[Senate Hearing 112-209]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-209
 
                  AVIATION FUELS: NEEDS, CHALLENGES, 
                            AND ALTERNATIVES

=======================================================================

                                HEARING

                               before the

       SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 28, 2011

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation




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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             KAY BAILEY HUTCHISON, Texas, 
JOHN F. KERRY, Massachusetts             Ranking
BARBARA BOXER, California            OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida                 JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey      ROGER F. WICKER, Mississippi
MARK PRYOR, Arkansas                 JOHNNY ISAKSON, Georgia
CLAIRE McCASKILL, Missouri           ROY BLUNT, Missouri
AMY KLOBUCHAR, Minnesota             JOHN BOOZMAN, Arkansas
TOM UDALL, New Mexico                PATRICK J. TOOMEY, Pennsylvania
MARK WARNER, Virginia                MARCO RUBIO, Florida
MARK BEGICH, Alaska                  KELLY AYOTTE, New Hampshire
                                     DEAN HELLER, Nevada
                    Ellen L. Doneski, Staff Director
                   James Reid, Deputy Staff Director
                   Bruce H. Andrews, General Counsel
                Todd Bertoson, Republican Staff Director
           Jarrod Thompson, Republican Deputy Staff Director
    Rebecca Seidel, Republican Chief Counsel and Chief Investigator
                                 ------                                

       SUBCOMMITTEE ON AVIATION OPERATIONS, SAFETY, AND SECURITY

MARIA CANTWELL, Washington,          JOHN THUNE, South Dakota Ranking 
    Chairman                             Member
DANIEL K. INOUYE, Hawaii             JIM DeMINT, South Carolina
BARBARA BOXER, California            ROGER F. WICKER, Mississippi
BILL NELSON, Florida                 JOHNNY ISAKSON, Georgia
FRANK R. LAUTENBERG, New Jersey      ROY BLUNT, Missouri
AMY KLOBUCHAR, Minnesota             JOHN BOOZMAN, Arkansas
TOM UDALL, New Mexico                PATRICK J. TOOMEY, Pennsylvania
MARK WARNER, Virginia                DEAN HELLER, Nevada
MARK BEGICH, Alaska


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 28, 2011....................................     1
Statement of Senator Cantwell....................................     1
Statement of Senator Thune.......................................     2
Statement of Senator Warner......................................     4
Statement of Senator Lautenberg..................................     4
Statement of Senator Klobuchar...................................    43
    Prepared statement...........................................

                               Witnesses

Dr. Lourdes Maurice, Executive Director, Office of Environment 
  and Energy, Office of Policy, International Affairs, and 
  Environment, Federal Aviation Administration...................     6
    Prepared statement...........................................     7
Terry Yonkers, Assistant Secretary for Installations, Environment 
  and Logistics, United States Air Force.........................    12
    Prepared statement...........................................    13
Billy M. Glover, Vice President, Environmental Strategy and 
  Aviation Policy, Boeing Commercial Airplanes...................    16
    Prepared statement...........................................    18
Tom Todaro, CEO, AltAir Fuels, LLC...............................    22
    Prepared statement...........................................    24
Sharon Pinkerton, Senior Vice President of Legislative and 
  Regulatory Policy, Air Transport Association of America, Inc. 
  (ATA)..........................................................    26
    Prepared statement...........................................    28
Judith Canales, Administrator, Rural Business Service, United 
  States Department of Agriculture...............................    46
    Prepared statement...........................................    47
Richard L. Altman, Executive Director, Commercial Aviation 
  Alternative Fuels Initiative (CAAFI)...........................    49
    Prepared statement...........................................    51
John Plaza, President and CEO, Imperium Renewables, Inc..........    55
    Prepared statement...........................................    58

                                Appendix

Jim Rekoske, Vice President/General Manager, Renewable Energy and 
  Chemicals, Honeywell/UOP, prepared statement...................    67
Response to written questions submitted to Dr. Lourdes Maurice 
  by:
    Hon. John D. Rockefeller IV..................................    68
    Hon. Maria Cantwell..........................................    69
Response to written questions submitted to Billy M. Glover by:
    Hon. John D. Rockefeller IV..................................    70
    Hon. Maria Cantwell..........................................    70
Response to written question submitted to Tom Todaro by:
    Hon. John D. Rockefeller IV..................................    71
    Hon. Maria Cantwell..........................................    71
Response to written question submitted to Sharon Pinkerton by:
    Hon. John D. Rockefeller IV..................................    71
    Hon. Maria Cantwell..........................................    72
Response to written question submitted by Hon. Maria Cantwell to:
    Judith Canales...............................................    72
    Richard Altman...............................................    73
Response to written question submitted to John Plaza by:
    Hon. John D. Rockefeller IV..................................    75
Report dated September 2010, entitled ``Fueling the Future 
  Force--Preparing the Department of Defense for a Post-Petroleum 
  Era'' by Christine Parthemore and John Nagl, Center for a New 
  American Security..............................................    75


                  AVIATION FUELS: NEEDS, CHALLENGES, 
                            AND ALTERNATIVES

                              ----------                              


                        THURSDAY, JULY 28, 2011

                               U.S. Senate,
  Subcommittee on Aviation Operations, Safety, and 
                                          Security,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:02 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Maria 
Cantwell, Chairman of the Subcommittee, presiding.

           OPENING STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Good morning.
    The Senate Committee on Commerce, Science, and 
Transportation, Aviation Operations, Safety and Security 
Subcommittee will come to order.
    I want to thank all our witnesses for being here today. And 
we have two panels that we're going to hear from--obviously, 
those involved in the industry and production and those who are 
the end users in industry who are supporting how we get an 
infrastructure built to support alternative aviation fuels.
    I want to thank Senator Thune for being here and being part 
of this hearing this morning.
    I also especially want to thank Mr. Torado, Mr. Plaza, and 
Mr. Glover, all from Washington State. So, thank you all for 
traveling here to be here.
    Let me take a moment to comment on the current FAA 
situation. Our air, our Nation's air traffic control system is 
being held hostage, and it's not fair to the thousands of 
workers wanting to get back to work and on the job, and it's 
not fair to Americans. There's about $200 million of weekly 
revenue that is not being collected. And what we need is to 
move forward on getting a continuing of the FAA. We've done 
this about 20 times now, so I'm hoping my colleagues in the 
House will come to terms with moving this legislation--
particularly since the FAA overall bill is so close to being 
done as well. A lot of issues have been resolved. So, I'm 
hopeful that this week we will be able to resolve both of those 
issues.
    This hearing is focused in the importance of investing in a 
stable supply chain for aviation production of biofuels. With 
the rising cost of jet fuel and the thriving American biofuel 
industry, we have an opportunity to help aviation by keeping 
costs down for the future.
    More importantly, production of green jet fuel will mean 
real economic growth and opportunity, not just in the United 
States but around the country.
    For over the past 50 years, Jet A fuel is the benchmark 
fuel used by commercial airlines. It's the gold standard that 
meets the strict requirements necessary for safe aircraft 
operation over a broad range of air temperatures and pressures.
    But today's Jet petroleum A isn't perfect. It contains 
sulphur, results in pollutants, particulate matter that harms 
surfaces and the air quality at airports. The recovery 
processing and combustion of Jet A fuel contributes to 2 
percent of the global greenhouse gasses. And come January, 
flying to and from the EU will be subject to the Europeans' 
cap-and-trade regime.
    And Jet A is subject to the same elevated volatile prices 
that we have seen in the oil and gas markets. In 2003, the 
average Jet A was 85 cents per gallon, after peaking at over $3 
in 2008, and then it settled at $2.24 last year. Fuel costs now 
represent a significant percentage of an airline's operating 
expense. The upward trajectory of fuel prices, when combined 
with its price volatilities, make it difficult for airlines to 
enter into long-term fuel contracts.
    And all of these downsides are just going to get more 
challenging in the future. The demand for air travel is 
projected to grow. Airlines will require access to more fuel at 
ever-increasing prices. And the airline sector's greenhouse 
emissions will increase, and more communities around airports 
will be classified by EPA as nonattainment areas, making things 
more challenging.
    So, that's why this hearing is so important, and the work 
that many of you have been doing is so important--the 
development and adoption of alternative fuels, particularly 
green fuels. And expanding the total fuel supply and making 
sure that we reduce our carbon footprint are all important 
issues.
    By replacing foreign oil with domestic sources of fuel, we 
will also be creating U.S. jobs. The production of green jet 
fuel will real economic opportunity. I know in my state, by 
creating an important industry--obviously, aerospace is already 
an important industry--investing in biofuels could lead to new, 
nearly 200,000 jobs and $37 billion of economic impact over the 
next 12 years if we make the right investments today.
    So, I thank you all for being here at this important 
hearing. I'm looking forward to what you have to say as we move 
forward.
    We obviously need to make sure that the supply chain and 
the delivery of this fuel can be done. The Air Force plans a 
very cost-competitive process for domestic fuel and, via this 
alternative blend by 2016. We're going to hear about that 
today. The Navy has also started ambitious goals. So, I look 
forward to getting into more depth on exactly how we're going 
to move forward on this important issue.
    And now I'd like to turn it over to the Ranking Member, 
Senator Thune, for his opening remarks.

