Last week the US House of Representatives passed the fiscal 2013 National Defense Authorization Act by a wide, bi-partisan margin. It included two controversial provisions relating to energy that will presumably be debated when the Senate Armed Services Committee takes up the bill this week. Sections 313 and 314 would exempt the Department of Defense from a provision of the Energy Independence and Security Act of 2007 (EISA) barring the government from purchasing alternative fuels with higher emissions than conventional fossil fuels, while prohibiting the purchase of any alternative fuel that costs more than the conventional fuel it would replace, except for testing and certification purposes. If enacted, the bill would require drastic revisions to the current alternative energy strategies of the US military branches.
It would be easier to attribute these provisions to partisan maneuvering, if our economic and fiscal circumstances hadn't changed so dramatically subsequent to the passage of EISA in 2007. Although I don't dismiss the influence of election-year politics in such matters, we are now in the third full year of a recovery so weak that many Americans still think we're in a recession, and we face deficits and a ticking debt bomb that forced a reluctant Congress to agree to deep spending cuts starting next January. Nearly $500 billion of those cuts are targeted at military spending. Moreover, our perspective on US energy security has been altered by the emergence of shale gas and so-called "tight oil", and by our recent shift from net importer to net exporter of petroleum products--though certainly not of crude oil. While it remains desirable for the US military to diversify its energy sources, the value of that diversification has arguably fallen. Meanwhile, the biofuels industry, despite tremendous growth and advances, has been unable thus far to compete with petroleum-based fuels without either large subsidies or strict mandates, even with a global price of oil that has remained consistently above $100 per barrel since January 2011.
Last year I had a couple of opportunities to question Defense Department officials about their alternative energy strategies, as part of an Army/Air Force energy forum and a subsequent Air Force media briefing at the Pentagon. Although I was impressed by the changing military culture concerning energy and the methodical way they were approaching the introduction of new fuels, I was concerned that at some point the services' procurement of higher-cost renewable fuels would conflict with their other priorities, including the need to replace equipment worn out in Iraq and Afghanistan and to field the next generation of aircraft and naval vessels. What I thought I heard very clearly from the Air Force Deputy Assistant Secretary for energy was that his service was not going into the fuel-production business, and would only buy renewable fuels--other than for certification with their fleet--if they were competitive with conventional fuels. That approach seems very different than the one embodied in the Navy's "Great Green Fleet" initiative.
The rationale behind the military's adoption of alternative fuels rests on many complex issues, including the vulnerability of military supply chains and budgets to potential disruptions in oil supplies and price spikes, consistency with the government's imposition of renewable energy mandates on the private sector, and the desirability of reducing the environmental footprint of the military's global activities. There's also the human dimension of personnel put at risk delivering fuel to front-line units, although it's not clear how biofuels would alleviate that risk unless they were produced in forward locations. In any case, however, all these concerns must be reconciled with a realistic response to budget constraints. That looks extremely challenging, and it shouldn't be divorced from deeper questions about the evolving drivers for biofuels or other alternative fuels for the US military.
Consider the question of supply disruptions, for example. US oil production looks set to continue increasing and oil imports to keep falling, while we now enjoy a refining surplus that is supporting new product exports. We also have a Strategic Petroleum Reserve that could replace up to half of our net crude oil imports for up to 5 months, or a smaller disruption for much longer. As a result of these factors, it's become more difficult to envision a scenario in which an oil market event affected the military's access to fuels in a manner that the present renewable energy industry could alleviate. And with the cost of most alternatives still above even today's elevated prices for oil and its products, the investment required to develop an alternative fuel industry capable of making a meaningful dent in the military's needs under such a scenario would be very substantial. Should the military make that investment, should someone else, or should it be left to the market? And that doesn't begin to address the issues related to the non-renewable alternative fuels that would be enabled by Section 313, including synthetic fuels derived from natural gas or coal, though these would still be subject to the restriction that they must be price-competitive with conventional fuels.
I suspect that the House bill will not be the last word on this subject, though I also imagine that in the new world of "sequestered" budgets and the fiscal challenges that lie ahead, the US military may need to rethink what can be achieved in this area without sacrificing readiness and combat capabilities. It's also important to note that the 2013 Defense Authorization Act's provisions on alternative fuels shouldn't affect the services' efforts to integrate renewable electricity generation, which looks like a real boon for some forward-deployed applications.
