Archive for the 'energy security' Tag
In a time where we complain of tight budgets, are we throwing too much at one of the SECNAV’s pet projects? Via David Alexander at Reuters;
When the Navy first tested biofuel versions of marine diesel and jet fuel in 2012, it spent eye-popping sums for small amounts.
In one case, it paid $424 a gallon for 20,055 gallons of biofuel based on algae oil. To test the Great Green Fleet in the summer of 2012, it spent nearly $27 a gallon for 450,000 gallons of biofuel, later mixed into a 50-50 blend. The $15-per gallon-cost was four times that of conventional fuel.
The fuel for the Great Green Fleet deployment over the next year is a competitively priced blend of 90 percent diesel and 10 percent biofuel made from beef fat, Navy officials said.
A California firm, AltAir Fuels, is contracted to supply 77 million gallons of the fuel between Oct. 1, 2015, and Sept. 30, 2016.
The Navy pays $2.05 a gallon, thanks in part to a subsidy of 15 cents a gallon from the Commodity Credit Corp, a government-owned enterprise that supports farm products.
Fuel costs in the last few years have fallen through the floor. We are now an oil exporting nation once again, and via fracking, we have greatly expanded access to fuel at inside our lifelines. Supply is no longer an issue for the economy in general, and well beyond a threat to our Navy.
Why are we doubling down on an idea that seems from the 1970s? Why are we also creating our own pet industrial policy?
To boost production of alternative fuels, the Navy has awarded $210 million to help three firms build refineries to make biofuels using woody biomass, municipal waste and used cooking grease and oil. The U.S. Department of Agriculture is providing an additional $161 million in crop supports.
The refineries are expected to begin operations this year, with full production not likely until 2017.
Is this what we need to spend our money on?
There is a financial cost, but what other risks are we taking on? What are we buying in to? What are we investing our reputational capital in?
One of the companies that got a lucrative biofuel contract from the military was the San Francisco–based Solazyme Inc. According to the Congressional Research Service, in 2009, Solazyme got a $223,000 contract for 1,500 gallons of algae-based motor fuel. That works out to $149 per gallon. Perhaps it’s a coincidence, but Solazyme has also been a big donor to Democratic causes, giving some $300,000 to Democratic candidates and committees. The company has also donated between $100,000 and $250,000 to the Bill, Hillary, and Chelsea Clinton Foundation.
Last month, Fortune reporter Katie Fehrenbacher wrote an excellent piece about the spate of failed cellulosic-biofuel companies that have been backed by Silicon Valley promoter Vinod Khosla. In 2006, Khosla claimed that we “can replace most of our gasoline needs in 25 years with biomass.” One of Khosla’s investments was in Range Fuels, the failure of which I wrote about on NRO back in 2011. Range Fuels got a $76 million grant from the Department of Energy as well as an $80 million loan that was guaranteed by the federal government. Despite the failure of Range, Khosla plunged forward with a company called KiOR, which claimed it could profitably produce liquid fuels from the wood of pine trees. The company got tens of millions of dollars in government money, but its process never worked as promised, and it filed for bankruptcy in 2014. The state of Mississippi, which provided the company with a $75 million loan, is now suing Khosla, as well as several KiOR executives, claiming the state was deceived about the company’s technology.
… the marketplace is trumping government mandates and subsidies. Today, ethanol distilleries are consuming about 40 percent of all domestic corn output in order to produce fuel equivalent of about 600,000 barrels of oil per day. (Total U.S. consumption in 2014 averaged about 19 million barrels per day.) And it took roughly four decades of mandates and subsidies for the corn-ethanol industry to grow to that size. Let’s compare that result with what has happened in the oil patch. Since 2006, thanks to the shale revolution, domestic oil production has increased by more than 3.6 million barrels per day. Thus, in just this past decade, the oil sector has increased production by six times the total output of every ethanol distillery in America. That increased oil production didn’t happen because of congressional mandates or subsidies. It happened because privately owned companies risked billions of dollars, and in doing so they innovated in everything from drill bits to mud pumps.
With the service still suffering from the Fat Leonard scandal, all this money going to places it has no economic reason to makes me a bit itchy. That is the worst-worst case. Best worst-case, just a boondoggle. Best case? You were just following orders.
My instincts are that this remains what it looks like, a well meaning but misguided personal priority of the SECNAV. It does not make sense from an economic or national security point of view – but that is just my view, and he’s the SECNAV. His call.
Government money chasing hard to defend programs do not result in a kind judgement from history. Sal’s recommendation: let this be pushed by the civilians and political appointees – this is their business. If in uniform, do what your job strictly requires, but edge your way out of the picture when the PAO comes around. The reward is small, but the potential frag pattern is huge.
On August 6th, the Center for International Maritime Security (CIMSEC) ran a feature on the latest Japanese helicopter destroyer, the Izumo (DDH-183). CIMSEC contributor Miha Hribernik observed that the Izumo, which is supposedly capable of carrying an aviation squadron and boasts a 814 feet-long (248 meters) STOBAR (short take-off but arrested recovery) flight deck, is “sure to cause concern in China…[since the launching of the ship] presents a potent addition to the operational capabilities and strategic reach of the JMSDF.”
According to Business Insider, the launching of the helicopter destroyer “came in” shortly after China’s recent statement that it is in “no rush [to sign the proposed Code of Conduct] since [Southeast Asian nations involved] harbor unrealistic expectations.” Japan’s territorial row involving Diaoyu/Senkaku coupled with threats emanating from the DPRK (Democratic Republic of Korea) might have triggered increased defense spending. However, the two aims of Japan’s burgeoning defense spending, pre-emptive strike capabilities and the creation of an amphibious assault unit similar to the United States Marine Corps, have made its East Asian neighbors uneasy. As for America’s reaction, Zachary Keck believes that while it is “unclear” how the Obama Administration will respond to Japan’s pre-emptive attack on its “adversary’s bases,” the Obama Administration could become “vocal” should Japan act upon its “threats to review [its] past apologies.”