The Big $55M Drop-in Military Biofuels Op

In Washington D.C., the Office of the Secretary of Defense announced a $55-million funding opportunity for a 10 million gallon biorefinery capable of producing advanced drop-in bio-equivalent fuels suitable for military use. Proposals may take the form of either brown field expansion/modification of existing pilot-scale facilities, commercial-scale facilities, or new green field construction. Attention will be paid to enhancing merchant supplier capabilities in order to effectively serve the broad Department of Defense (DoD) and non-DoD communities.

This Title III project is aiming at “a complete value chain including feedstock production, chemical conversion and processing, and fuels blending, transportation and logistics.”

The Time and the Money

There will be just the one award, and the expected project would come in at $110 million. There would be up to a $55 million government share plus $55 million recipient share.

Projects will be executed in two phases. The government will provide up to $8 million (plus Recipient share) for phase one. The government will provide up to $47 million (plus Recipient share) for phase two. Selected awardees will be required to share at least 50 percent of the total project cost.

The anticipated period of performance for this award is 66 months total, including 30 months for phase one (planning, preliminary design and financial close), followed by up to 36 months for phase two (construction, commissioning and performance testing).

It’s New Money, Sort Of

Buried on page sixe of the complete solicitation is this gem:

Fiscal year 2013? Fiscal year 2016? What is going on here? Yes, it’s the original $55 million that was held back in case Nature’s Bioreserve was able to put a feasible project together, which doesn’t appear to have happened. As we reported in September 2014, “Nature’s BioReserve was also awarded a phase one grant to complete more extensive engineering and plans in support of a commercial-scale project.” But they just never got to Ready-for-Prime-Time status.

Originally, Nature’s Bioreserve back in the dawn of history, also known as 2010, was a beef tallow biodiesel plant targeted for South Sioux City, Nebraska, with a capacity of up to 60 million gallons — ultimately repurposed conceptually for military biofuels.

Let’s Rewind Briefly

Back in 2014, the DoD awarded $210 million under the Defense Production Act to Emerald Biofuels, Fulcrum BioEnergy and Red Rock Bio towards the construction of biorefineries that produce cost-competitive, drop-in military biofuels. Under the grants, the companies will build biorefineries to produce military spec fuel that is expected to cost the U.S. military, on a weighted average, less than $3.50 per gallon — or cost competitive with petroleum-based fuels, with availability expected as soon as 2016, and have a 50 percent or greater reduction of emissions compared to conventional fuels.

Where are those other three? There’s chat going around in Washington D.C. that Fulcrum is on the verge of closing its long-sought financing. We expect that Red Rock is still on track to close financing this year.  But it is something that the DPA Title III office needs to look into, in terms of how they have structured this approach to defense production. Imagine waiting around for, hmm, atomic weapons in 1945 because the government messed up the structure of the Manhattan Project’s financing. We know it’s tough to finance bioenergy projects, that’s why the DPA Title III Office is involved in the first place — and the cavalry is supposed to get through.

Emerald, we’re not quite so sure of. It’s been quite some time since we’ve seen anyone from that project team at an industry gathering. We’ve heard that ultimately that project will a) reach fruition or b) the dollars could be reallocated to another deserving project.

If Cost-competitive, the Government is a Customer

The DoD has indicated “that it intends to purchase biofuel blends that meet approved specifications…[importantly], cost competitiveness of the biofuel with conventional petroleum derived fuels is a primary DoD objective.”

Must Be Blendable

The Air Force, which is overseeing the bid, requires that “the total enterprise envisioned in this effort must include a capability to blend the neat biofuel product with petroleum-based equivalent fuels, if required in order to meet approved certifications and specifications, and thus furnish a ready for use, drop-in biofuel blend. Capabilities and/or facilities to store and transport the resulting product must also be an element of the project.”

Meets Military Specifications

The targeted fuels will be for military operational use, and as such, must be either currently approved/certified or are likely to be approved and certified MILSPEC JP-5, MILSPEC JP-8, approved for U.S. military use ASTM D1655 / D7566 Jet A/A1 and/or MILSPEC F-76 equivalents by the time a commercial-scale IBPE would become operational.

Your Trump Card: Made in the USA (or, psst!, Canada)

As defined in the Defense Production Act of 1950 a domestic production source is: “A business concern that performs in the United States or Canada substantially all of the research and development, engineering, manufacturing, and production activities required of such business concern under a contract with the United States relating to a critical component or a critical technology item.”

The Defense Production Act Backstory

Title III of the Defense Production Act provides unique authorities, under which the government may provide appropriate incentives to create, maintain, protect, expand, or restore the productive capacities of domestic production sources for critical components, critical technology items, and industrial resources essential for the execution of the national security strategy of the U.S. The principal objective of all DPA Title III investments is to strengthen and expand these domestic productive capacities and to ensure government access to critical technology items well into the future.

The Dates to Know

The “Intent to Propose”: April 27, 2017.

Proposal Due Date: May 25, 2017.

Anticipated award date: December 4, 2017.

This article was originally published by Biofuels Digest and was republished with permission.

Lead image credit: DVIDSHUB | Flickr

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