alcohol-to-jet, pyrolysis oils, and

direct sugar to hydrocarbon, will continue in the future.22

Navy Biofuel Production Under the Defense

Production Act

In June 2011, the Departments of the Navy, Energy, and Agriculture signed a Memorandum of

Understanding (MOU) to “assist the development and support of a sustainable commercial biofuels

industry.” The MOU argues that because of the current economic environment, start-up risks, and

Department of Defense, Opportunities for DOD use of Alternative and Renewable Fuels: FY10 NDAA Section 334

Congressional Study, July 18, 2011. p. 4-10.

Department of Defense, Opportunities for DOD use of Alternative and Renewable Fuels: FY10 NDAA Section 334

Congressional Study, July 18, 2011. p. 4-10.

Minty Knighton, “A-10 first aircraft to use alcohol-based fuel,” Air Force Print News Today, July 2, 2012, http://www.af.mil/

news/story_print.asp?id=123308337.

Discussion with Navy energy official, October 2, 2012.

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

competitive barriers posed by the established crude oil market, without government investment, adequate

domestic production capacity of advanced drop-in biofuels will not be achieved in a timely manner.23

The MOU calls for the Navy, the Department of Energy, and the Department of Agriculture to support

advanced drop-in biofuel plants and refineries to produce advanced biofuels that

•

meet military specifications;

•

are price competitive with petroleum;

•

are at geographically diverse locations with ready market access; and

•

have no significant impact on the food supply.24

Under the authority of the Defense Production Act, the Navy and the Department of Energy plan to fund

this initiative with $340 million in federal funds for capital investment and production, with at least equal

cost-sharing from industry. The Department of Agriculture will provide an additional $171 million

through the Commodity Credit Corporation to support biofuel feedstocks. Total government funding for

this project is anticipated at $510 million over a period of three years, with $170 million each from the

Navy, the Department of Energy, and the Department of Agriculture.25 For discussion of the authority of

the Defense Production Act as it relates to energy and biofuels, please see CRS Report R42568, The Navy

Biofuel Initiative Under the Defense Production Act, by (name redacted) et al.

Funding Opportunity Announcement

The Funding Opportunity Announcement (FOA-12-15-PKM) for this biofuels production initiative under

this MOU was initially released on June 27, 2012, with an announced government funding amount of

$210 million. Awards for biofuels production facilities are planned to occur in two phases:

Phase 1: approximately five awards of up to $6 million each for planning and preliminary designs for

biofuel production facilities. Phase 1 awards are expected to be announced in March 2013.

Phase 2: up to three awards of up to $70 million each for construction, commissioning, and performance

testing of biofuel production facilities.

Requirements for a successful proposal include

•

at least 50% cost share for both Phase 1 and Phase 2;

•

domestic production of advanced biofuels, including domestic sourcing of feedstocks;

Memorandum of Understanding Between the Department of the Navy and the Department of Energy and the Department of

Agriculture, June 2011, p. 2. Available at http://www.rurdev.usda.gov/SupportDocuments/

DPASignedMOUEnergyNavyUSDA.pdf

Memorandum of Understanding Between the Department of the Navy and the Department of Energy and the Department of

Agriculture, June 2011, p. 2. Available at http://www.rurdev.usda.gov/SupportDocuments/

DPASignedMOUEnergyNavyUSDA.pdf

Memorandum of Understanding Between the Department of the Navy and the Department of Energy and the Department of

Agriculture, June 2011, pp. 2-3. Available at http://www.rurdev.usda.gov/SupportDocuments/

DPASignedMOUEnergyNavyUSDA.pdf

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

•

compliance with Section 526 of the Energy Security and Independence Act of 2007;26

•

use of an acceptable renewable feedstock;

•

production of a drop-in fuel;

•

projected cost-competitiveness of the produced fuel with conventional petroleum-based

fuels; and

•

a production capacity of at least 10 million gallons a year.

The stated FOA funding level of $210 million includes

•

$100 million from DOD, funded via the $150 million appropriated for the DPA Fund in

the FY2012 Department of Defense Appropriations Act;27

•

$70 million of requested funding for the Navy’s drop-in biofuels production initiative as

part of the $89 million request for the DPA fund in the DOD’s FY2013 budget request;28

and

•

$40 million from DOE following the receipt of the authority, requested in DOE’s FY2013

budget request,29 to transfer monies from DOE Energy Efficiency and Renewable Energy

appropriated funds into the DPA Fund to support the MOU between the Navy, DOE, and

USDA.

It does not include $171 million of USDA funding via the Commodity Credit Corporation to subsidize the

production of bio-based jet fuel,30 under the broader authority granted to USDA and the Commodity

Credit Corporation to increase the use of agricultural commodities under the Commodity Credit

Corporation Charter Act.31 The Corporation has the authority to borrow up to $30 billion directly from the

P.L. 100-140.

