September 30, 2011
Det 1 AFRL/PKMD
ATTN: Laura J. Ortiz
2310 Eighth Street, Bldg 167
Wright-Patterson AFB OH 45433-7801
Via email at: email@example.com
Re: Comments of the Biotechnology Industry Organization in response to RFI-11-27-PKM, Defense Production Act Title III Advanced Drop-in Biofuels Production Market Research
The Biotechnology Industry Organization (BIO) on behalf of its member companies commends the U.S. Navy, Department of Energy (DOE) and Agriculture (USDA) on their Memorandum of Understanding (MOU) designed to help develop advanced drop-in and marine biofuels to power military and commercial transportation. We are pleased to provide this response to the joint request for information (RFI).
I. Introduction and Description of BIO, its Members and Their Work and Potential Related to this RFI
a. BIO and its Members: Overview
BIO is the world’s largestbiotechnology trade organization, representing more than 1,100 biotechnology companies, academic institutions, state biotechnology centers and related organizations across the United States and in more than 30 other nations. BIO members are involved in the research and development of innovative healthcare, agricultural, industrial and environmental biotechnology products.
BIO’s Industrial and Environmental Section includes more than 85 member companies, from small start-ups to large commercial producers, representing the entire value chain of biofuels, biobased products, and renewable chemicals. Companies include dedicated energy crop and other feedstock producers, enzyme producers, commercial integrated biorefinery developers, and large chemical and energy companies.
b. Opportunities and Challenges for the Industry to Produce Commercial Volumes of Biofuels, Particularly Advanced Drop-in Biofuels
Individual advanced biofuel producers have achieved milestones toward commercial development of a diverse array of feedstock and technology combinations. Some advanced biofuel companies already have worked with the Department of Defense (DOD) or with commercial airlines to test and certify advanced biofuel/petroleum blends, and more are poised to do so. The challenges of creating entirely new upstream feedstock and downstream market value chains while simultaneously raising capital for construction of pioneer biorefineries are challenging and warrant public policy assistance. The full range of projects located in diverse areas of the country, combining local feedstocks with tailored technology and processes, represent a robust response to the challenges, particularly for military biofuel needs.
U.S. military forces require reliable fuel supplies and secure supply lines both at home and abroad, which add to the fully burdened costs of fuels. Access to adequate fuel supplies in strategic locations could be an important “force multiplier,” by increasing the military’s ability to operate where needed and reducing the necessity to protect long supply lines. Small-to-medium scale biorefineries producing advanced biofuels from local feedstocks represent perhaps the best option for meeting military needs. Conversely, though the U.S. military represents only two percent of the U.S. fuel market, it possesses sufficient purchasing power to drive development of new advanced biofuels in sufficient quantities at the right price. By playing the role of an early customer and partner, the DOD can speed commercialization of advanced biofuels that can grow to meet commercial consumer market needs.
On the date the Energy Independence and Security Act of 2007 (EISA) was signed into law, a few pilot-scale advanced biorefineries existed for proving the technology and working out economic and technical issues prior to scale-up. Today, four years later, more biorefineries – thermochemical, biochemical and hybrid, with variations on different process stages – have reached demonstration and pilot scales, and many developers are raising capital to build new commercial-scale facilities. Since 2007, BIO has tracked the development of more than 65 pilot, demonstration and commercial projects for advanced, cellulosic and algae biofuels across the United States and in Canada.
These 65 projects are pursuing a variety of feedstock and technology strategies that are specific to regional supplies. The growth of the industry is therefore not likely to follow the pattern of the conventional biofuel industry, which was based on a single feedstock (corn) and technology strategy (dry mill biorefining). Biotechnology companies have developed the technology to produce a range of chemical molecules – including butanol and other higher alcohols, ketones and aromatics, diesels and oils – that can be used as drop-in fuel, fuel additives, or upgraded to military specifications for fuel. The projects we’ve tracked are also pursuing a range of capital formation strategies, including licensing of technology, adding advanced biofuel capacity to existing conventional capacity, or converting conventional capacity to advanced production.
c. Role of Federal Support to Help Bridge the “Valley of Death”
Start-up companies raising capital and developing a market for a new technology face significant challenges. The process of taking any new technology from the laboratory and scaling it up in early commercialization is often described as “the valley of death.”
Biofuel producers’ ability to raise capital – in particular debt capital – has been hampered by the recent economic recession and banking crisis. A 2009 report from Bio Economic Research Associates, estimated the need to construct 389 new biorefineries, ranging from 20 million to 200 million gallons per year in nameplate capacity, by 2022 to meet the volume requirements under the federal Renewable Fuel Standard (RFS). The total capital cost was projected to be more than $95 billion. A report from Sandia National Laboratories found no fundamental barriers to the construction of an even larger 60 billion gallon biofuel industry, though capital expenditures on the order of $250 billion were needed to construct a complete value chain from feedstocks to fuel delivery.
The RFS—revised under EISA in 2007—and its consistent implementation is one of the fundamental policy drivers for continued development of the U.S. biofuels industry, especially for advanced and cellulosic biofuels. The RFS help provides industry and investors some long-term policy stability and market access necessary to foster capital formation and commercialization of these fuels. The large volume of the advanced biofuels mandate of the RFS (21 billion gallons by 2022) permit a number of technologies, feedstocks and strategies to compete for market space, depending on their ability to achieve cost competitiveness and regulatory approvals and meet end-user needs. The RFS also allows the mandate to be met by additional categories of jet fuel and home heating oil.
In addition to creating a guaranteed market, EISA created other federal programs – such as grants to support continued research and development, loans or loan guarantees to match private capital investment– designed to hurry the market introduction of advanced biofuels. Implementation of the RFS, loan guarantees, reverse auction and other important federal programs has been slow, due to lengthy rulemaking procedures and inconsistent budgetary funding through Congressional appropriations. Additional programs that support the creation of feedstock supply chains – such as the Biomass Crop Assistance Program (BCAP) enacted under the Food, Conservation, and Energy Act of 2008 (Farm Bill) – also were subject to lengthy rulemakings and Congressional appropriations. Tax credits for cellulosic biofuel production are set to expire at the end of 2012, before most companies will be able to claim them.
Enduring federal commitment to the goals of EISA and the Farm Bill is vital to continued investment and commercialization progress. These goals include energy security through domestic production of transportation fuel and environmental improvement through the reduction of greenhouse gas and other particulate emissions associated with fuel combustion. Additional benefits include creating new markets for agricultural products, keeping productive or strategic farm land in use, and improving trade balances.
While also beneficial to military advanced biofuels development, these programs are targeted primarily at civilian surface transportation (car and truck) markets. It is important to note that no program currently exists to overcome the specific challenges of advanced drop-in biofuels for aviation and marine use. The MOU addressed by this RFI directly addresses these challenges, and is thus of vital importance to achieving the objectives of this collaboration.
 Bio Economic Research Associates (bio-era™), “U.S. Economic Impact of Advanced Biofuels Production: Perspectives to 2030.” Biotechnology Industry Organization, February 2009.
“90 Billion Gallon Biofuel Deployment Study.” Sandia National Laboratories/GM. February 2009.