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Madam Chairwoman.
    I'd like to thank Chairwoman Cantwell for holding today's 
hearing with me on such an important topic, the aviation fuel 
needs of our country.
    Today, the United States imports nearly 65 percent of its 
petroleum. By 2030, we're on a course for importing 70 percent. 
I think it goes without saying that our aviation industry is 
highly dependent upon foreign sources of fuel.
    Because of our lack of domestic fuel production we're 
routinely subjected to major price fluctuations that cause 
taxpayers, consumers and industry billions of dollars each 
year.
    The Department of Defense estimates that a $1 rise in the 
price per barrel of oil equates to $130 million per year in 
their fuel costs. This year alone, DOD may have to pay an 
additional $1.5 billion in fuel costs, and DOD's projected fuel 
use remains at their current levels. In fact, late last month 
the Air Force requested that $261 million be reprogrammed to 
cover the rising cost of fuel.
    Delta Airlines similarly estimates that their fuel bills 
will rise by 35 percent this year, equating to an additional $3 
billion in additional fuel costs.
    Even more concerning is the fact that some of the largest 
foreign oil reserves are held by unstable and unfriendly 
regimes. For example, Venezuela was recently tabbed as having 
the largest oil reserve in the world. Meanwhile, Iran's proven 
oil reserves were recently upgraded by 10.3 percent, for a 
total of 151.2 billion barrels.
    I think everyone here today would agree that it's in 
America's vital interest to secure domestic alternative fuel 
sources, whether they're synthetic or biofuels. Ultimately, 
this will improve our national security, promote jobs 
throughout the country, reduce costs to consumers and to the 
taxpayers, and will better help protect our environment by 
reducing greenhouse gas emissions.
    As we listen to our panels today, my hope is that they can 
shed some light on current U.S. developments in this growing 
industry, the challenges faced by the industry, and how we can 
reach the goal of implementing 100 percent renewable aviation 
fuel.
    That said, it's important to recognize that alternative 
aviation fuels are still too expensive at their current levels 
of approximately $35 per gallon. To make alternative fuels 
viable for commercial aviation and the Department of Defense, 
we need to promote a commercial infrastructure that 
dramatically increases production and distribution so that 
these synthetic and biofuels can compete with traditional jet 
fuels.
    We can help build this infrastructure by decreasing the 
amount of time required for improving and certifying new fuel 
sources, as well as allowing for long-term Government 
contracts. Both of these changes are key to encouraging private 
sector investment in the development of alternative aviation 
fuels.
    As such, my hope is that all parties here today can do 
everything possible to help speed up the certification and 
approval process. Ultimately, I believe this will help the 
aviation sector reach the FAA-established goal of using 1 
billion gallons of alternative jet fuel per year by the year 
2018.
    Last, I want to applaud the Department of Defense and the 
Air Force for their relentless pursuit of alternative fuels. 
What an incredible achievement the Air Force has done and made 
in certifying nearly 99 percent of their aircraft fleet to fly 
on a 50-50 blend.
    Again, thank you, Chairwoman Cantwell, for holding this 
hearing today so that we can protect the American consumer 
while advancing the economic vitality of this great Nation.
    Senator Cantwell. Thank you very much, Senator Thune.
    And, Senator Warner, did you have any opening statement 
you'd like to make?

                STATEMENT OF HON. MARK WARNER, 
                   U.S. SENATOR FROM VIRGINIA

    Senator Warner. I'll just be very brief, Madam Chair. Thank 
you for holding the hearing. I concur with your interests and 
the Ranking Member's interests in moving forward on this.
    I just want to make sure as we think about alternative 
fuels and next generation avionics that we recognize that there 
is a critically important role that NASA-Langley can play in 
this process. And we've been looking forward to working with 
the Chair and others on seeing if we can take that expertise 
and try to work to create a public-private relationship where 
there would be a Center of Excellence building on some of the 
research and work on alternative fuels being developed, I know 
in the Northwest and elsewhere; but also make sure this NASA-
Langley facility could become that Center of Excellence--not 
just around next generation fuels, but next generation aviation 
design that will make our aircraft more efficient and 
effective.
    And I appreciate the Chair's willingness to have this 
hearing.
    Senator Cantwell. Thank you.
    Well, we'll go ahead and get started with our panel, unless 
the Senator from New Jersey has an opening statement to make.
    Senator Lautenberg. May I?
    Senator Cantwell. Not to put the Senator on the spot, but--
--
    Senator Lautenberg. I stopped for some synthetic fuel here.
    [Laughter.]

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. Forgive the moment.
    Madam Chairwoman, thank you very much for holding this 
important hearing. We can't go, as we have been, over these 
years.
    Senator Lautenberg. Senator Lautenberg, could you--OK, 
good. Go right ahead.
    Senator Lautenberg. Oh, yes. OK.
    And having the toxic emissions problem, the costs problem, 
and the availability problem.
    Aviation's importance to the country can't be overstated. 
Planes not only allow us to move people and goods from one 
coast to another in a matter of hours; they also keep our 
economy moving forward.
    The commercial aviation system--11 million jobs, generates 
more than $1 trillion to our economic activity.
    But, we know that the airlines are expensive to operate, 
and these costs do get passed on to customers, with more fees 
and higher prices. And some of this stems from a dramatic rise 
in the fuel costs, as I think is widely known.
    Last year our country's airlines--I don't have to tell you, 
but it's a shocking amount of money: $36 billion on buying 
fuel. Compare this to a decade ago, when the airlines spent $15 
billion for substantially less quantity. I'm sorry. $15 billion 
for slightly more quantity. In other words, this vital industry 
is spending twice as much to buy less fuel than it once did.
    So, this doesn't include the environmental costs, damages 
from air travel; aircraft engines emitting soot, pollution, can 
be deadly, are fast-growing wide-world contributors to global 
warming pollution which is heating our planet to dangerous 
levels.
    It is clear the airlines need to use more alternative fuels 
to reduce the industry's reliance on oil, minimize the harm 
aviation causes on our environment.
    And we find that not all of the aviation fuels are created 
equal. Fuels that are made from coal products produce 
significantly more emissions than standard jet fuel. Using coal 
as an aviation fuel is taking us in the wrong direction--toward 
dirtier fuels at a time when our environment is already under 
assault.
    And that's why I'm pleased that after years of investment 
it appears that clean biofuels are ready for widespread use. 
Last month I attended the Paris Air Show, where two separated 
planes arrived after making the first transatlantic flights 
using clean biofuels. One of them left from Morristown, New 
Jersey, and was powered by green jet fuel which New Jersey-
based Honeywell produces.
    While the use of these fuels is essential, alternative 
fuels alone won't do enough to strengthen our critically 
important aviation industry, cut costs, and protect our planet. 
We also need to continue building our country's next generation 
air traffic control system, and develop more fuel efficient 
aircraft and engines.
    The NextGen System will use state-of-the-art GPS technology 
to help planes chart more direct routes, reduce delays, and 
limit idling, all of which will cut--help cut emissions. And 
that's why I'm so disappointed that our friends on the other 
side are playing politics with the FAA reauthorization, causing 
nearly 650 people to be furloughed at our Tech Center in New 
Jersey, the FAA Tech Center, where so much of the NextGen 
research and development is taking place. And making aircrafts 
more fuel-efficient, whether by redesigning planes or improving 
engines, will also improve performance and minimize 
environmental impacts.
    The bottom line is this: We all want the aviation industry 
to be strong. It's essential for the well-being of America--
both for the sake of our economy, the loyal employees who rely 
upon the airlines for their livelihoods. But we've also got to 
protect the health of our planet and the pocketbooks of the 
American people, who shouldn't be nickel-and-dimed with more 
fees and higher prices.
    So, Madam Chairwoman, thank you. I look forward to hearing 
from our panel about how we can work together to deal with 
skyrocketing fuel costs, reduce greenhouse gas emissions, build 
the NextGen aircraft control system, and keep costs low for 
consumers.
    And I thank all of you for being here with us today.
    Senator Cantwell. Thank you, Senator Lautenberg.
    And now we'll move to our panel. I want to welcome them.
    Thank you very much for being here, and your testimony 
today, Dr. Lourdes Maurice, from the Environmental and Energy 
section of FAA; TerryYonkers, Assistant Secretary for USAF 
Installations; and Bill Glover, from, the Vice President of 
Environmental and Aviation Policy of Boeing; Tom Todaro, Chief 
Executive Officer of Targeted Growth and Alt. Air Fuels; and 
Sharon Pinkerton, who is the Senior Vice President of the Air 
Transportation Association.
    Welcome to all of you. We look forward to hearing your 
testimony.
    And we're going to start with you, Dr. Maurice.