Enacted as the Consolidated Appropriations Act, 2012, P.L. 112-74.

Office of the Secretary of Defense, “Department of Defense Fiscal Year (FY) 2013 President's Budget Submission,

Justification Book Defense: Production Act Purchases,” February 2012, p. 2. http://comptroller.defense.gov/defbudget/fy2013/

budget_justification/pdfs/02_Procurement/Office_of_Defense_Production_Act_PB_2013.pdf

Department of Energy, “FY2013 Congressional Budget Request.,” Vol. 3. Office of the Chief Financial Officer, February

2012. Energy Efficiency and Renewable Energy: Biomass and Biorefinery Systems Program. p. 40.

U.S. Department of Agriculture, U.S. Department of Agriculture, USDA FY2013 Budget Summary and Annual Performance

Plan, February 2012. The Commodity Credit Corporation is the funding mechanism for the mandatory farm commodity program

payments that farmers receive from the USDA Farm Service Agency, and some of the conservation payments from the Natural

Resources Conservation Service and the Farm Service Agency. The Commodity Credit Corporation also is or has been the

funding source for a relatively small subset of USDA programs for foreign trade, bioenergy, rural development, agricultural

research, and other programs. The Commodity Credit Corporation has the authority to borrow up to $30b directly from the

Treasury or from private lenders, to be repaid, with interest, through appropriations from Congress. This borrowing authority

does not require specific congressional appropriations. For more information about the CCC, please see CRS Report R41254,

Defense: FY2011 Authorization and Appropriations, coordinated by (name redacted). http://www.obpa.usda.gov/budsum/

FY13budsum.pdf. p. 21.

P.L. 80-806. From the USDA FY2013 Budget Summary and Annual Performance Plan, “Section 4(e) of the CCC Charter Act

authorizes CCC to take action to increase the use of agricultural commodities by “…aiding in the development of new and

additional markets, marketing facilities, and uses for such commodities.” Under this authority, CCC will make available up to

$171 million to subsidize the production of bio-based jet fuel. Because there is no existing viable commercial source for the

large-scale production of such fuel, CCC has entered into an agreement with the Department of Energy and the Navy to assist in

the development of this product.” p. 23. For more information regarding USDA’s authority to engage in renewable energy

programs, please see CRS Report R41985, Renewable Energy Programs and the Farm Bill: Status and Issues, by (name

redacted).

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Treasury or from private lenders, to be repaid, with interest, through appropriations from Congress. This

borrowing authority does not require specific congressional appropriations.

Table 3. Funding Sources for the Navy, DOE and USDA Biofuel Production Initiative

Commodity

Credit

Corporation

Defense Production Act Fund

FY2012

FY2013

DOD/Navy

$100m

$70m (requested)

Department

of Energy

—

$40m (requested)

Department

Agriculture

—

Total

Funding to

date:

Total

FY2014

FY2015

Subtotal

—

$170m

—

$170m

—

$170m

—

$171m

total of $130m across

FY2014 and FY2015

(to be requested)

—

$210m

(anticipated, as per

the Funding

Opportunity

Announcement)

$511m

(anticipated)

Source: Navy energy officials, October 2012.

Notes: DOD and DOE funding requests and amounts for FY2013 can be found in their respective annual budget requests

and appropriations bills. The Commodity Credit Corporation has the authority to borrow up to $30 billion directly from

the Treasury or from private lenders, to be repaid, with interest, through appropriations from Congress. This borrowing

authority does not require specific congressional appropriations. According to Navy officials, the appropriations requests

for the balance of the DOE’s $170 million funding share after FY2013, $130 million, will be divided between FY2014 and

FY2015 requests. The amounts to be requested in each year are not yet known.

Legislative Activity in 2012

Legislative activity in 2012 related to DOD’s alternative fuels efforts has focused on two areas: (1)

proposals to expand or limit DOD’s ability to purchase alternative fuels and invest in alternative fuel

production capability, and (2) appropriations related to the Navy’s biofuel production efforts under the

DPA.

Restrictions on DOD’s Purchase or Production of Biofuels

H.R. 4310 as passed by the House on May 28, 2012, contained two provisions (Section 313 and Section

314) that would exempt DOD from Section 526 of EISA (which requires all alternative fuels purchased

by the federal government for operational use to have lifecycle greenhouse gas emissions less than or

equal to those from conventional fuels) and limit its ability to purchase alternative fuels that are more

expensive than comparable petroleum fuels, respectively.

S. 3254, as passed by the Senate on December 4, 2012, did not contain any provisions that would restrict

DOD’s abilities to purchase alternative fuels or invest in biofuels production capability. Two restrictive

provisions added via amendments during the Senate Armed Services Committee markup (Section 314 and

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Section 2823, as reported June 4, 2012) were removed by S.Amdt. 2985 and S.Amdt. 3095, respectively,

during floor debate.

