15 August 2012

MEMORANDUM

From: To: Associate Director of Research and Scholarship for Internships & Technology TransferVia: (1) LCDR Jason Chiodi, USN Department of Political Science Internship Coordinator

(2) CDR Tom Robertson, USN Division of Humanities and Social Sciences Internship Coordinator

Subj: AFTER-ACTION REPORT FOR INTERNSHIP, SUMMER 2012

Ref: (a) COMDTMIDN/ACDEANINST 1531.73A

Encl: (1) Point Paper(2) DPA Research Paper(3) Cost Analysis Paper

A. Summary Information

1. This After-Action Report (AAR) is provided in accordance with reference (a). Internship details:

Location: OPNAV N45E Dates: 23 July– 14 August 2012

B. Technical

1. Title of Project: Defense Production Act of 1950 and Alternative Fuels

2. Objective: The subcommittee focused on preparing a brief for Congress suggesting that the Defense Production Act of 1950 (DPA) could be used to procure and develop a sustainable domestic biofuel industry.

3. Approach: I acted as a head researcher discovering how the DPA was used in years past to fund and sustain industries critical for national security. Past projects have included titanium, aluminum, steel, nanotechnology, carbon fiber, and rare earth industries, and these were cited. Also cited were the threats to national security that would occur if the US Navy’s fuel supply was cut off.

4. Accomplishments and My Contributions to the Project: For the DPA Research Paper, I made several trips to Crystal City to interview Mark Buffler, the civilian director of the DPA Title III Fund Management Allocation. After gaining knowledge on the inner workings of the DPA funding process, I spend 15 hours a week researching past and present DPA funded projects to use as examples in preparing the paper. Afterwards, I drafted the enclosed papers, which will be

used in either an upcoming congressional hearing or at the Navy Energy Forum later in October to demonstrate how procurement of Biofuels could be possible.

5. Publications and/or Presentations: At the end of the internship period, I had completed a short research paper which suggested how the DPA could be implemented to develop a biofuel industry, and also what challenges a fuel shortage would impose on US National Security. The paper also made a few recommendations to USN as to how we should re-examine our policy regarding DPA funding in general. I also completed an accompanying Point Paper outlining the approach recommended by the research paper. In my spare time, I completed a paper consisting of an independent economic analysis of the cost to the US Government to save the life of a soldier (theoretically). The cost was determined by calculating the reduction in fuel convoys from the deployment of ExFOBs (Experimental Forward Operating Bases) and comparing it to the investment in research and development. (Paper titled Cancer and Energy)

C. Administrative

Obtaining travel orders, security clearances, and NMCI accounts all went smoothly. It was beneficial that computer access was arranged prior to the midshipman arriving at the internship, though a few clearances still needed to be taken care of (badge access, NMCI .mil account). It takes 2 days for NMCI clearance, and 2 lost days out of only 20 or so is not relatively high percentage, considering that I could log in to the network via CAC card. I just couldn’t access my email.

The Naval Academy provided no assistance in terms of lodging, equipment, transportation, or meals. These were all left to the midshipman, which can get quite expensive. This internship is accessible using the Metro rail and a shuttle. The Pentagon does offer a transit subsidy to all “Paid Interns, and DoD personnel permanently stationed at the Pentagon…” but since I am an unpaid intern on TAD at the Pentagon, I could not access the $230 transit subsidy. Daily cost of travel was $13.50 for the metro ($4.75 each way, and $4.00 parking at New Carrollton), plus gas for a 48 mile round trip daily commute (weekly cost of gas was $35.00 average). Total out of pocket costs for the internship was $350.00 for travel/commuting.

D. Evaluation

1. Relevance The internship is relevant to my academic and career goals for a number of reasons. First,

the Secretary of the Navy has mandated high standards for Navy Energy through 2020 including the Great Green Fleet Initiative, 50 percent alternative fuel usage, and a hybrid commercial vehicle fleet. Being able to see how these efforts were planned, organized, and funded from an internal perspective greatly increased my awareness of how the Navy operates in terms of budgets, logistics, and operations. As a mechanical engineer working with alternative fuels for an independent research project through the Bowman Scholarship program, it was very useful to see that my research is both relevant and actively being pursued by the Navy.

2. Impact: This internship impacted my development as an officer, adding knowledge of how day to day operations at the higher levels of Navy organizations occur, and providing me with

contacts who were up to date on Navy policy and allowing me to experience a ‘shore’ billet in addition to my fleet cruises. This internship also encouraged me to pursue graduate education in Alternative Energy and Environmental Engineering. I have restructured my Marshall Scholarship Application to reflect and include the newfound knowledge I have acquired regarding the production, distribution, and policies regarding alternative fuels.

3. Level of interest/challenge: The level of interest for this internship is high for anyone interested in Navy Energy, budgets, high level policy and decision making, and active research. The project I was presented was completed in about a week; then the fun started. I took the opportunity to visit other areas of the Pentagon, meet with senior leaders, and discuss topics that interested me including future operations for the Navy, research and development, and life as a submarine officer (my current selection). The working hours were standard (0800-1600), though there is a great deal of flexibility. After the first two days of being awestruck by the fact that I was working in the Pentagon (and getting my clearances) the opportunities just opened up, and I was active in learning all I could about Navy Energy. As long as I was on time, productive, and made progress towards my work, there were no complaints.