               STATEMENT OF DR. LOURDES MAURICE,

         EXECUTIVE DIRECTOR, OFFICE OF ENVIRONMENT AND

        ENERGY, OFFICE OF POLICY, INTERNATIONAL AFFAIRS,

        AND ENVIRONMENT, FEDERAL AVIATION ADMINISTRATION

    Dr. Maurice. Thank you, and good morning.
    Madam Chairwoman, Senator Thune, and members of the 
Subcommittee, thank you very much for inviting me to testify 
before you.
    Today, commercial aviation faces a number of challenges--
fuel costs, environmental impacts, and energy security--that 
sustainable jet fuels can help address.
    Fuels derived from biomass may offset a portion of the 
carbon produced by the aircraft, as well as mitigate air 
quality impacts from emissions of sulphur and particulate 
matter. And domestic alternatives to petroleum type fuel can 
expand and diversify jet fuel supplies and contribute to price 
stability and supply security.
    Today's hearing is well-timed. Aviation continues to make 
enormous progress identifying, testing, and approving 
alternative jet fuels for commercial use.
    As you may know, the FAA does not directly approve jet 
fuel. Rather, we approve aircraft to operate on fuel whose 
quality and safety is managed by industry-developed 
specifications. In partnership with industry, we have 
identified a number of drop-in fuels. These are alternative jet 
fuels that can replace petroleum jet fuel without the need to 
modify aircraft engines and fueling infrastructure.
    On July 1, ASTM International, the industry standards 
organization, reached a major milestone with the announcement 
of the approval for use of a new class of jet biofuels at a 50 
percent blend level with petroleum jet fuel. Known as HEFA, or 
hydroprocessed esters and fatty acids jet fuels, the biofuel 
component can be made from renewable plant oils. This approval 
was the product of over 3 years of collaboration by FAA, DOD, 
manufacturers, airlines and fuel suppliers.
    Alternative jet fuels are a key component of the FAA's 
environmental energy approaches for NextGen. Over the past 5 
years, the FAA has taken a comprehensive approach in 
cooperation with other stakeholders and enabled the end use of 
sustainable jet fuels in commercial jet aircraft. We have 
worked with our partners through CAAFI, who you will hear from, 
to address many of the issues related to creating drop-in 
sustainable jet fuels.
    The FAA's role is multi-fold. It includes support of fuel 
properties and performance testing, facilitation of fuel 
approval by ASTM International, conducting environmental 
measurements and analysis, and facilitating information 
exchange between stakeholders.
    FAA has worked in partnership with other departments and 
agencies. For example, the collaboration with USDA has created 
a Feedstock Readiness Level Tool to help us determine the 
ability to use various agricultural or forest-based feedstocks 
to produce jet fuels.
    The FAA's CLEEN program and other NextGen investments in 
environment and energy research, are vehicles we at the FAA are 
using to address the certification and environmental issues of 
alternative aviation fuels. We appreciate the Subcommittee's 
support for these efforts.
    As we move forward, FAA recommends focusing on certain 
areas: We must foster the development and production scale-up 
of appropriate feedstocks for aviation biofuels. We must 
continue to support development, testing, and approval through 
ASTM International of additional classes of drop-in biofuels. 
We must quantify environmental impacts and understand how 
sustainability issues will be managed.
    A major hurdle is the lack of jet biofuel infrastructure. 
The economic slowdown diminished the availability of capital to 
respond to the opportunities that aviation uniquely provides. 
However, we believe that successful production facilities can 
be built at locations which combine feedstock availability, and 
access to airports and U.S. airlines eager to use these new 
fuels.
    The Nation has often counted upon the skills of the 
aerospace community to lead the way in technical innovation. 
Sustainable jet fuels offer the opportunity to team aerospace 
with agriculture, energy, and environmental communities to 
address the challenges we face.
    Madam Chair and members of the Subcommittee, thank you so 
much. I started my career working in alternative fuels 28 years 
ago, and I am so impressed that the Senate is paying attention 
to this issue. So, thank you so much, and I welcome any 
questions that you may have.
    [The prepared statement of Dr. Maurice follows:]

 Prepared Statement of Dr. Lourdes Maurice, Executive Director, Office 
of Environment and Energy, Office of Policy, International Affairs, and 
              Environment, Federal Aviation Administration

    Madam Chair, Senator Thune, and members of the Subcommittee:
    Thank you for inviting me to testify before you today on ``Aviation 
Fuels: Needs, Challenges, and Alternatives.'' I am the Executive 
Director of the Office of Environment and Energy for the Federal 
Aviation Administration (FAA). In that role, I also serve as the 
environmental team co-leader for the Commercial Aviation Alternative 
Fuels Initiative (CAAFI). I am pleased to speak to the Subcommittee 
today about the development and deployment of sustainable alternative 
jet fuels.
    Today, commercial aviation faces a number challenges--fuel cost, 
environmental impacts and energy security--that sustainable jet fuels 
can help to address. Fuels that are derived from biomass may offset a 
portion of the carbon produced by the aircraft as well as mitigate air 
quality issues such as emissions of sulphur and particulate matter. And 
domestic alternatives to petroleum jet fuel can expand and diversify 
the jet fuel supply and contribute to price stability and supply 
security.
    Industry, government and academia all need aviation to get these 
fuels off the drawing board and into the gas tank. Indeed, the Future 
of Aviation Advisory Committee, which was founded by Transportation 
Secretary LaHood in 2010, singled out aviation fuels and the 
environment in one of its recommendations.
    I believe that today's hearing is well timed. Aviation continues to 
make enormous progress in identifying, testing, and approving 
alternative jet fuels for use by commercial airlines. As you may know, 
the FAA has the responsibility to make sure that any aircraft, aircraft 
engine or part, or fuel that is used in aviation is safe and performs 
to set standards. In partnership with industry, we have identified a 
number of alternative jet fuels (including sustainable jet fuels) that 
can replace petroleum jet fuel without the need to modify aircraft, 
engines, and fueling infrastructure. These are often referred to as 
``drop in'' fuels. Drop-in fuels are a near-term solution to addressing 
aviation environmental and energy challenges, and enable us to maintain 
the existing commercial airline fleet.
    The aviation sector is well positioned to adopt alternative fuels 
and is in fact beginning to do so.\1\ Moreover, this effort is critical 
to achieving the level of environmental and energy performance that 
will allow sustained growth of the Nation's aviation system. FAA has 
set an aspirational target for use of 1 billion gallons of alternative 
jet fuel per annum by 2018.
---------------------------------------------------------------------------
    \1\ Following ASTM approval Lufthansa, KLM and UK airline Thompson 
Airways have begun regular commercial flights using HEFA biofuels 
sourced from Finnish fuel supplier Neste Oils (Lufthansa) and U.S. fuel 
supplier Dynamic Fuels (KLM, Thompson).
---------------------------------------------------------------------------
Overview of FAA Role and Activities
    Alternative jet fuels are a key component of the FAA's 
environmental and energy approaches for Next Generation Air 
Transportation System (NextGen). Over the past 5 years the FAA has 
taken a comprehensive approach, in cooperation with other departments 
and agencies, industry, and academia to address barriers, and enable 
the adoption, production, and end use of sustainable jet fuels in 
commercial jet aircraft. Beginning in 2006, we have worked with 
industry and government partners through CAAFI to address the business, 
research and development, environmental, and certification issues 
related to creating ``drop-in'' sustainable jet fuels for today's 
commercial aircraft.
    The FAA's role has been multifold. It includes support of fuel 
properties and performance testing and demonstration; facilitation of 
fuel approval by the industry standard setting organization, ASTM 
International; conducting environmental measurements and analysis; and 
facilitating information exchange among industry and government 
stakeholders as a co-sponsor of CAAFI. FAA has worked in partnerships 
with the Department of Defense (DOD), the National Aeronautics and 
Space Administration (NASA), the Department of Energy (DOE), the 
Environmental Protection Agency (EPA), the Department of State (DOS), 
Department of Commerce (DOC), and the Department of Agriculture (USDA) 
to advance technical research and development, as well as 
environmental, fuel standard setting, and deployment efforts needed to 
support sustainable alternative fuels for jet aircraft.
    The FAA's Continuous Lower Energy, Emissions and Noise (CLEEN) 
program, as well as NextGen investments in environment and energy 
research, are vehicles available to address the certification and 
environmental issues of alternative fuels. We appreciate the 
Subcommittee's support for these efforts.