Section 315 of the enrolled FY2013 National Defense Authorization Act (H.R. 4310/P.L. 112-239) states:

Amounts made available to the Department of Defense pursuant to the Defense Production Act of

1950 (50 U.S.C. App. 2061 et seq.) for fiscal year 2013 for biofuels production may not be obligated

or expended for the construction of a biofuel refinery until the Department of Defense receives

matching contributions from the Department of Energy and equivalent contributions from the

Department of Agriculture for the same purpose.

DOD and DOE Appropriations for Biofuels Production Initiative

The Departments of Defense and Energy have also requested $70 million and $40 million in

appropriations for FY2013 to fund the joint Departments of Defense, Energy, and Agriculture biofuels

production initiative under the Defense Production Act.

Department of Defense Appropriations

The Navy and the Department of Energy shares of the MOU with the Department of Agriculture to assist

the development of a commercial-scale domestic advanced biofuel industry rely on appropriated funds.

The USDA portion of the funds would be provided through the Commodity Credit Corporation.

For FY2013, the Navy requested $70 million for advanced drop-in biofuels production, as part of the $89

million total requested appropriations to the Defense Production Act Fund.32 The House Appropriations

Committee report on FY2013 Department of Defense Appropriations Act (H.R. 5856, H.Rept. 112-493)

declined to fund the $70 million requested for the joint biofuel production initiative as part of the DPA

Fund. As passed by the House on July 19, 2012, H.R. 5856 contains $63.5 million in DPA funding to

remain available until expended. The corresponding Senate Appropriations Committee report (S.Rept.

112-196) recommends funding the overall DPA Fund at $100 million over the amount requested in the

budget submission, for a total of $189 million, with no specific mention of biofuel production.

The Department of Defense, Military Construction and Veterans Affairs, and Full-Year Continuing

Appropriations Act, 2013 (H.R. 933/P.L. 113-6) includes the FY2013 DOD appropriations as Division C.

This act appropriates $223,531,000 for the Defense Production Act Fund, an increase of about $134.3

million over the amount requested. However, the explanatory statements of both the House and the

Senate, as passed by the Senate on March 20, 2013 and the House on March 21, 2013, reduced the

funding requested for production of advanced drop-in biofuels by $10 million as “ahead of need,” for an

appropriation of $60 million.

H.R. 933/P.L. 113-6 also included $20 million in funding for research into lowering the emissions of coal

to liquid fuels, in Research & Development, Air Force. The explanatory statements of the Senate (as

passed March 20, 2013) and House (as passed March 20, 2013):

PROMOTING ENERGY SECURITY

Department of Defense, FY2013 President’s Budget Submission. “Defense Production Act Purchases Justification Book.”

February 2012. pg. iv. Available at http://comptroller.defense.gov/defbudget/fy2013/budget_justification/pdfs/02_Procurement/

Office_of_Defense_Production_Act_PB_2013.pdf

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

The conferees do not include a provision as proposed by the House regarding the Energy Independence and Security

Act. However, the conferees provide $20,000,000 in Research, Development, Test and Evaluation, Air Force only

for research that will improve emissions of coal to liquid fuel to enable this technology to be a competitive

alternative energy resource to meet the goals established in the Department of Defense's Operational Energy

Strategy and its Implementation Plan. The conferees direct the Secretary of the Air Force, in consultation with the

Assistant Secretary of Defense for Operational Energy Plans and Programs, to inform the congressional defense

committees 30 days prior to any obligation or expenditure of these funds.

Department of Energy Appropriations

For FY2013, DOE requested the authority to transfer $40 million from its Energy Efficiency and

Renewable Energy appropriations into the Defense Production Act Fund. The House-passed version of

the FY2013 Energy and Water Development and Related Agencies Appropriations Act (H.R. 5325, as

passed on June 6, 2012) does not include any language authorizing the Department of Energy to transfer

money into the Defense Production Act Fund, while the Senate version (S. 2465, as reported on April 26,

2012) allows the Department of Energy to transfer up to $100 million of Energy Efficiency and

Renewable Energy funds into the Defense Production Act Fund. Under the Department of Defense,

Military Construction and Veterans Affairs, and Full-Year Continuing Appropriations Act, 2013 (H.R.

933/P.L. 113-6), the Department of Energy funding was appropriated under a continuing resolution.

DOE’s Energy Efficiency and Renewable Energy was funded at approximately $1.8 billion.

For a more detailed history of recent legislative action, please see Appendix B.

Questions for Congress

DOD and the services’ alternative fuels initiatives raise several potential oversight questions and issues

for Congress, including the following:

Benefits and Costs of Alternative Fuels

•

What benefits for the services do alternative fuels offer over conventional petroleum

fuels? Are there alternative ways to achieve these benefits?