E. Recommendation(s)

Change: Transit Subsidy. The Pentagon offers a metro subsidy up to $230/month for Paid Interns or DoD personnel permanently assigned to the Pentagon. If we could receive 1 month of pay from OPNAV N45, or use our Midshipmen Pay as justification, then the subsidy would be granted.

Retain: This internship should definitely be kept on the list of available internships. Also, there could be some coordination organized from within the Academy between all Midshipmen doing internships in DC during summer training. I am currently sharing lodging with another Midshipman and her sponsor parents, and we commute daily to DC (she has an internship at NDU). If a mass carpool distribution list was passed out to all Midshipmen interns, then a carpool system could be organized, saving us money. The only problem now is that we do not have access to a master-intern list, so we are unaware of who else would be willing to commute with us.

F. Other

All members of the NECO Team were very informative, helpful, and hard-chargers. I made some great contacts and met some awesome people. I would highly recommend this internship to any and all midshipmen with a passion for energy, efficiency, and sustainability.

Enclosure (1): Point Paper

UNCLASSIFIED 15 Aug N45,

Subject: History and Use of the DPA as it pertains to Biofuels

1. Executive Issues: The Defense Production Act (DPA) was enacted to provide a system to allow for

the production and allocation of resources which directly support national defense. Biofuels can provide a sustainable, domestic, and stable source of fuels to the

US Navy in both the surface and air warfare communities. DPA provides funds to private companies engaged in production or procurement.

The US Navy proposes to use Title III of the DPA to foster biofuel production. According to Secretary Mabus, “Every time the price of oil rises by $1/barrel,

the fuel bill of the Navy rises by $35 million.” N45 supports this effort as a part of the Great Green Fleet Initiative which is in

support of Secretary Mabus’ Alternative Energy Initiative.

2. Background : Past funding has led to an increase in vital minerals and metals for DoD use, as

well as numerous advancements in civilian and military technology. Recent projects include Armstrong Titanium Powder, Lithium Ion Batteries,

Carbon Nanotube Filament, Miniature Compressors, and Low-Cost GPS Technology.

3. Discussion: One major point of contention is whether biofuels are necessary for national

defense and thus eligible for Title III funding. Objective is to determine the historical use of the DPA funds to determine if

products similar to biofuels have been funded. At issue is the need to maintain a sustainable and available domestic fuel

supply against the cost of production biofuels relative to petroleum One major point of contention is whether biofuels are to be classified as a

‘resource necessary for naitonal defense’ or a ‘commodity’.

4. Recommendation: Biofuels should be funded with Title III funds in order to create a sustainable and

stable source of fuel. US Naval readiness would be crippled if fuel prices rose or supply was halted Mass production and distribution can drive costs down to levels comparable

to petroleum fuels while also reducing greenhouse gas emissions.

Enclosure (2): DPA Research Paper

USNA

[Type the document title]

[Type the document subtitle]

Windows User

[Pick the date]

In 1812, before the French invasion of Russia, General Napoleon Bonaparte astutely

observed that “an army marches on its stomach.” 200 years later, the US Military marches, sails,

and flies, while providing national security with some of the most advanced weapon systems

ever developed. Unfortunately, the appetite of the US Military and its weapon systems expand

far beyond meals and munitions. These systems require rare materials and an abundance of fuel

in order to maintain the operational tempo necessary to provide a sustained forward presence and

defensive posture necessary to maintaining global stability. In order to remain operational, the

military must maintain a ready supply of construction/fabrication materials such as steel,

titanium, aluminum, and rare earth metals for its systems and a constant supply of fuel to power

these systems whenever necessary. In the 1950’s, when the need for a larger stockpile of metals

for development was required, Congress passed the Defense Production Act (DPA) to empower

the federal government to “fund private industries with low or zero interest rate loans to produce

materials that were critical to national security1.”

Historically, the DPA has been used to bolster the supply of mission critical materials

during wartime when production was in short supply. Specifically, the Act invigorated the

nation’s steel, aluminum, copper, and titanium industries at the onset of the Korean War, though

in recent years, DPA has funded advancements in beryllium, tungsten, carbon fibers, and other

rare earth metals and technologies2. This funding was critical in ensuring that the US Military

was properly supplied to go to war, as a majority of the nation’s domestic resources were

decreasing in production rates after World War II. While the direct impact of the DPA in the

Korean War was to provide the US Military with the necessary resources to function effectively,

a secondary result of this investment was to foster a sustainable civilian resource production

1 FEMA, “Legislative History of the Defense Production Act.” June 19892 Title III Offices, “Advancing the Industrial Base to Defend the Nation,” 2012

industry within the US. DPA funding through General Electric, Bu Mines & Bu Standards, and

Vitro Corp was responsible for establishing these companies as pioneers and leaders in mineral

extraction and recovery3. Although these companies prospered during a 10-15 year period after

the Korean War, many companies closed as the funding by DPA led to inexpensive and effective

means to procure minerals. As a result, those companies that were either specialized (in

production) or localized (in geography) went out of business due to the natural capitalist business

cycle. However, the companies that did survive expanded nationwide, employing far more

citizens than the companies that went under, and are still responsible for the production of vital

materials.

