Last week the Senate Armed Services Committee voted to restrict efforts by the Department of Defense (DOD) to reduce its dependence on foreign oil. This will hurt the DOD's efforts to protect its budget from oil price shocks, diversify its energy mix and ensure security of supply. This is a step backwards.
The Department of Defense is one of the largest institutional energy users in the world, consuming more than 300,000 barrels of oil per day. Volatile global oil supply patterns create heightened exposure to price fluctuations. This instability was highlighted in a landmark report by the Defense Science Board entitled "More Fight-Less Fuel," which recommended that the Pentagon initiate energy innovations to reduce risk to soldiers and enhance the military's long-term energy security.
True to form, DOD responded in forceful fashion. A recent Pew report highlights the military's investments and efforts in vehicle efficiency, energy efficiency, renewables and advanced biofuels as a way to diversify its energy sources and reduce demand and costs. A part of this strategy is the implementation of a Memorandum of Understanding (MOU) that was signed last August by the Departments of defense, energy and agriculture. The agencies committed to jointly invest $510 million to spur production of advanced aviation and marine biofuels to power military and commercial transportation. These investments -- to be matched by the private sector -- will be made through the Defense Production Act, which was enacted in 1950 to enable the federal government to partner with domestic industry to meet national security needs.
This MOU is a core component of improving the military's readiness capabilities and reducing fuel costs. DOD's overall energy budget in 2012 was $16 billion. In fiscal years 2011 and 2012, DOD accrued $5.6 billion in unanticipated fuel costs (not budgeted) for military operations and maintenance.
In early May, Rep. Conaway of Texas offered two amendments to the armed services authorization bill that set up a battle in the Senate Armed Services Committee this week over the military's clean energy initiatives. The first amendment would have exempted DOD from Section 526 of the Energy Independence and Security Act of 2007 (EISA). Passed overwhelmingly by Congress, including many of the same members now opposing the measure, and signed into law by President Bush, Section 526 states that DOD and other federal agencies are not permitted to purchase fuels with higher life-cycle emissions than those of conventional petroleum fuels. Thankfully, Section 526 was protected today in the Senate Defense Authorization Bill.
Conaway's other amendment prohibits DOD from using funds to move forward on the advanced biofuels MOU. Sadly, by a slim majority, the Senate Armed Services Committee voted to restrict funds to be used for the purchase of alternative fuels.
Meanwhile, U.S. advanced biofuel producers have made rapid progress toward cost-competitiveness. Per gallon cost of test quantities of advanced biofuels under Navy contracts have declined more than 90 percent over the past two years and will continue to decline as these technologies scale to commercial production. Bloomberg New Energy Finance, the premier clean energy data and analysis firm, forecasts that advanced biofuels will be cost competitive by 2018. A key factor in that forecast is DOD's continued commitment to reduce use of foreign oil and increase use of American advanced biofuels.
Without the Pentagon's commitment -- signaled by Section 526 and the MOU -- it will be much harder and take much longer for the private sector to build these refineries on their own. With advanced biofuels or any other emerging sectors, investors want to make sure that there is a long-term demand signal before investing.
Congress should support policies that will reduce our reliance on foreign oil, not undermine them. There is too much at stake for the nation's energy future to do anything less.