•

Should these alternative fuel efforts be viewed in terms of their potential benefits to the

services, or in terms of their potential benefits to the nation?

•

How much funding should be invested in the services’ alternative fuels testing and

certification efforts?

•

To what extent are the services coordinating their alternative fuels testing and

certification efforts to prevent duplication of effort?

Navy Role in Developing Advanced Biofuels

•

What analysis by the Navy, DOE and USDA supports the Navy’s conclusion that this

$510 million investment would positively impact the domestic advanced biofuel

industry?

•

Should biofuel investment be left to private industry (e.g., commercial aviation) or other

government agencies such as the Department of Energy or the Department of

Agriculture?

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

•

Why is the DOD effort to jumpstart a domestic advanced biofuels industry being led by

the Navy?

DOD Coordination of Service Alternative Fuel Initiatives

•

How well is the office of the Assistant Secretary of Defense for Operational Energy Plans

and Programs (ASD(OEPP))33 coordinating the alternative fuel goals of the military

services?

•

How is ASD(OEPP) overseeing current investments by the military services in alternative

fuels testing and certification? Is ASD(OEPP)’s oversight authority, including the

required budget certification process, adequate?

•

Has ASD(OEPP)’s coordination activities or alternative fuels guidance and policy

affected the alternative fuel goals and initiatives of the military services? If so, what have

been these changes?

Coordination of Alternative Fuel Initiatives between DOD and Other

Federal Agencies

•

Is there overlap or duplication between DOD's alternative fuel initiatives and the

alternative fuel initiatives being pursued by other federal agencies?

•

Does the executive branch use a process to coordinate alternative fuel and other energy

initiatives across all federal agencies? If so, what are the steps of this process and what

criteria are used to determine whether an initiative should be pursued by DOD or some

other federal agency?

This office was created as the Director of Operational Energy Plans and Programs via §902 of the FY2009 NDAA (P.L. 110417. §902 of the FY2011 NDAA (P.L. 111-383) designated the position as an Assistant Secretary of Defense. This office was

given the responsibility of leading and overseeing DOD’s alternative fuel activities, issuing guidelines and policy to streamline

alternative fuels investment across DOD and making recommendations regarding the development of alternative fuels by the

military departments and the Office of the Secretary of Defense by §314 of the FY2012 NDAA (P.L. 112-81).

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Appendix A. DOD Alternative Fuel Contracts to Date

Table A-1. DOD Alternative Fuel Contracts, 2007-November 2012

Contract

Award Data

or Option

Date

Gallons

FT Iso

Paraffinic

Kerosene

6-Jun-07

315,000

FT Iso

Paraffinic

Kerosene

26-Jun-08

FT Iso

Paraffinic

Kerosene

3-Jul-08

Sustainable

Oils

HRJ5

31-Aug-09

09-D-0518

Solazyme

HRJ5

1-Sep-09

1,500

09-D-0520

Sustainable

Oils

HRJ8

15-Sep-09

100,000

09-D-0517

UOP

HRJ8

15-Sep-09

100,000

09-D-0523

PM Group

Int'l

FT F76

30-Sep-09

20,000

10-D-0489

Sustainable

Oils

HRJ8

26-Jul-10

34,950

Option

Sustainable

Oils

HRJ5

29-Jun-10

150,000

Sustainable

Oils

HRJ8

Contract

Number

07-D-0486

08-D-0496

08-D-0497

09-D-0519

Option

CRS-13

Company

Shell

SASOL

Product

31-Aug-10

Cost per

Gallon

Total Cost

$3.41

$1,074,150

$3.75

$225,000

$3.90

$1,306,500

$66.60

$2,664,000

$149.00

$223,500

$66.80

$6,680,000

$64.00

$6,400,000

$7.00

$140,000

$38.60

$1,349,070

$34.45

$5,167,500

$34.90

$3,490,000

60,000

335,000

40,000

100,000

Feedstock

Service

Funding

Source

Natural Gas

Air Force

RDT&E

Coal

Air Force

RDT&E

Coal

Air Force

RDT&E

Camelina

Navy

Navy & DLA

ARRA

RDT&Ea

Algal Oil

Navy

DLA ARRA

RDT&E

Camelina

Air Force

RDT&E

Tallow

Air Force

RDT&E

Nat Gas

Navy

Navy RDT&E

Camelina

Army

DLA ARRA

RDT&E

Camelina

Navy

Navy RDT&E;