The DPA is currently used as a means to procure advanced technology for military

systems and applications, including the M1 Abrams Main Battle Tank, Lithium Ion Batteries,

Titanium Metal Composites, Microprocessors, Miniature Compressors for Electronic Cooling,

Low-Cost Military GPS, Titanium Powder Production, and High Quality Beryllium Production4.

Many of these technologies are being directly integrated into the civilian and private sectors, and

are responsible for drastic improvements and advances in consumer goods.

Stronger, lighter, and less expensive carbon fiber A-arms (and other structural designs)

are being used in automobiles nationwide, replacing larger, bulkier, and energy intensive metal

components, resulting in lighter, cheaper, and more efficient automobile designs.

Armstrong Titanium Powder is being utilized in 3-D Printing, which is a revolutionary

technology capable of constructing functional components ranging from prosthetics, to engines,

to propeller screws and jet wings, by constructing the model from a 3-D computer file one layer

at a time. Recent work at the National Transportation Research Center’s Manufacturing Demo

3 Defense Production Act, “Research & Development Contracts Under Title III”4 “Advancing the Industrial Base to Defend the Nation”

Facility is currently producing meshed titanium components with only 10-15% of the titanium

that a full-bodied component would use, with no decrease in performance5. International

Titanium Powder, located in Woodridge, IL, has now become the single largest supplier of high

quality titanium powder for 3-D printing through a healthy Title III investment.

GPS Technology is now available to a majority of the US population, after its public

release in the 1990’s, and has been further updated to calculate the least time-intensive routes

through real time updates, allowing the nation as a whole to increase its productivity and

transport speed. Current GPS research conducted by Rockwell Collins, and funded through Title

III, is focused on lowering cost and improving reception for high precision and real-time data.

Lithium Ion Battery technology has all but replaced aging, inefficient, and toxic

Cadmium-Nickel batteries, reducing waste and boosting life, improving performance in

automotive (hybrid), military (UAV), and civilian sectors6. Many new corporations including

Quallion, LLC, located in Sylmar CA, have emerged to produce LI batteries for use in

automobiles (both military vehicles and civilian), portable electronic devices, and other

widespread applications though DPA appropriated funds.

Another product of Title III DPA investment is High-Quality Beryllium. Beryllium is a

vital component of many military applications including Forward Looking Infrared Radar

(FLIR) combat systems, nuclear test reactors, and guidance systems for missiles and surveillance

satellites. There is currently no substitute material for this grade of beryllium, and due to its

desirable properties including high tensile strength, high melting point, shielding, and

conductivity; it has been exported to the private marketplace for use in the aerospace, software,

5 Glenn, Shane, “Stratasys and Oak Ridge National Laboratory Partner to Advance Additive Manufacturing Process” Stratasys. 29 June 2012.

6 “Advancing the Industrial Base to Defend the Nation”

and nuclear power industries7. Today’s beryllium manufacturing takes place at the Materion

Corporation in Mayfield Heights, OH, and this company has experienced significant growth in

the past three years. These advancements have all stemmed from the startup funding of the

DPA, and the corollary benefits of that funding have migrated into the private sector to provide

higher quality goods, increased employment in emerging fields, and competitive prices in the

public marketplace.

However, these goods would not exist in quantities sufficient for wide scale application

without significant government investment. Prior to 1950, the United States’ aluminum and

titanium markets were virtually nonexistent. A number of factors contributed to this absence

including a high cost of production, few contemporary applications, and an overall lack of

demand. The dynamics changed at the onset of the Korean War as jet aircraft, such as the F-86

Sabre, required lightweight, yet durable materials to execute their missions effectively.

Aluminum and titanium were the metals selected to be used in the construction of all jet aircraft,

due to their desirable properties8. Without substantial government investment through the

Defense Production Act, the Air Force would have faced significant difficulty establishing air

superiority. After the Korean War, aluminum and later titanium were used extensively in all

applications requiring lightweight, durable, corrosion-resistant, and cost-effective materials were

required. Prior to 1950, the cost of Aluminum was $1.69/lb (2012 dollars) compared to the

current price of $0.85/lb (2012 dollars)9. In 62 years, the price of aluminum was reduced by half

due to mass production and distribution, even though global supply is dwindling and demand is

rising exponentially. With such a widespread commercial and military application, the

7 Pope, Sydney, Mark Roupas, and Mark Buffler. "Defense Production Act." Defense Production Act. 20 Jan. 2010. Power Point8 Defense Production Act, “Research & Development Contracts Under Title III.”

9 $9.56 (2012) = $1.00 (1950)

development of the aluminum and titanium industries through Titles I and III of the DPA can be

deemed vital to national security and private interests.

Today, aluminum is classified as a commodity on the open market and is mined,

produced, and traded by nearly every industrial nation. The same is true of beryllium, tungsten,

titanium, and other metals. As the supply of these mission critical raw materials is dwindling,

synthetic versions of palladium, titanium, and nickel are being developed through DPA funded

projects to provide identical resources artificially.