Fuel Approvals
    FAA does not directly approve jet fuel. Rather the FAA approves 
aircraft to operate on fuel whose quality and safety is managed by 
industry-developed specifications, such as ASTM International. FAA 
personnel and funding have, however, been crucial to facilitation of 
this specification development process at ASTM International. The ASTM 
alternative jet fuels standard (also known as Specification D7566) was 
first issued in September 2009 and at that time approved use of blends 
of up to 50 percent synthetic fuels made via the Fischer-Tropsch 
process, which produces synthetic fuels from feedstocks including coal, 
natural gas or biomass.\2\ The specification is structured to allow for 
the addition of new fuels as they are qualified for use. The writing of 
the specification and its revisions are accomplished via a 
collaborative and consensus driven process that is facilitated by FAA's 
leadership of the CAAFI certification and qualification team.
---------------------------------------------------------------------------
    \2\ The Fischer-Tropsch (FT) process created in Germany in the 
1930s and later commercialized in South Africa by SASOL, produces 
synthetic fuels from any source of carbon and hydrogen via gasification 
and then conversion to fuels using chemical catalysts. Feedstocks 
include coal, natural gas or biomass (e.g., crop residue, wood chips, 
or waste).
---------------------------------------------------------------------------
    On July 1, 2011, the aviation community reached a major milestone 
when ASTM International approved a revision of the D7566 specification 
to add alternative jet fuels made from bio-derived oils. Known as HEFA 
(hydroprocessed esters and fatty acids) jet fuels, they can be made 
from renewable plant oils such as camelina, jatropha, and algae or 
waste fats which are then mixed with petroleum jet fuel up to a 50 
percent blend level. This represents the culmination of more than 3 
years of collaborative work by FAA, DOD, and industry, including the 
engine and aircraft manufacturers, airlines, and fuel suppliers. The 
approval assures the safety and performance of the fuel and is 
enabling, for the first time, the commercial use of biofuel by airlines 
globally.
    HEFA was the second alternative jet fuel to be approved for use by 
ASTM since 2009, but it will not be the last. Cooperative testing of 
additional advanced alternative jet fuels is already underway by FAA, 
DOD, and industry. From FAA's perspective, this is part of a strategic 
approach to approving as many commercially viable and environmentally 
sustainable alternative jet fuel options as possible.
    Some of the fuel testing to support approval is being done through 
the FAA's CLEEN program. CLEEN supports maturation of green engine and 
airframe technologies and development and testing of alternative fuels. 
Under the CLEEN program, FAA leverages the Federal investment by 
partnering with industry.\3\ For example, CLEEN has supported the 
Boeing Company to conduct aircraft fuel system materials compatibility 
testing of HEFA fuels. With Honeywell, we are testing the use of fully 
renewable jet biofuels. With Rolls Royce, we are doing fuel property, 
performance and engine testing to support evaluation of early stage, 
promising novel sustainable jet fuels.
---------------------------------------------------------------------------
    \3\ All CLEEN projects include a one to one cost share commitment 
by industry although the industry contribution leveraged is sometimes 
greater.
---------------------------------------------------------------------------
    Through the Department of Transportation/Research and Innovative 
Technology Administration's (DOT/RITA) Volpe National Transportation 
Systems Center (Volpe Center), the FAA will shortly be announcing grant 
awards to benchmark fuel quality control procedures, to conduct engine 
durability tests with alternative fuels, and to perform key testing to 
support qualification and certification of novel jet biofuels from 
alcohols, pyrolysis, and other processes. These are intended to support 
the next round of fuel approvals that are currently targeted to begin 
in 2013.

Environmental Assessment
    In addition to certification and qualification of fuels, FAA is 
working to improve our understanding of the environmental benefits and 
impacts of alternative jet fuels. The U.S. has National Ambient Air 
Quality Standards for particulate matter emissions, and 44 percent of 
our 50 largest airports reside in areas of non-attainment. Common to 
all alternative fuels under consideration is their potential to reduce 
particulate matter emissions. Working with NASA, we have obtained 
direct measurements of in-service aircraft engines that clearly 
validate these benefits.
    Through the Partnership for AiR Transportation Noise and Emission 
Reduction (PARTNER) Center of Excellence, FAA is funding assessments of 
emissions for alternative fuels including sustainable jet fuels.\4\ The 
National Academies of Science's Airports Cooperative Research Program 
(ACRP) is supporting a project to understand the costs and the 
potential air quality benefits of alternative jet fuel use at 
commercial airports.
---------------------------------------------------------------------------
    \4\ This PARTNER project is Emissions Characteristics of 
Alternative Aviation Fuels and Ultra Low Sulfur (ULS) Jet Fuel 
Environmental Cost Benefit Analysis. More information about PARTNER is 
available at http://web.mit.edu/aeroastro/partner/projects/index.html.
---------------------------------------------------------------------------
    Reducing aviation's contribution to carbon dioxide emissions and 
climate change impacts are key potential benefits of alternative jet 
fuels. Measuring those benefits requires quantifying the full life 
cycle emissions from alternative fuel production, distribution, and 
operation. The FAA and the U.S. Air Force are jointly funding the 
development of greenhouse gas life cycle analyses (LCA) through the 
FAA's PARTNER Center of Excellence.\5\ Results show that certain 
alternative jet fuels could realize CO2 lifecycle reductions 
as high as 80 percent. We continue to work and consult with EPA, DOE 
and a team of researchers to improve and broaden these analyses. The 
CAAFI Environment team, which FAA co-leads, is similarly involved in 
coordinating a broad group of experts to look at sustainability 
questions such as water use, food versus fuel, and invasiveness to 
provide insight into how sustainability certification may be conducted. 
And, through Volpe Center grant awards mentioned above, the FAA will 
support evaluation of biofuel sustainability criteria.
---------------------------------------------------------------------------
    \5\ For work to develop alternative jet fuel life cycle analyses, 
see PARTNER Center of Excellence Project 17: Alternative Jet Fuels and 
Project 28: Alternative Jet Fuel Environmental Cost Benefit Analysis at 
http://web.mit.edu/aeroastro/partner/projects/index.html.
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Key Recent Developments
    A review of recent developments will give you a sense of the 
tremendous momentum behind alternative jet fuels and demonstrate the 
broad industry and interagency cooperation and innovative partnerships 
that are providing the push.
Jet Biofuels Approval and Flights
    The July 1, 2011, ASTM International approval of HEFA alternative 
jet fuels made from bio-derived oils was a landmark. This has been 
followed by the first commercial service flights with HEFA biofuels by 
four airlines in Europe and has energized plans for possible production 
and fuel purchase agreements here in the United States.

Paris Air Show Alternative Aviation Fuels Showcase
    In June 2011, the FAA and CAAFI worked with the Department of 
Commerce to showcase alternative jet fuel suppliers and U.S. and 
international airlines as a central event at the Paris Airshow. The 
event included visits of support by Secretary of Transportation Ray 
LaHood, FAA Administrator Babbitt, Acting Secretary of Commerce 
Sanchez, and Secretary of Agriculture Vilsack. It was successful in 
focusing the attention of the biofuels and agriculture communities and 
the media on the need and opportunity presented by aviation. 
Significant industry highlights at the airshow included the 
announcement by 7 U.S. airlines of negotiation with biofuel supplier 
Solena for 16 million annual gallons of fuel from waste in Northern 
California and two successful transatlantic biofuel flights to the 
airshow by Honeywell and Boeing.