DLA ARRA

RDT&E

Camelina

Air Force

RDT&E

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Contract

Number

Company

Product

Contract

Award Data

or Option

Date

Gallons

Cost per

Gallon

Total Cost

$32.40

$3,240,000

$59.00

$413,000

$59.00

$236,000

Option

UOP

HRJ8

31-Aug-10

100,000

11-D-0526

Gevo

ATJ8

23-Sep-11

7,000

Option

Gevo

ATJ8

28-Sep-11

4,000

11-D-0530

UOP

HRJ8

30-Sep-11

4,500

$33.00

12-D-0549

Dynamic

HRD76

30-Nov-11

350,000

12-D-0549

Dynamic

HRJ5

30-Nov-11

12-D-0559

UOP

HRJ8

12-D-0560

Amyris

Option

Feedstock

Service

Funding

Source

Tallow

Air Force

RDT&E

Alcohols

Air Force

RDT&E

Alcohols

Air Force

RDT&E

$148,500

Camelina

Army

Army RDT&E

$26.75

$9,362,500

UCO/Algal

Navy

Navy OM&N

100,000

$26.75

$2,675,000

UCO/Algal

Navy

Navy OM&N

2-May-12

4,500

$29.90

$ 134,550

UCO/ICO

Army

Army RDT&E

DSH76

27-Sep-12

15,000

$25.73

$ 385,950

Ferm. Sugar

Navy

Navy RDT&E

Amyris

DSH76

TBD

25,000

$25.73

$ 643,250

Ferm. Sugar

Navy

Navy RDT&E

Option

Amyris

DSH76

TBD

25,000

$25.73

$ 643,250

Ferm. Sugar

Navy

Navy RDT&E

12-D-0561

Gevo

ATJ8

27-Sep-12

30,000

$59.00

$ 1,770,000

Alcohols

Air Force

RDT&E

Option

Gevo

ATJ8

27-Sep-12

15,000

$59.00

$ 885,000

Alcohols

Air Force

RDT&E

TOTAL:

1,886,450

$47,970,220

Source: Data from DLA-E, November 9, 2012.

Note: As of November 26, 2012, the Navy has not exercised its two options to purchase a total of 50,000 additional gallons of DSH fuel at a cost of $25.73 per gallon

from Amyris, for a total cost of $1,286,500. If the Navy exercises these options, DOD purchases of biofuels to date will total 1,936,450 gallons at a total cost of

$49,256,720.

CRS-14

DLA ARRA RDT&E refers to funds from the American Recovery and Reinvestment Act of 2009 (P.L. 111-5).

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

Appendix B. Recent Legislative Action

FY2012 Department of Defense Appropriations Act (P.L. 112-74)

The FY2012 Department of Defense Appropriations Act (combined into the Consolidated

Appropriations Act of FY2012 [H.R. 2055/P.L. 112-74 ]) included $150 million in appropriated

funds to support DPA Title III funding. While not specifically directing this additional $150

million of DPA Title III funding to biofuels production, both the House and Senate accompanying

reports were supportive of DOD biofuels initiatives and encouraged longer contract terms for

biofuels procurement. The Senate Appropriations Committee report (S.Rept. 112-77 of September

15, 2011, accompanying H.R. 2219) stated:

Long-term Contracts.—The Committee is encouraged by the Department’s biofuels

initiatives such as the Green Fleet program; however, the Committee is concerned that the

Department lacks the long-term contracting ability to ensure that adequate biofuels are

produced. To address this issue, the Department may fund multi-year contracts with purchase

periods up to 15 years for biofuels products in order to maximize efficiencies of scale for the

best purchase price. (page 160).

The House Appropriations Committee report (H.Rept. 112-331 of December 15, 2011,

accompanying H.R. 2055), stated:

LONG TERM CONTRACTS

The conferees believe that the time and money being invested by the Department of Defense

in biofuels and alternative energy will reap dividends not only for the Nation’s armed forces,

but eventually for the Nation itself. The conferees want the Department to be in the best

position possible to take advantage of the expected breakthroughs in this area and encourage

the Department to eventually pursue extended multi-year contracts, pursuant to the Financial

Management Regulation, for biofuel products in order to maximize efficiencies of scale for

the best purchase price. (p. 671)

FY2013 Department of Energy Appropriations Act

(H.R. 5325/S. 2465)

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.34

The House-passed version of the Energy and Water Development and Related Agencies

Appropriations Act, FY2013, (H.R. 5325, as passed on June 6, 2012) did not include any

language authorizing DOE to transfer money into the Defense Production Act Fund. The House

Appropriations Committee, in its accompanying report (H.Rept. 112-462 of May 2, 2012),

Department of Energy, “FY2013 Congressional Budget Request.,” Vol. 3. Office of the Chief Financial Officer,

February 2012. Energy Efficiency and Renewable Energy: Biomass and Biorefinery Systems Program. p. 40.