The same cannot be said of a particular strain of elements known as “rare earth metals”

which are found in low concentrations in the Earth’s surface.10 One of the most appealing

properties of these metals is their magnetic longevity, which is critical for use in the following

areas: fin actuators in missile guidance, disk drive motors in weapons systems, lasers for mine

detection and countermeasures, satellite to ship communications, electronics in the F-35 JSF, and

guidance chips in smart bombs11. These metals are currently being produced and stockpiled in

large quantities in China, who has also established export quotas to the rest of the world. As a

result, a Congressional Report was released on 25-APR-12 to consider options to increase the US

Supply of Rare Earth Metals, one option being to use Title III of the DPA to “encourage

domestic production of minerals and metals vital to national security due to a possible shortage

of usable material.” In addition to increasing mining operations, the objective of this Title III

implementation would be to increase the synthetic production of these rare but vital

commodities.

Presently, the US Military faces the threat of a shortage of another critical resource:

petroleum. The US Navy is currently the largest consumer of fossil fuels in the world, and is

10 Grosso, Valerie. Rare Earth Elements in National Defense: Background, Oversight Issues, and Options for Congress. Rep. N.p.: n.p., n.d. Print.11 “Defense Production Act”

responsible for 0.53% of all national consumption (Overall Department of Defense consumption

is 2.0% of total US consumption)12. A significant quantity of petroleum comes from areas that

are politically unstable including the Middle East and Latin America; these regions have been

known to cease exportation of petroleum in the past. In addition to this volatility, there is also

hostility to consider as a significant percentage of foreign aggression in the past 20 years has

come from these regions. As a result, it is a dangerous step to assume that petroleum will

continue to flow freely into the US in the years to come13. Even if petroleum does continue to

flow, the supply is not unlimited. At some point in the future, “peak oil” conditions will occur,

in which case the discovery of new reserves, and production of oil will be outpaced by the

consumption of oil, leading to a global shortage. On that day, it is pivotal that the US Military be

operating on an alternative fuel source, or the nation’s war fighting capabilities would be

crippled. Just as production of synthetic rare earth metals is a viable solution to the metal

shortage, synthetic fuel production is a viable solution to the petroleum uncertainty and eventual

exhaustion.

One proven form of synthetic fuel is Hydrotreated Renewable Fuels (HTR) including

Diesel (HRD) and Jet (HRJ). These fuels are second generation biofuels derived from non-food

feedstocks and are classified as ‘drop in’ fuels, that is, they function as well as the equivalent

petroleum product, whether it is F-76 diesel or JP-5 jet, with no engine modifications required,

unlike first generation biofuels such as ethanol14. These fuels, if produced in sufficient

quantities, can provide a domestic, sustainable, and ecologically compatible source of energy for

the US. HTRs are superior to first generation biofuels because the non-food feedstocks will not

12 Bartlett, Rep. Roscoe. “Ensuring Reliable, Affordable Liquid Fuels and Electricity for the United States Armed Forces.” Fourth Admiral Thomas H. Moorer Military Energy Security Forum on “Energy Security – Threats and Opportunities” National Defense University. 19 July 201213 “Ensuring Reliable, Affordable Liquid Fuels and Electricity for the United States Armed Forces.”14 “Funding Opportunity Announcement.” Air Force Research Lab, June 2012.

compete with fertile land (as corn ethanol does), and thus will not leadto a rise in food prices.

Also, one of the most popular HTR feedstocks, camelina, can be grown in conditions not suitable

for crop growth, further mitigating a rise in food prices from underproduction of food15. In

addition, the well to wheel (or in the case, well to prop) analysis of emissions from waste-

cooking oil biofuels is significantly lower than current diesel and jet emissions.

Today’s facts demonstrate that HTRs are identical in performance and cleaner than

conventional petroleum products over the entire fuel life. Also, HTRs do not possess the flex-

fuel and crop competing drawbacks of first generation biofuels. The single most significant

obstacle to the widespread implementation of biofuels in the marketplace is cost. Current

biofuels cost about $15/gallon, compared to $4/gallon for diesel and jet. This cost is expected to

decrease, as a result of innovative and efficient manufacturing techniques. For example,

traditional HTRs have to be grown, harvested, refined, and certified for use, entailing a

significant field to barrel cost.

One new production method currently employed by Joule Energy in Texas bypasses a

significant portion of those costs. At Joule Energy, pure waste carbon (from carbon dioxide or

other sources) is fed to genetically engineered bacteria that produce carbon chains necessary for

fuel production as a waste product from CO2 consumption16. This process reduces the cost of

production and refinement, and demonstrates that biofuels are becoming cost-effective as more

research is conducted. There is also significant private interest accompanying this innovation. In

response to a BAA release this past June, fourteen companies have already expressed interest in

15 “Funding Opportunity Announcement”16 Robertson, Dan., Stuart A. Jacobson, Frederick Morgan, David Berry, George M. Church and Noubar B. Afeyan, “A New Dawn For Industry.” Photosynthesis Research. Official Journal of the International Society of Photosynthesis Research. 10.1007/s11120-011-9631-7. 2011

developing commercial grade biofuels with DPA funding, demonstrating that companies are

willing to take a risk in developing these products17.