U.S.--Brazil Partnership for the Development of Aviation Biofuels
    During President Obama's visit to Brazil in March 2011, the United 
States and Brazil announced the creation of a ``Partnership for the 
Development of Aviation Biofuels'' under the Memorandum of 
Understanding between the United States and Brazil to Advance 
Cooperation on Biofuels signed on March 9, 2007. The FAA is a key 
participant and is engaged with the DOD, DOE, USDA, and other Federal 
departments and agencies to identify and carry out cooperative 
activities with Brazilian counterparts under this MOU. This agreement 
represents cooperation by the world's two largest biofuels producers 
and two important aviation States to support the development of 
sustainable jet fuels. It builds upon and will leverage existing 
collaboration with Brazil already underway via CAAFI.
FAA and USDA Partnership to Develop Renewable Jet Fuels
    In October 2010, the FAA and the U.S. Department of Agriculture 
(USDA) signed a 5 year agreement that creates a framework of 
cooperation between FAA's Office of Environment and Energy, the USDA's 
Agricultural Research Service (ARS), and the USDA Office of Energy 
Policy and New Uses (OEPNU). Under the partnership, the three offices 
bring together their experience in research, policy analysis and air 
transportation to assess the availability of different kinds of 
feedstocks that will be needed by biorefineries to produce sustainable 
jet fuels. The collaboration has created the feedstock readiness level 
(FSRL) \6\ tool, developed by the USDA and FAA to enable the 
determination of the stage of readiness of agricultural or forest-based 
feedstock for the production of commercial and military aviation 
biofuels. A public version is expected to be released soon.
---------------------------------------------------------------------------
    \6\ The Feedstock Readiness Level (FSRL) tool was developed by the 
USDA and FAA to enable the determination of the stage of readiness of 
agricultural or forest-based feedstock for the production of commercial 
and military aviation biofuels. The FSRL tool was structured to 
complement the Fuel Readiness Level (FRL) tool in use by the aviation 
industry. FSRL can be used to facilitate a coordinated allocation of 
resources to effectively develop a viable aviation biofuels industry.
---------------------------------------------------------------------------
Farm to Fly Partnership Formed between Airlines, USDA, and Boeing
    In July 2010, the USDA joined with CAAFI sponsor Air Transport 
Association of America (ATA) and the Boeing Company in a resolution to 
``accelerate the availability of sustainable aviation biofuels in the 
United States, increase domestic energy security, and establish 
regional supply chains and support rural development.'' The agreement 
included the formation of a ``Farm to Fly'' working group that is 
identifying opportunities for accelerating a domestic jet biofuel 
production industry and supporting economic development in rural 
communities. This is a promising innovative effort that can further the 
interests of U.S. agriculture and U.S. aviation.

Challenges Ahead
    To achieve the successful development and deployment of sustainable 
jet fuels in commercial aviation, we view the following areas as 
hurdles, as well as opportunities for future focus:

        We must foster the development and production of appropriate 
        feedstocks for aviation biofuels. Expanding the number and 
        availability of crops appropriate for jet fuel conversion and 
        optimizing their production are necessary to reduce costs, 
        enable commercial deployment, and maintain sustainability. Our 
        work with the USDA on the feedstock readiness level is a 
        promising start, and we expect to continue to build on this 
        collaboration.

        We must continue to support the development, testing and 
        approval of advanced biofuel conversion processes for high 
        energy ``drop in'' hydrocarbon biofuels. Our past successes 
        with Fischer-Tropsch and HEFA fuels would not have been 
        possible without the leadership and contributions of the FAA, 
        and this level of support must be maintained to move forward 
        with new renewable and sustainable jet fuels. In addition to 
        the CLEEN program and Volpe Center grant awards, the FAA 
        resources will need to be allocated to support the ASTM 
        International process to qualify and approve these new fuels. 
        Investments by DOE, USDA, and DOD's Defense Advanced Research 
        Projects Agency (DARPA) in these areas have been and will 
        continue to be crucial. FAA must continue to work with DOD to 
        coordinate the qualification and certification testing of both 
        commercial and military fuels to make the best use of our 
        limited resources.

        The next hurdle is accurately quantifying environmental 
        impacts. Assessments of both air quality and greenhouse gas 
        life cycle emissions impacts must continue to be timely and 
        thorough as new fuel options emerge. For example, FAA, in 
        collaboration with EPA and NASA, needs to populate emissions 
        prediction models with measured emissions data for emerging 
        sustainable jet fuels. Acquiring such data is empirical in 
        nature and requires significant testing and investment. 
        Reducing the uncertainties associated with land use changes, 
        fertilizer use, and impacts on the quality and quantity of 
        water resources, greenhouse gas inherent in-life cycle analyses 
        (that is, from harvest to processing to transport and use of 
        the sustainable jet fuels) will also require significant effort 
        and investment. The collaboration of all stakeholders involved 
        is needed to ensure an agreeable and accurate framework. We 
        must continue to facilitate defined national and international 
        sustainability criteria and Life Cycle Analysis (LCA) 
        methodologies to provide certainty and compatibility regarding 
        how fuels will be judged and accepted.

        The final hurdle is the lack of jet biofuel infrastructure 
        investment by private industry. The economic slowdown 
        diminished the ability and interest of conventional investment 
        sources to respond to the opportunities that aviation uniquely 
        provides. However, we believe that successful production 
        facilities can be built with relatively modest investment at 
        locations which combine feedstock availability, existing 
        biofuel infrastructure, need for air quality gains, access to 
        airports and U.S. airlines eager to use sustainable jet fuels. 
        Progress being made by the Farm to Fly effort and via USDA, DOE 
        and DOD programs suggest that early deployment may be close at 
        hand, but will continue to require near term support.

    Aviation's dependence on high-density liquid hydrocarbon fuels for 
the foreseeable future is perhaps unique. Unlike surface 
transportation, we won't have an electric option in the near future. 
Another unique characteristic of U.S. commercial aviation is 
concentrated fueling infrastructure, where 80 percent of all jet fuel 
is used in only about 35 locations, i.e., at our busiest airports. 
Airports also provide an opportunity for distributing the co-products 
of sustainable jet fuel production (such as diesel) due to the many 
different fuel users on airports. The National Academies of Science's 
ACRP is sponsoring projects to assess the opportunity presented to 
airports of alternative fuel production and distribution. These 
realities of dependence and concentrated infrastructure should lead to 
aviation becoming a ``first mover'' in the deployment of alternative 
fuels. A final plus is the enthusiasm and commitment of the aviation 
industry to pioneer sustainable alternative jet fuels.
    The nation has often counted upon the skills of the aerospace 
industry to lead the way in technical innovation. Renewable jet fuels 
offer the opportunity to team aerospace science and technology efforts 
with those of agriculture, energy, and environment to address the 
challenges that we face.
    Madam Chair and members of the Subcommittee, thank you again for 
the opportunity to testify on how the aviation community is leading the 
way to develop and realize the potential of emerging aviation 
sustainable jet fuels. This completes my prepared remarks. I welcome 
any questions that you may have.

    Senator Cantwell. Thank you, Dr. Maurice.
    Mr. Yonkers, welcome to the Committee. Thank you for being 
here today.