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

declined to fund and authorize the Department of Energy’s portion of this joint initiative. The

report states:

Biomass and Biorefinery Systems R&D.—... The Committee recommends $203,000,000 for

Biomass and Biorefinery Systems R&D, $3,000,000 above fiscal year 2012 and $67,000,000

below the budget request. The Department is directed to continue conducting only research,

development, and demonstration activities advancing technologies that can produce fuels and

electricity from biomass and crops that could not otherwise be used as food. The budget

request proposed funding and legislative language for a joint initiative with the Navy and the

Department of Agriculture to develop commercial diesel and jet biofuels production capacity

for defense purposes. The Department has not adequately justified why the Department of

Energy should fund this Defense initiative, and whether the proposed investments can

successfully lower costs to competitive levels in several years or will only serve to sink costs

into a product that is too immature to compete without federal support. The recommendation

includes no funding for the proposed initiative and does not include the requested legislative

language. (p. 85-86)

In FY2013, the Senate Appropriations Committee Energy and Water Development and Related

Agencies Appropriations Act (S. 2465, as reported on April 26, 2012) provides that, of the funds

appropriated for Energy Efficiency and Renewable Energy, “the Secretary may transfer up to

$100,000,000 to the Defense Production Act Fund for activities of the Department of Energy

pursuant to the Defense Production Act of 1950 (50 U.S.C. App. 2061, et seq.).”

The accompanying report (S.Rept. 112-164 of April 26, 2012) includes language supportive of

the DOD, DOE, and USDA joint biofuel production initiative. The report states:

Biomass and Biorefinery Systems R&D.—The Committee recognizes that quality and

reliability of supplies will be key in acceptance of advanced drop-in biofuels into the supply

chain once they are demonstrated at a convincing scale. To that end, the Committee is

supportive of the collaboration between the Navy, Department of Agriculture and DOE to

develop innovative technologies for jet and diesel fuels for military uses. With the

Department of Defense as an early adopter of these alternative fuels, the wider marketplace

will be more likely to follow.

FY2013 National Defense Authorization Act (H.R. 4310/S. 3254)

H.R. 4310

Two provisions of H.R. 4310, as reported by the House Armed Services Committee (H.Rept. 112479 of May 11, 2012), affect the Department of Defense’s procurement and production of

biofuels:

SEC. 313. EXEMPTION OF DEPARTMENT OF DEFENSE FROM ALTERNATIVE

FUEL PROCUREMENT REQUIREMENT.

Section 526 of the Energy Independence and Security Act of 2007 (P.L. 110-140; 42 U.S.C.

17142) is amended by adding at the end the following: `This section shall not apply to the

Department of Defense.'

SEC. 314. LIMITATION ON AVAILABILITY OF FUNDS FOR PROCUREMENT OF

ALTERNATIVE FUEL.

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

(a) Limitation- Except as provided in subsection (b), none of the funds authorized to be

appropriated by this Act or otherwise made available during fiscal year 2013 for the

Department of Defense may be obligated or expended for the production or purchase of any

alternative fuel if the cost of producing or purchasing the alternative fuel exceeds the cost of

producing or purchasing a traditional fossil fuel that would be used for the same purpose as

the alternative fuel.

(b) Exception- Notwithstanding subsection (a), the Secretary of Defense may purchase such

limited quantities of alternative fuels as are necessary to complete fleet certification for 50/50

blends. In such instances, the Secretary shall purchase such alternative fuel using competitive

procedures and ensure the best purchase price for the fuel.

S. 3254

As passed by the Senate on December 4, 2012, S. 3254 does not contain any provisions that

would restrict the ability of the Department of Defense to procure or produce biofuels.

Two provisions in S. 3254, as reported by the Senate Armed Services Committee (S.Rept. 112173 of June 4, 2012), would have affected the Department of Defense’s procurement and

production of biofuels. Via floor amendments, both of these provisions were stricken from the

version of S. 3254 that was passed by the Senate.

S.Amdt. 2985 was sponsored by Senator Mark Udall and co-sponsored by Senators Murray,

Shaheen, Bingaman, Hagan, Kerry, Begich, and Tom Udall. This amendment, which passed 6237, struck Section 313 from the version of S. 3254 as reported by the Senate Armed Services

Committee. Section 313 would have limited the ability of the Department of Defense to purchase

alternative fuels whose costs exceeds that of an equivalent traditional fossil fuel.

S.Amdt. 3095 was sponsored by Senator Hagan, and co-sponsored by Senators Johnson (SD),

Murray, Shaheen, Collins, Schumer, Stabenow, Whitehouse, Coons, Udall (NM), Tester, and

Udall (CO). This amendment, which passed 54-41, struck Section 2823 from the version of S.

3254 as reported by the Senate Armed Services Committee. Section 2823 would have prohibited

the Department of Defense from entering into a contract to plan, design, refurbish, or construct

biofuels refinery infrastructure unless specifically authorized by law.