Political implications also accompany the economic effects of the DPA funding of

biofuels. First, the decision to implement alternative fuels into military vehicles stems from both

the executive mandates to lower emissions of greenhouse gases and the strategic imperative to

fuel the vehicles of the US military. If Title III funds were appropriated to biofuels, the

accompanying purchase agreements would have to be able to allow private investors to recoup

around 80% of their initial investment. Though the Department of Defense (DoD) is the single

largest consumer in the US, it only consumes 2% of all US fuel. If the DoD fuel supply came

strictly from biofuels, the amount of purchase would likely not be enough to support a national

industry. As a result, the private industry would need to consume biofuels as well, which would

be difficult given the cost differential. As a result, additional government subsidies to purchase

biofuel, higher taxes on petroleum, or mandates to have all commercial fuels be HTR/petroleum

blends would need to be introduced in order to sustain and cultivate the market. However, costs

of biofuels can be expected to drop as volume increases, and production technology improves,

and the price of oil can be expected to rise as “peak oil” conditions are approached.

Title III funding to invigorate the domestic biofuel industry is critical to the overall

success of the industry. Yes, biofuels currently cost $15/gallon when compared to $4/gallon for

petroleum fuels. However, now is the time to develop these biofuels while petroleum fuels are

$4/gallon in order to maintain the status quo of fuel prices. For example, one of the primary

reasons why gasoline is only $4/gallon is because the profit from producing, refining, and selling

a 55 gallon barrel of oil is derived from fuel sales and byproduct sales. Byproducts of

conventional petroleum refining are utilized in the petro-chemical and plastics industries, and

17 “Funding Opportunity Announcement”

these additional profits help stabilize fuel prices. If the price of oil were to suddenly rise, during

embargo or peak oil conditions, the price of these associated products would rise as well. With

investment and innovation today, biofuels that can also produce byproducts necessary for use in

the petro-chemical and plastic industries can be developed as well, which will sustain two

additional markets going forward. In addition, mass production traditionally lowers the cost of

production of a commodity. Initial investment today can lead to biofuel/petroleum blends

available for commercial purchase at the gas pump while providing another market for

businesses to tap in addition to the US government. For example, today’s gasoline is blended

with ethanol, and in most cases, the change in performance or cost is not noticeable unless

purchasing E85 or any other Flex Fuel. With drop in fuels, no flex fuel engines are required, and

small blends beginning with B2, B5, or even B10 can be installed at pumps, through additional

legislation, to provide an additional market for biofuels without dramatically affecting the price

of gasoline. However, it is critical to start this process sooner rather than later, because if the

price of fuel rises unexpectedly due to embargo or peak oil, imposing biofuel expenses will be

more noticeable.

As mentioned previously, there are numerous benefits to national security would

accompany domestic production. The US would always possess a ready supply of fuel, even in

cases of embargo and shortage. As a result, the military would be able to lengthen its fuel tether

and can operate for longer periods knowing that a guaranteed resupply of fuel is available.

There are environmental advantages as well, as the emissions spectrum of camelina oil is

significantly lower than conventional fuels. Biofuel production and research is expensive, but

the breakthroughs that have been achieved are remarkable considering the total amount of

investment. As a result, for the sake of fueling warships for national security, and maintaining

the cost of fuel for privately owned vehicles 20, 40, or 80 years down the line, government

investment in biofuels is critical, and current research progress has been substantial considering

the breakthroughs discovered per dollar.

Works Cited

Title III Offices, “Advancing the Industrial Base to Defend the Nation,” 2012.

Glenn, Shane, “Stratasys and Oak Ridge National Laboratory Partner to Advance Additive

Manufacturing Process” Stratasys. 29 June 2012.

Pope, Sydney, Mark Roupas, and Mark Buffler. "Defense Production Act." Defense Production Act. 20

Jan. 2010. Power Point

Defense Production Act, “Research & Development Contracts Under Title III.”

Grosso, Valerie. Rare Earth Elements in National Defense:Background, Oversight Issues, and Options

for Congress. Rep. N.p.: n.p., n.d. Print.

Bartlett, Rep. Roscoe. “Ensuring Reliable, Affordable Liquid Fuels and Electricity for the United States

Armed Forces.” Fourth Admiral Thomas H. Moorer Military Energy Security Forum on “Energy

Security – Threats and Opportunities” National Defense University. 19 July 2012.

“Funding Opportunity Announcement.” Air Force Research Lab, June 2012.

Robertson, Dan., Stuart A. Jacobson, Frederick Morgan, David Berry, George M. Church and

Noubar B. Afeyan, “A New Dawn For Industry.” Photosynthesis Research. Official Journal of

the International Society of Photosynthesis Research. 10.1007/s11120-011-9631-7. 2011

Buffler, Mark. "Manufacturing and Industrial Base Policy.” Defense Production Act.

FEMA, “Legislative History of the Defense Production Act.” June 1989.

Morgan, Dr. John, Chief Staff Officer-Bureau of Mines, “Statement before Senate Banking Committee.”

15 September 1981.

Appendix I: Common Misconceptions and Criticisms of HTR Biofuels.

1) Biofuels, like Ethanol, must draw on land from somewhere that is used for something other than just empty space.