        STATEMENT OF TERRY YONKERS, ASSISTANT SECRETARY

         FOR INSTALLATIONS, ENVIRONMENT AND LOGISTICS,

                    UNITED STATES AIR FORCE

    Mr. Yonkers. Good morning.
    Chairwoman Cantwell, Senator Thune, distinguished members 
of the Committee, it really is a pleasure to be here today, and 
I thank you for the invitation.
    Before I get started, I want to, I would certainly be 
remiss if I didn't thank you all again for your tremendous 
support for our Air Force and our airmen that are serving 
across the globe in many different places every day in the 
interest of this Nation.
    From aviation operations to installation infrastructure 
both here and abroad, energy enables our core competencies of 
global vigilance, global reach, and global power, which we need 
to fly, fight and win. And while the military forces will 
always be dependent on energy, it certainly is in our best 
interest to reduce the risk to national security associated 
with our current energy posture. For the Air Force, this means 
having access to reliable supplies of energy, and the ability 
to protect and deliver sufficient fuel to meet our operational, 
as well as, our training needs.
    From an aviation perspective, this includes both increasing 
our fuel diversity and reducing our demand by becoming more 
efficient and more responsible in the way we use fuel. As part 
of our effort to diversify our sources of jet fuel, back in 
2006 we began testing and certifying our fleet to use these 
alternative aviation fuel blends, beginning with a 50-50 blend 
of traditional JP-8 and synthetic aviation fuel.
    We have since expanded that initiative to certify our fleet 
on a blend of JP-8 and biofuels, and are just beginning to 
evaluate a third pathway and a fuel blend on alcohol-to-jet.
    Last year the Air Force used nearly 2.5 billion gallons of 
jet fuel at a cost of about $7 billion. We recognize that a $1 
change in the price of a gallon results in about $2.5 billion 
of increased cost, and that has to get paid for in the year of 
execution. So, as we look at this price volatility, they're not 
always planned, unless we can look down that road far enough. 
And we saw this just recently this year with the cost of fuel 
going from about $3 to almost $4 a gallon.
    I want to emphasize that, while we're certainly concerned 
about cost stability and looking at cost, the primary reason 
for the Air Force launching into the certification process is 
to have access to that supply and those supply options that 
we're going to need to accomplish our mission, no matter where 
we are across the world.
    Our goal is to be prepared to purchase 50 percent of the 
aviation fuel we use in the United States as alternative 
aviation fuel blends by 2016. This means that of the 100--of 
the 1.25 billion gallons we consume in the U.S. on an annual 
basis, we're looking to purchase about 600 million gallons as 
alternative aviation fuel blends. However, I will also tell you 
that our certification process has been so successful that we 
think we're going to be ready to launch on this well before the 
year 2016.
    The Air Force has the incentive to move swiftly because, in 
addition to deriving the energy security benefits, we've also 
found that biofuels burn cleaner and cooler than conventional 
fossil fuels, and this has a tremendous implication for the 
wear and tear on our engine parts, and how often we need to 
put, take engines off of aircraft to recondition them in 
depots. If we could extend the life, engine life, from 10 or 15 
or 20 percent, that would certainly improve our readiness and 
our ability to go to war.
    I also recognize that there are challenges to developing 
the alternative aviation fuel industry, including the 
regulatory and economic barriers that have been talked about 
here today. But, the example that the Air Force supports the 
goals and intent of the Energy Independence and Security Act, 
Section 526, it's also key to recognize that all--not all 
feedstocks comply with this Section 526.
    Another potential barrier is the financial commitment to 
investment in commercial-scale production plants. We'll talk 
about that today. To reduce the risk to investors, we may need 
to consider these long-term contracts or other production 
incentives as a means to attract private capital.
    And while we're keeping an eye on all economically-viable 
alternatives that may be coming to market, the Air Force is 
also looking at game-changing technologies that will reduce 
cost, diversify our alternative fuel sources, and optimize our 
use of domestically produced fuels. And, for example, we're 
exploring innovative ways to make alternative fuel production 
units portable and deployable. If we can produce the fuel where 
we need it, we can reduce the number of convoys we need to use 
the fuel into our forward operating locations.
    Now, we're not just focused on biofuels and synthetic 
fuels. We're looking at things such as hydrogen as a next 
generation fuel, starting with a small plant at Hickam Air 
Force Base in Hawaii with an eye toward expanding this 
technology to tactical vehicles.
    Each of the examples highlight our intent to advance the 
Air Force's energy security posture, as well as meet our future 
energy demands, while reducing our greenhouse gas footprint.
    Chairwoman Cantwell, Senator Thune, and members of the 
Committee, that concludes my remarks. I thank you again for 
inviting me to be here, and I look forward to your questions.
    [The prepared statement of Mr. Yonkers follows:]

     Prepared Statement of Terry Yonkers, Assistant Secretary for 
   Installations, Environment and Logistics, United States Air Force