These stricken sections were adopted by the Senate Armed Services Committee as amendments

sponsored by Senator Inhofe and Senator McCain, respectively. These amendments were each

approved in votes of 13-12. A third amendment, sponsored by Senator Inhofe, failed in the Senate

Armed Services Committee on a tie vote of 13-13. This amendment would have exempted the

Department of Defense from Section 526 of the Energy Independence and Security Act of 2007

(P.L. 110-140), which prohibits federal agencies from purchasing alternative fuels whose lifecycle

greenhouse gas emissions exceed those of conventional fuels. This amendment was similar to

Section 313 in H.R. 4310 as reported by the House Armed Services Committee on May 11, 2012,

and passed by the House.

These two stricken sections, as they appeared in the version of S. 3254 that was reported by the

Senate Armed Services Committee on June 4, 2012, are as follows:

SEC. 313. LIMITATION ON AVAILABILITY OF FUNDS FOR PROCUREMENT OF

ALTERNATIVE FUEL.

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

(a) Limitation- Except as provided in subsection (b), none of the funds authorized to be

appropriated by this Act or otherwise made available during fiscal year 2013 for the

Department of Defense may be obligated or expended for the production or sole purchase of

an alternative fuel if the cost of producing or purchasing the alternative fuel exceeds the cost

of producing or purchasing a traditional fossil fuel that would be used for the same purpose

as the alternative fuel.

(b) Exception- Notwithstanding subsection (a), the Secretary of Defense may purchase such

limited quantities of alternative fuels as are necessary to complete engine or fleet

certification for 50/50 blends. In such instances, the Secretary shall purchase such alternative

fuel using amounts authorized for research, development, test, and evaluation using

competitive procedures and shall ensure the best purchase price for the fuel.

SEC. 2823. PROHIBITION ON BIOFUEL REFINERY CONSTRUCTION.

Notwithstanding any other provision of law, neither the Secretary of Defense nor any other

official of the Department of Defense may enter into a contract to plan, design, refurbish, or

construct a biofuels refinery or any other facility or infrastructure used to refine biofuels

unless such planning, design, refurbishment, or construction is specifically authorized by

law.

Regarding Section 313, S.Rept. 112-173 states:

Limitation on availability of funds for procurement of alternative fuel (sec. 313)

The committee recommends a provision that would prohibit the use of funds authorized to be

appropriated to the Department of Defense in fiscal year 2013 from being obligated or

expended for the production or sole purchase of an alternative fuel if the cost exceeds the

cost of traditional fossil fuels used for the same purpose, except for continued testing

purposes.

The committee notes that in December 2011, the Defense Logistics Agency, on behalf of the

Department of the Navy, purchased 450,000 gallons of biofuels for $12.0 million, which

equates to $26.66 a gallon. According to the Department of the Navy it was the single largest

purchase of biofuel in government history and was carried out in order to “demonstrate the

capability of a Carrier Strike Group and its air wing to burn alternative fuels.” The

Department of the Navy noted that, despite the use of operation and maintenance funds for

the purchase, the demonstration is deemed a research, development, test, and evaluation

(RDTE) initiative as justification for the higher cost per gallon.

The committee also notes that the Vice Chief of Naval Operations testified before the

Subcommittee on Readiness and Management Support on May 10, 2012, regarding pressure

on readiness accounts from increased fuel prices that “every $1 increase in the price per

barrel of fuel results in approximately $31M of additional cost annually above our budgeted

level.” Therefore, the high cost of fuel has direct and detrimental impact on other readiness

accounts.

The committee strongly supports initiatives undertaken by the Department of Defense to

reduce the fuel demand of the operational forces through affordable new technologies that

increase fuel efficiency and offer alternative sources of power. But given the pressure placed

on current and future defense budgets, the committee is concerned about the use of operation

and maintenance funds to pay significantly higher costs for biofuels being used for RDTE

efforts. Therefore, the committee directs the Secretary of Defense to develop and promulgate

guidance to the military services and defense agencies on the difference between the

operational use of alternative fuels versus continued RDTE initiatives. (Pages 80-81)

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

H.R. 4310/P.L. 113-6

Section 315 of the enrolled FY2013 National Defense Authorization Act (H.R. 4310/P.L. 112239) states:

SEC. 315. LIMITATION ON OBLIGATION OF DEPARTMENT OF DEFENSE FUNDS

FROM DEFENSE PRODUCTION ACT OF 1950 FOR BIOFUEL REFINERY

CONSTRUCTION.

Amounts made available to the Department of Defense pursuant to the Defense

Production Act of 1950 (50 U.S.C. App. 2061 et seq.) for fiscal year 2013 for biofuels

production may not be obligated or expended for the construction of a biofuel refinery

until the Department of Defense receives matching contributions from the Department of

Energy and equivalent contributions from the Department of Agriculture for the same

purpose.

Department of Defense, Military Construction and Veterans

Affairs, and Full-Year Continuing Appropriations Act, 2013 (H.R.