“The point is, no land is used for nothing,” he tells Danger Room. “If you use crop land, you increase the price of food. Using ‘new’ land would work — if you depend on a bunch of technologies which haven’t been commercialized yet, a bunch of things that don’t really exist in this world.” - Michael Oppenheimer, a professor of geosciences and international affairs at Princeton University

http://www.wired.com/dangerroom/2012/07/green-fleet/all/

Response:

This is just not true. Camelina can be grown in mountainous and arid regions with little soil and water, providing an additional crop and market in areas where production of anything would otherwise be impossible. Algae can be harvested from many different sources, and photobioreactor production requires no land for crow growth (Photobioreactors are giant 2000+ gallon vats of algae that are fed a nutrient rich growth mixture and produce oil like hens in a chicken farm produce eggs). Initiatives are also in place to use aging boats to “screen” the algae infested Chesapeake Bay and other waterways to both purify the water and acquired a stock of algae.

Also, take for instance, Dynamic Fuels’ 75 million gallon commercial-scale facility, which makes military fuel intermediates from animal waste – and which provided much of the fuel for this 2012 demonstration.

2) Claim: Biofuel Production CANNOT BE DONE! Congress asked for 2 billion barrels and only got 40 million.

True or false? ”In 2007, Congress set a goal of producing two billion gallons of advanced biofuels within five years. But today, firms can only generate around 40 million gallons of the stuff — 98 percent less than the original plan’s total.”

http://www.biofuelsdigest.com/bdigest/2012/07/20/the-6-big-myths-of-military-biofuels/

Response:

Advanced biofuels, as defined in the Congressional goal, specifically include sugarcane ethanol and biodiesel, and more than 10 billion gallons “of the stuff” were produced around the world last year – vastly exceeding the Congressional target.

3) Claim: The US Navy will be spending extra money to purchase Biofuels at $15/gallon compared to $4/gallon for conventional petroleum.

That amounted to $12 million — a rounding error in a defense budget in the $600 billion range. $13 per gallon actually wasn’t a bad price, either. Small amounts of a new product are always bound to be more expensive than the plentiful stores of the established alternative. In fact, it was about half of what the Navy had paid for biofuels just a few years prior. But Republicans on the Hill — sick of the brush-off from Mabus and sensing political opportunity in Solyndra’s wake — pounced.

In fact, there is such a study, commissioned by the Department of Defense and quietly published last summer. According to this report, the Navy will need to buy 336 million gallons of renewable fuel per year in order to meet its aim. Each gallon will cost between $1.43 and $5.24 more than petroleum. Which means the Navy could wind up spending an extra $1.76 billion annually on biofuels. In comparison, a new destroyer costs about $1.6 billion, at a time when the shipbuilding budget is getting cut.The chances that the Navy will ever get to spend that money, however, are growing dim.

http://www.wired.com/dangerroom/2012/07/green-fleet/all/

Response:

The Navy has said it will not buy biofuels for operational use until the price is competitive with petroleum.

"The Navy is pursuing cost-competitive alternative fuels and greater fuel efficiency because unpredictable and increasingly volatile oil prices could have a direct impact on readiness," a Navy spokeswoman said. "That volatility resulted in more than $500 million additional fuel bill to the Navy in FY12."

http://uk.reuters.com/article/2012/07/19/us-usa-navy-greenfleet-idUKBRE86I0B220120719

4) Claim: Biofuels have received no support in Congress and are opposed by both Democrats and Republicans

On Wednesday, the Great Green Fleet is scheduled to make its first demonstration voyage in Hawaii, just as Mabus promised it would. But this is hardly the triumphant moment that the Navy Secretary depicted back in that hotel ballroom. Support for the Great Green Fleet — and for Mabus’ entire energy agenda — has collapsed on Capitol Hill, where both Republicans and Democrats have voted to all but kill the Navy’s future biofuel purchases. In the halls of the Pentagon, the Navy’s efforts to create a biofuel market are greeted with open skepticism. Even inside the environmental community, there’s deep division over the wisdom of relying on biofuels.

Response:

Hundreds of veterans, about two dozen former flag officers and several senators threw their support behind Defense Department efforts to adopt alternative fuel sources.The senators said they believed they could defeat the amendment barring alternative-fuel spending, which passed by one vote in the Senate Armed Services Committee in June.“We have bipartisan support to undo the work of the committee,” said Sen. Mark Udall (D-Colo.), according to Reuters.

Sens. Susan Collins (R-Maine) and Jeanne Shaheen (D-N.H.) co-wrote a June 15 editorial for Politico stating their intentions to roll back the amendment. “The Defense Department, as the federal government’s largest energy consumer, has a clear interest in weaning itself off foreign oil,” they wrote. “We hope to correct that short-sighted mistake when the bill reaches the Senate floor.”

A letter of support for the alternative fuels was written to Congress and President Barack Obama this week and included signatures from former Senate Armed Services Committee chairman John Warner and retired Gen. Anthony Zinni

http://bangordailynews.com/2012/07/26/politics/susan-collins-veterans-defend-navy-green-energy-initiatives/

5) Claim: The US DoD should not be investing in biofuels; this should be left to DOE or another agency. Biofuels are NOT cost-effective.