    From aviation operations to installation infrastructure within the 
homeland and abroad, energy enables the dynamic and unique defense 
capabilities of global vigilance, global reach and global power the Air 
Force executes to fly, fight and win. . .in air, space and cyberspace. 
Effective and efficient energy management is not only necessary--it is 
critical to assuring available energy today and sustainable energy into 
the future to ensure the Air Force can execute these missions. There is 
a recognized need to have assured access to reliable energy sources and 
ensure that sufficient energy is available to meet Air Force 
operational needs. The Air Force is proud to be a leader in America's 
ongoing quest for efficient and effective energy use through improved 
processes, better operational procedures and new technologies, as well 
as in helping the Nation decrease its dependence on imported oil 
through alternative fuel and renewable energy usage.
    In his recent Blueprint for a Secure Energy Future, President Obama 
put forward a plan to develop and secure America's energy supplies. At 
the same time, he challenged Federal agencies to lead by example and 
help scale up new technologies to support energy security and reduce 
energy and fuel consumption, resulting in lower costs and reduced 
pollution. Over the last 4 years, the Air Force has been testing and 
certifying alternative aviation fuels for unrestricted operational use. 
The Air Force is certifying its fleet on two fuel blends--the first is 
a 50/50 blend of traditional JP-8 and synthetic fuel derived through 
the Fischer-Tropsch process and the second is a 50/50 blend of 
traditional JP-8 and biomass-derived ``hydroprocessed renewable jet'' 
(HRJ). A third fuel blend, a 50/50 blend of traditional JP-8 and 
alternative fuel derived from cellulosic-based materials, will begin 
initial feasibility studies within the next few months. The Air Force's 
alternative aviation fuel initiative is helping the Air Force and the 
nation improve its energy security posture and is part of the solution 
to meet some of the President's goals.
    The Air Force recognizes that there are many national energy policy 
objectives, to include the economic impacts of energy costs, the need 
to reduce greenhouse gas emissions and the national security 
implications of a high reliance on imported oil. While addressing these 
challenges, it is of vital importance the Air Force have the energy 
available necessary to accomplish its missions. Accordingly, the Air 
Force has developed a comprehensive energy strategy to improve its 
ability to manage supply and demand in a way that enhances mission 
capability and readiness. This energy strategy is supportive of DOD's 
priority program to ``Increase Energy Efficiencies'' to reduce energy 
consumption and increase renewable energy.
    Air Force Energy Policy: The Air Force's Energy Vision--Make Energy 
a Consideration in All We Do--highlights that energy is central to all 
aspects of the Air Force's mission execution. In July 2009, the Air 
Force formally institutionalized its energy program along with its 
strategy and goals with the issuance of Air Force policy. In December 
2009, the Air Force released its Energy Plan, which established ``End 
State Goals'' for 2030 and provided a strategic framework to translate 
formal policy into actionable energy ``Focus'' areas.
    Three primary pillars underpin the Air Force approach's to energy: 
Reduce Demand, Increase Supply, and Change the Culture. Each pillar is 
defined and further developed to include implementing goals, objectives 
and metrics. This three-pronged approach integrates demand-side energy 
efficiency and mission effectiveness with supply-side alternative 
energy utilization, both of which are enhanced by creating a culture 
that values energy as a mission-critical resource. The Air Force's 
alternative aviation fuel program supports the Air Force energy 
strategy by addressing the need for assured domestic supplies of non-
petroleum based aviation fuel.
    Program Objectives: The Air Force is motivated by the need to 
develop a robust, resilient and ready energy security posture, which 
includes having aviation fuel when and where it is needed to ensure 
freedom of operation. By increasing the types of fuels available to Air 
Force aircraft with no degradation in performance, the Air Force is 
ensuring mission accomplishment and improved national energy security 
through diversification of supply options. Alternative aviation fuels 
can have second order effects, multiple fuels sources may insulate the 
Air Force against volatile oil prices and reduce the environmental 
impact from aircraft.
    The Air Force's long-term goal is to be prepared to cost 
competitively acquire 50 percent of its domestic aviation fuel 
requirement via alternative fuel blends by 2016. As part of the goal, 
the alternative aviation fuel component in the blend will need to be 
derived from domestic sources and produced in a manner that is more 
environmentally friendly compared to fuels produced from conventional 
petroleum. Additionally, any alternative aviation fuel needs to be a 
drop-in fuel that does not require unique systems or components, or 
modification to existing systems.
    Overview: The Air Force is currently certifying its aircraft and 
associated support vehicles, equipment and infrastructure for 
unrestricted operational use on two 50/50 alternative fuel blends. The 
first blend is a 50-50 mixture of JP-8 and synthetic fuel produced via 
the Fischer-Tropsch process. The Fischer-Tropsch process starts with a 
carbon-based feedstock, such as coal, natural gas, biomass or any other 
carbon-based material, and is gasified before it is converted into a 
fuel that contains the same chemical properties as traditional 
petroleum.
    The second blend is a 50-50 mixture of JP-8 and HRJ biomass-derived 
fuel. Under this process, a renewable fuel with properties similar to 
petroleum is produced from triglycerides, such as plant oils and animal 
fats. Both the synthetic fuel and the biofuel need to be blended with 
traditional JP-8, as they do not contain some of the aromatic and other 
compounds necessary in aviation fuel to safely operate the aircraft.
    To ensure an alternative aviation fuel can be used in Air Force 
aircraft and systems, it undergoes an initial evaluation phase at the 
Air Force Research Laboratory at Wright-Patterson Air Force Base in 
Ohio, before undergoing a test and certification phase. This phase, led 
by the Air Force Alternative Fuel Certification Office, includes 
engines and flight tests to identify any potential issues with the 
alternative aviation fuel.
    The Air Force is not the only organization evaluating alternative 
aviation fuels. It is partnering with the airline and aircraft 
manufacturing industries through the Commercial Aviation Alternative 
Fuels Initiative to jointly review potential candidate fuels on the 
basis that the fuels be drop-in with no safety issues or cost 
increases. The Air Force is also seeking greater efficiencies through 
joint efforts with the U.S. Navy, the U.S. Army and allied militaries. 
For example, the Air Force is working with the Canadian Air Force to 
study of the effects of the HRJ alternative aviation fuel blend on the 
C-130H aircraft.
    Fischer-Tropsch Synthetic Fuel Blend: The Air Force alternative 
aviation fuel initiative began on September 19, 2006, when a B-52 
Stratofortress took off from Edwards Air Force Base in California to 
conduct a flight test that involved running two of the bomber's engines 
on a synthetic fuel blend, while the jet's other six engines ran on 
traditional JP-8 jet fuel. This synthetic fuel blend was a 50-50 blend 
of traditional JP-8 and Fischer-Tropsch synthetic fuel produced using 
natural gas as the feedstock.
    Following that first flight, the Air Force has achieved a number of 
successes using a synthetic fuel blend, including the first 
transcontinental flight, the first supersonic flight, the first aerial 
refueling and the first fighter demonstration flight. Currently, more 
than 99 percent of the Air Force fleet is certified for unrestricted 
operational use of this 50/50 synthetic fuel blend and certification 
activities are on-track for completion this year. To date, the Air 
Force has not identified any performance or safety-of-flight anomalies 
as a result of the synthetic fuel blend, and the military JP-8 Fuel 
Specification was revised in 2010 to include Fischer-Tropsch synthetic 
fuel as a blending component. Additionally, the Air Force expects to 
complete the synthetic fuel certification efforts under budget.
    The only remaining Air Force-owned platform left to be certified is 
the MQ-9 Reaper, which is scheduled to undergo testing and 
certification later this fall. The only two remaining aircraft in the 
Air Force fleet requiring certification, the CV-22 Osprey and the F-35 
Joint Strike Fighter, are being worked in coordination with the Navy, 
as both systems are Navy-managed assets.
    Bio-mass Derived Alternative Fuel Blend: Following the success of 
the synthetic fuel certification, the Air Force began evaluation in 
January 2009 of the 50/50 blend of traditional JP-8 and H RJ biomass-
derived fuel. Due to anticipated cost and availability of candidate 
fuels, the close chemical similarity of HRJ to the previously evaluated 
synthetic aviation fuel produced using the Fischer-Tropsch process, and 
the incorporation of ``Lessons Learned'' from the initial synthetic 
aviation fuel certification effort, the Air Force determined a fleet-
wide certification effort was unnecessary. Rather, the Air Force 
evaluated only representative aircraft and the most challenging systems 
from the synthetic fuel certification effort. The remainder of the 
aircraft will utilize the data obtained during testing of those 
aircraft and will be certified by similarity.
    The Air Force announced its second alternative aviation fuel 
certification effort when it flew an A-10 Thunderbolt II in March 2010 
from Eglin Air Force Base in Florida powered solely by a blend of 
biomass-derived and conventional JP-8 fuel. This A-10 was the first 
aircraft ever to be completely powered by such a blend. On February 4, 
2011, the Air Force certified the C-17 Globemaster for unrestricted 
operations using the 50/50 biofuel blend--first Air Force platform 
certified to fly on the biofuel blend. Only a few months ago, the Air 
Force's Thunderbirds became the first Department of Defense aerial 
demonstration team to fly on an alternative aviation fuel blend when 
three of the six aircraft conducted aerial maneuvers using the biofuel 
blend at the Joint Service Open House air show at Joint Base Andrews in 
Maryland. Since the second certification effort began, the Air Force 
has tested and certified the F-15, C-17 and F-16 aircraft for 
unrestricted operations, and has demonstrated performance of the A-10 
and F-22 using a 50/50 blend of traditional JP-8 and HRJ-derived 
biofuel. Fleet-wide certification is on track for completion by 2013.
    The Air Force has acquired three HRJ fuels in support of its 
certification efforts, including 200,000 gallons of fuel derived from 
camelina oil, 200,000 gallons derived from animal fats, and 40,000 
gallons derived from waste greases. These fuels were developed 
domestically, providing an opportunity for U.S. job growth in an 
industry that improves the Nation's energy security posture. For 
example, the fuel used to power the Thunderbirds was developed from 
camelina grown in Montana, while the camelina seed oil used in the H RJ 
process was cultivated in Montana and Washington State. In both cases, 
the camelina was grown in rotation with non-irrigated wheat when those 
fields would otherwise lie fallow, and uses the same infrastructure 
used for planting and harvesting. The oil was then shipped to Texas, 
where it went through the refining process to prepare it for use by the 
F-16s that were part of the Thunderbirds squadron.
    To ensure both the synthetic fuel and the biofuel met the Air 
Force's drop-in requirement, the Air Force tested a C-17 Globemaster on 
blends of JP-8, Fischer-Tropsch synthetic fuel, and H RJ fuel in August 
2010 at Edwards Air Force Base. The tests demonstrated the Air Force 
could treat both blends as JP-8 drop-ins, as well as co-mingle both 
alternative fuels. On July 1, 2011, ASTM International, a standards 
board for materials and products, approved the commercial standard for 
the renewable fuel which is made from natural plant oils and animal 
fats and is referred to as ``hydroprocessed esters and fatty acids.'' 
This approval provides commercially-derived aircraft, including several 
Air Force aircraft, the option to use 50/50 HRJ blends in their day-to-
day operations and provide industry with another potential customer.
    Way Forward: Even after certification of the synthetic fuel and 
biofuel blends is completed, the Air Force will continue to review and 
evaluate potential alternative aviation fuel candidates. The Secretary 
of the Air Force recently approved an effort to conduct an initial 
feasibility demonstration, analysis, and evaluation of the alcohol-to-
jet pathway, which uses cellulosic-based materials, such as 
agricultural and forest waste, to develop an alternative aviation fuel. 
This initial phase will require no additional funding beyond what has 
already been provided and enables the Air Force to ensure commercially 
approved fuels do not compromise the safety and effectiveness of the 
Air Force systems that may eventually use them. Following the initial 
study, the Air Force will re-evaluate the alcohol-to-jet pathway to 
determine if full fleet certification is required. The alcohol-to-jet 
pathway has been identified by industry as having more commercial 
potential when compared to both the synthetic and the biofuel blends.
    The Air Force has certified nearly all its aircraft and equipment 
for unrestricted operational use of a 50/50 synthetic fuel blend and is 
well on its way to certifying its fleet to use a 50/50 biofuel blend. 
Following full certification, the Air Force will be looking to private 
industry to develop alternative aviation fuels in commercial-scale 
quantities. From a feedstock and process perspective, the Air Force is 
agnostic--as long as the fuel meets the desired performance, 
environmental and safety specifications, the Air Force will include it 
in its aviation fuel portfolio. In addition to certifying that all new 
fuels are safe and effective, the Air Force will use only fuels that 
comply with all applicable laws and regulations. Even after 
certification has been completed, the Air Force will not be a producer 
of alternative aviation fuel, but will use what the market cost 
competitively provides. This is another reason for pursuing multiple 
alternative aviation fuel certifications, as it provides the 
opportunity for the Air Force to ensure it can use any aviation fuel 
that is commercially available.
    Summary: Energy availability and security impacts all Air Force 
missions, operations, and organizations. The Air Force must have 
assured energy access to meet the demands of contingency operations 
abroad and protect the homeland from emerging threats. To enhance 
energy security, the Air Force is developing a portfolio of renewable 
and alternative energy sources, including drop-in alternative aviation 
fuels. By reducing energy demand, increasing the amount and diversity 
of energy supply, and changing the culture to make energy a 
consideration in every activity, the Air Force will increase 
warfighting capabilities, enhance mission effectiveness through 
efficiency, and help the nation to reduce its dependence on imported 
oil.