5856, H.R. 933/P.L. 113-6)

For the 2013 fiscal year, the House Appropriations Committee, in its report (H.Rept. 112-493 of

May 25, 2012, on H.R. 5856), states:

ADVANCED DROP-IN BIOFUEL PRODUCTION

The request [for Defense Production Act purchases] includes $70,000,000 for the

construction or retrofit of domestic commercial (or pre-commercial) scale advanced drop-in

biofuel plants and refineries. The Committee understands that the Department has allocated

$100,000,000 of the $150,000,000 program addition to the fiscal year 2012 Defense

Production Act account for this effort and that $70,000,000 of this funding likely will not

execute until well into fiscal year 2013 or even into fiscal year 2014. While the Committee is

supportive of alternative energy development, in these times of decreasing budgets, it does

not seem prudent to stockpile funds so far ahead of need. Accordingly the recommendation

provides no funding for this effort in fiscal year 2013. The Committee urges the Secretary of

Defense to request this funding in future years when it can execute in a timely manner. (Page

203)

For the FY2013 fiscal year, the Senate Appropriations Committee, in its report (S.Rept. 112-196

of August 2, 2012, on H.R. 5856), provides for an additional $100 million for the DPA fund over

the amount requested in the FY2013 budget request. The report states:

Additional Funding - The Committee recognizes the critical role that the DPA title III

program serves in strengthening the U.S. defense industrial base and believes that this work

is in the national interest. Therefore, the Committee increases funding for DPA by

$100,000,000 over the budget request. The Committee directs that the additional funding be

competitively awarded to new initiatives and priority consideration should be given to

completion of DPA projects initiated in prior years. Furthermore, the Committee directs the

Under Secretary of Defense for Acquisition, Technology, and Logistics to inform the

congressional defense committees 30 days prior to any obligation or expenditure of these

funds. (Page 164)

Congressional Research Service

DOD Alternative Fuels: Policy, Initiatives and Legislative Activity

The Department of Defense, Military Construction and Veterans Affairs, and Full-Year

Continuing Appropriations Act, 2013 (H.R. 933/P.L. 113-6) includes the FY2013 DOD

appropriations as Division C. This act appropriates $223,531,000 for the Defense Production Act

Fund, an increase of about $134.3 million over the amount requested. However, the explanatory

statements of both the House and the Senate, as passed by the Senate on March 20, 2013 and the

House on March 21, 2013, reduced the funding requested for production of advanced drop-in

biofuels by $10 million as “ahead of need,” for an appropriation of $60 million.

H.R. 933/P.L. 113-6 also included $20 million in funding for research into lowering the emissions

of coal to liquid fuels, in Research & Development, Air Force. The explanatory statements of the

Senate (as passed March 20, 2013) and House (as passed March 20, 2013) state:

PROMOTING ENERGY SECURITY

The conferees do not include a provision as proposed by the House regarding the Energy

Independence and Security Act. However, the conferees provide $20,000,000 in Research,

Development, Test and Evaluation, Air Force only for research that will improve emissions

of coal to liquid fuel to enable this technology to be a competitive alternative energy resource

to meet the goals established in the Department of Defense's Operational Energy Strategy

and its Implementation Plan. The conferees direct the Secretary of the Air Force, in

consultation with the Assistant Secretary of Defense for Operational Energy Plans and

Programs, to inform the congressional defense committees 30 days prior to any obligation or

expenditure of these funds.

Under the Department of Defense, Military Construction and Veterans Affairs, and Full-Year

Continuing Appropriations Act, 2013 (H.R. 933/P.L. 113-6), the Department of Energy funding

was appropriated under a continuing resolution. DOE’s Energy Efficiency and Renewable Energy

was funded at approximately $1.8 billion.

Author Contact Information

(name redacted)

Analyst in Foreign Affairs

[redacted]@crs.loc.gov, 7-....

Congressional Research Service

EveryCRSReport.com

The Congressional Research Service (CRS) is a federal legislative branch agency, housed inside the

Library of Congress, charged with providing the United States Congress non-partisan advice on

issues that may come before Congress.

EveryCRSReport.com republishes CRS reports that are available to all Congressional staff. The

reports are not classified, and Members of Congress routinely make individual reports available to

the public.

Prior to our republication, we redacted names, phone numbers and email addresses of analysts

who produced the reports. We also added this page to the report. We have not intentionally made

any other changes to any report published on EveryCRSReport.com.

CRS reports, as a work of the United States government, are not subject to copyright protection in

the United States. Any CRS report may be reproduced and distributed in its entirety without

permission from CRS. However, as a CRS report may include copyrighted images or material from a

third party, you may need to obtain permission of the copyright holder if you wish to copy or

otherwise use copyrighted material.

Information in a CRS report should not be relied upon for purposes other than public

understanding of information that has been provided by CRS to members of Congress in

connection with CRS' institutional role.

EveryCRSReport.com is not a government website and is not affiliated with CRS. We do not claim

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.