Response:

Sure, the Pentagon has a track record of financing the growth of high-tech, high-risk ventures, from microchips to GPS. “But they were all in niche markets at the time; who needed stealth in the early ’70s but us?” Geiss adds. ”The challenge with petroleum fuels is that it’s a commodity. You’re trying to jump into a commodity market.” That’s not a place for the government to be, in Geiss’ opinion. And that’s why the Air Force refused to sign onto the Navy’s biofuel plan.Response:

This criticism also fails to acknowledge the long-standing partnership of DOD and DOE in energy development. DOE already funds and maintains the nuclear reactors that power all Navy aircraft carriers and submarines. DOD should not be prohibited from securing our energy independence and, by extension, our national security simply because some tasks involved may overlap with DOE.

Though biofuel’s current cost is indeed higher than oil, the long-term savings from development of these fuels could be far greater. In the past two years alone, the price Navy paid for biofuels has plummeted by more than 90 percent.The Defense Department has had success with next-generation investments before. In the 1880s, the United States was dependent on steel imported from foreign countries. To encourage

domestic production, the federal government paid $486 per ton — more than three times market rate. It was an enormous cost.

But by the eve of World War I, the U.S. was the world’s dominant steel producer. Our country no longer relied on Europe for basic war materials, and our own suppliers provided steel to the government at competitive rates. Today, few would argue that DOD’s help in developing a domestic steel industry was not in our national security interests.

http://www.politico.com/news/stories/0712/78517_Page2.html#ixzz22Oavs6oV

6) Failure to address the total cost of energy

Response:

"Achieving energy security is critical to national security and military readiness, and the domestic advanced biofuel industry is attempting to do its part to help the U.S. military reach its goals. It is clear that our military cannot achieve energy security by continuing to depend on foreign oil. Liquid fuels are needed to fly planes and sail ships, so biofuels are critical components of military energy security.

"U.S. taxpayers spend $80 billion each year for the U.S. military to defend international oil shipping lanes in the Persian Gulf and elsewhere. At the same time, the United States is importing nearly 2 million barrels of oil from the Persian Gulf each and every day. U.S. consumers are essentially paying twice for each barrel of our continued dependence on foreign oil.

"The U.S. military has experienced as much pain at the pump in recent years as every other U.S. consumer, due to the increasing volatility of oil prices. The Department of Defense spent $17.3 billion on petroleum in 2011, a 26 percent increase from the previous year with practically no change in the volume purchased. In the past year, the $30 increase in oil prices resulted in more than $3 billion in additional, unplanned costs for the DoD.

http://news.thomasnet.com/companystory/BIO-Responds-to-Criticism-of-Navy-s-biofuels-demonstration-618820

Enclosure (3): Cost Analysis PaperOPNAV N45

Cancer and EnergyInnovation and Investment working in Harmony

The National Cancer Institute (NCI) was founded by President Franklin Roosevelt in

1937 an independent research agency within the National Institute of Health. Since its inception,

NCI has been responsible for the production and implementation of over two thirds of all

available synthetic chemotherapy treatments and has provided auxiliary research towards HIV

medication as well. In more recent years, the NCI has allocated a larger percentage of its

funding away from treatment options and invested heavily in preventative treatment and

screenings for malignant tumors, with implementation of revolutionary colorectal screening

(colon cancer), widespread HPV vaccination (for cervical cancer) and lung screening and spot

detection (lung cancer) coming online in 201218. There has also been development toward s

inexpensive and readily available cancer treatments, though chemotherapy remains the most

popular option in 2012.

According to the American Institute of Cancer Research (AICR), the average cost of a

chemotherapy regime is eight to ten thousand dollars (roughly), while the direct cost of the drugs

themselves can range between twenty and thirty thousand dollars (roughly)19. Again, this is only

an estimate, but if the average cost is assumed, then the cost to treat a cancer patient with a

chemotherapy regime is about thirty thousand dollars. According to the American Cancer

Society, there are expected to be 1.6 million new cases of cancer in 201220. Assuming that this

estimate is accurate, the estimated cost to treat these patients is 48 billion dollars in

chemotherapy costs alone. However, the ACS also calculated the total cost of cancer in 2011 to

be 226.8 billion dollars ($103.8 billion for direct medical costs (total of all health expenditures)

18 National Cancer Institute." NCI Research Funding. National Cancer Institute19 The Global Economics of Cancer." American Institute for Cancer Research (AICR): Infographics Economics. AICR20 ACS. "Cancer Facts & Figures." ACS.

and $123.0 billion for indirect mortality costs (cost of lost productivity due to premature death),

due to ongoing treatment and operational costs21.

Fortunately, this money is put to good use. According to the ACS, the five year survival

rate from 2002-2007 is 67%, up from 49% during 1975-1977. This is an incredible achievement

over the past 35 years: if only 49% of people today survived cancer, then 800,000 people are

expected to die as opposed to 575,00022. While all deaths are tragic, saving 225,000 lives is a

miracle, and investment in cancer research should continue to be funded. This past year, the

NCI’s budget was 5.87 billion dollars, and the ACS generated 3.61 billion dollars in donations.

Between these two major institutes, 9.48 billion dollars in revenue was generated towards cancer

research, and an average of 42,150 dollars spent for each additional life saved (roughly)23. While

costly, this price is the amount of money spent to save an additional 225,000 lives through 35

years of innovation and funding. As a disclaimer, these numbers were chosen because they

represent the correlation between research and efficiency: the 9.48 billion dollars in research

resulted in 225,000 additional lives being saved; this does not include the above cost of 226.8

billion dollars in medical expenses.

The reason for this distinction is to address a touchy but important question: what is the

cost of a human life? Based on the above data, additional cancer research has resulted in 225,000

lives being saved at a cost of 42,150 dollars per life, annually. Research develops new

technology to achieve results previously unattainable: the 225,000 lives saved that would have

otherwise perished for example. Compare this figure to the number of soldiers killed annually in

the Global War on Terror in one of the most mundane yet critical aspects of war: supply.

Between 2003-2007, an average of one American soldier was killed in every twenty four

21 ACS22 ACS23 NCI

convoys sent to resupply mountain outposts and bases24. With roughly 72,000 supply convoy

operations taking place over that five year period, this resulted in the deaths of 3,000 service men

and women delivering fuel from one place to another. Fortunately, sustainable energy

technology can reduce these deaths through the reduction of convoys. Technology such as the

ExFOB (Experimental Forward Operating Base), Photovoltaic Solar cells, and Solar Water

Heating, have been proven to reduce the fuel consumption at one marine outpost in Afghanistan

from twenty five gallons per day to two and a half gallons per day, a 90% reduction25. The total

cost of investment in developing the ExFOB system was 3.9 million dollars, with 1.6 million

coming from the Office of Naval Research (ONR)26. If ExFOBs were to be implemented at all

outposts and bases where required, then the total amount of fuel that would need to be convoyed

through hostile territory would be reduced by 90%. Building on this theory, 90% of the total

number of convoys would be eliminated, and theoretically, 90% of the convoy-related deaths

might not occur. The reduction in convoys could theoretically save 2,700 lives (90% of the

3,000 lost in a five year period) over 5 years, or, 540 lives per year. If we were to perform the

same cost-benefit analysis on an ExFOB as was performed on Cancer research, the data shows

that a 3.9 million dollar investment saving 540 lives annually results in a cost of only $7,250 per

additional life saved. The benefit of researching technology to decrease fuel consumption is far

greater than the benefits of researching cancer innovations, and greater returns have been derived

from a significantly smaller investment.

Now, there will be a large production cost to build, purchase, deliver, and operate these

ExFOBs in a hostile combat zone. In fact, Secretary of Defense Leon Panetta announced

recently that the Department of Defense would invest 3 billion dollars in FY 2012 to pursue 24 Fein, Geoff S. "ONR, Marine Corps Save Dollars and Lives with Alternative Energy at Forward Operating Bases." News: ONR, Marine Corps Use Alternative Energy at Forward Operating Bases. Office of Naval Research25 ONR. "Experimental Forward Operating Base." ONR. Office of Naval Research26 ONR, Marine Corps Save Dollars and Lives with Alternative Energy at Forward Operating Bases

alternative energy initiatives27. This research will be divided up equally between procurement,

research, and operational costs, and will be spread evenly among the services. This direct

operating cost, which is less than 3 billion dollars for ExFOBs, can serve as a direct corollary to

the 226.8 billion dollar toll that cancer imposes; medical costs and premature death costs are

comparable to production/manufacturing costs and casualties.

Any effort to save human life is a noble and welcome endeavor, though some methods of

improving longevity are more appealing than others. In a world where fiscal responsibility is

becoming a priority, it is important to develop cost-effective means to assist the globe as a

whole. Even though a relatively small investment in ExFOBs can save 2,700 lives when

compared to the 225,000 lives saved through cancer research, the financial strain of ExFOB

investment is clearly a far more practical solution. All human life has value, and it would be

grossly unfair to value one human’s life over another. As a result, all people must be treated

equally, and even the most appealing investment to saving lives must be effective, practical, and

cost-effective. ExFOBs and other military energy saving technology meets such criteria.

27 ONR. "Experimental Forward Operating Base

Works Cited

"National Cancer Institute." NCI Research Funding. National Cancer Institute, 11 June 2011. Web. 07

Aug. 2012. <http://www.cancer.gov/cancertopics/factsheet/NCI>.

The Global Economics of Cancer." American Institute for Cancer Research (AICR): Infographics

Economics. AICR, June 2011. Web. 07 Aug. 2012. <http://www.aicr.org/learn-more-about-

cancer/infographics-economics.html>.

ACS. "Cancer Facts & Figures." ACS. American Cancer Society, 2012. Web. 07 Aug. 2012.

<http://www.cancer.org/Research/CancerFactsFigures/index>.

Fein, Geoff S. "ONR, Marine Corps Save Dollars and Lives with Alternative Energy at Forward

Operating Bases." News: ONR, Marine Corps Use Alternative Energy at Forward Operating

Bases. Office of Naval Research, 2011. Web. 07 Aug. 2012. <http://www.onr.navy.mil/Media-

Center/Press-Releases/2011/Forward-Operating-Base-Marine.aspx>.

ONR. "Experimental Forward Operating Base." ONR. Office of Naval Research, Nov. 2010. Web. 7

Aug. 2012.