    Senator Cantwell. Thank you, Mr. Yonkers.
    Next is Mr. Glover. Thank you very much for being here.

         STATEMENT OF BILLY M. GLOVER, VICE PRESIDENT,

          ENVIRONMENTAL STRATEGY AND AVIATION POLICY,

                  BOEING COMMERCIAL AIRPLANES

    Mr. Glover. Madam Chair, and Ranking Member, thank you for 
the opportunity to testify today.
    Two years ago I appeared before Congress to testify about 
the promise of sustainable fuels for the aviation industry. At 
that time, I stated that Boeing was bullish on sustainable 
aviation fuels because of the potential environmental benefits, 
potential economic benefits, and national security 
implications. What a difference a couple of years make. Today, 
I'm here to talk about the reality of sustainable aviation 
fuels.
    On July 1, ASTM International approved commercial use of 
renewable jet fuels derived from natural plant oils and animal 
fat. ASTM gave the green light for up to 50 percent blend of 
hydroprocessed fuels, also known as ``hydrotreated renewable 
jet. ''Commercial airlines are already flying on renewable 
blends. For example, KLM and Lufthansa have already started 
commercial flights.
    The ASTM's adoption of the standard for so-called, ``HRJ'' 
reflects an aviation industry cooperative effort that would not 
have happened as soon as it did without the combined work of 
the U.S. Air Force, the Federal Aviation Administration, the 
commercial aviation industry, and many others.
    What we learned from our cooperative approach is that these 
fuels match or exceed the performance of conventional jet 
fuels. For example, HRJ has excellent thermal stability 
properties, which may reduce maintenance costs, and very high 
energy density compared to conventional jet fuels. Higher 
energy density translates into less fuel per passenger mile.
    Nevertheless, while the industry is rightfully pleased with 
the accomplishments thus far, much work needs to be done to 
make these fuels commercially available on a widespread basis, 
and economically competitive. There are more than 20 U.S. 
biofuel projects in various stages of development, several of 
which have the potential to produce aviation jet fuel. These 
projects cover a wide range of feedstocks and process 
technologies, but all have one thing in common--the need for 
additional support for near-term development.
    Funding for biofuel production has been slowed by the 
troubled economy and the perception of risks associated with 
emerging technologies. Just as with the development of the 
Internet, rural electrification, technical advances growing 
from the space program, a strong governmental role is essential 
to assist the sustainable aviation fuels industry through its 
embryonic development.
    There are a number of actions the Government could be doing 
to spur the production of sustainable aviation fuels--for 
example, adoption of legislation to allow the U.S. military to 
enter into long-term contracts for the purchase of sustainable 
aviation fuels. Providing DoD with the authority to enter into 
contracts of 10 to 15 years would assist producers in obtaining 
necessary private financing. Financiers are looking for a 
commitment of at least 10 years by a party with at triple-A 
credit rating as a prerequisite for underwriting.
    Second, legislation to extend the tax credit under Section 
40A of the Internal Revenue Code for producers of biodiesel, 
renewable diesel, and certain aviation fuels derived from 
biomass.
    And third, funding for research and development on the next 
generation of sustainable aviation fuels. This is an area 
where, as Senator Warner mentioned, NASA could be very helpful.
    These recommendations were highlighted in the recent report 
of the Sustainable Aviation Fuels Northwest stakeholder study.
    Madam Chair, you've been a very strong supporter, and we 
greatly appreciate your efforts.
    No discussion of incentives for the production of 
sustainable aviation fuels would be complete, however, without 
mentioning the programs administered by the United States 
Department of Agriculture. The 2008 Farm Bill provides a number 
of important programs aimed at encouraging the production of 
sustainable biofuels, and while we recognize and understand the 
issues concerning the budget and the Federal deficit are 
paramount, we would hope that Congress would find a way forward 
to continue to support these important programs.
    Madam Chair, that concludes my prepared testimony. A 
complete version has been submitted for the record, and I'm 
happy to answer any questions.
    [The prepared statement of Mr. Glover follows:]

        Prepared Statement of Billy M. Glover, Vice President, 
Environmental Strategy and Aviation Policy, Boeing Commercial Airplanes

    Madam Chair and Ranking Member:
    Thank you for the opportunity to testify today on sustainable 
aviation fuels.
    As you know, The Boeing Company (``Boeing'') designs and 
manufactures commercial and military aircraft, helicopters, missiles, 
satellites and related components and equipment. We employ 
approximately 160,000 workers in the United States, and several 
thousand more overseas.

Introduction
    Two years ago, I appeared before Congress to testify about the 
promise of sustainable fuels for the aviation industry. Boeing and four 
of its airline customers had just completed test flights demonstrating 
that plant-derived oils could be operated in commercial aircraft 
without modification to the aircraft or engines. At that time, I stated 
that Boeing was ``bullish'' on sustainable aviation fuels because of 
the potential environmental benefits they could provide relative to 
reduced life cycle greenhouse (GHG) emissions, the potential economic 
benefits associated with increased fuel availability, and the national 
security implications that come with reliance on imported liquid 
petroleum fuels.
    What a difference a couple of years make. Today, I am here to 
testify to the reality of sustainable aviation fuels. On July 1, 2011, 
ASTM International (formerly the American Society of Testing and 
Materials) approved the commercial use of renewable jet fuels derived 
from natural plant oils and animal fat. In an amendment to its D7566 
jet fuel specification, ASTM gave the green light for up to a 50 
percent blend of hydroprocessed fatty acid esters and free fatty acid 
(HEFA) fuels--also known as hydrotreated renewable jet (HRJ) fuels--to 
be mixed with conventional kerosene.\1\ Commercial airlines are already 
flying on blends of HRJ fuels. KLM (flying a Boeing 737-800 aircraft) 
recently flew the first-ever commercial passenger flight (from 
Amsterdam to Paris) on a blend of HRJ and conventional jet fuel. 
Lufthansa recently started daily HRJ-powered commercial flights from 
Hamburg to Frankfurt. KLM plans to start regular commercial flights 
later this fall. TUI/Thomson Airways is making its first HRJ-powered 
commercial flight today, July 28--flying from the UK to Spain with a 
Boeing 757. In addition, Aeromexico next week will fly a Boeing 777 
airplane from Mexico City to Madrid, Spain--thus beginning 
transatlantic bio-powered service. All these airlines are using a blend 
of HRJ and kerosene.
---------------------------------------------------------------------------
    \1\ The previous D7566 standard, approved by ASTM in 2009, allowed 
for the use of fuel produced from coal, natural gas or biomass using 
the Fischer-Tropsch process. Both of the alternative aviation fuels 
approved by ASTM are complete drop-in substitutes for the petroleum-
based fuels currently used in aviation, and are able to use existing 
fuel transportation and storage infrastructure. The generic term 
``kerosene'' is used in this document to refer to jet fuel derived from 
petroleum.
---------------------------------------------------------------------------
    The ASTM's adoption of the D7566 standard for HRJ reflects an 
aviation industry co-operative effort--that would not have happened as 
soon as it did--without the combined work of the U.S. Air Force (USAF), 
the Federal Aviation Administration (FAA), and the commercial aviation 
industry (airlines, as well as aircraft and engine manufacturers and 
their suppliers). By working together, we were able to perform fuel 
property tests, materials compatibility testing and engine tests before 
our first demonstration flights. Once airborne, we were able to put 
these new fuels through their paces with climbs, engine accelerations 
and decelerations, windmill engine restarts, starter assisted restarts, 
and simulated go-around maneuvers. What we learned is that these fuels 
match or exceed the performance of conventional jet fuel. For example, 
HRJ has excellent thermal stability properties which may reduce 
maintenance costs and very high energy density compared to conventional 
jet fuel. Higher energy density translates to burning less fuel per 
passenger mile.\2\
---------------------------------------------------------------------------
    \2\ The common industry fuel approval process, as embodied in the 
ASTM process, takes time but results in a very thorough outcome. The 
thoroughness assures that conforming fuels can be used across the 
existing fleet without modification or further regulatory action. In 
short, all airplanes are already approved for any conforming fuel. The 
process can be slowed or accelerated depending upon the availability of 
test data. If resources like those of the USAF or NASA are readily 
available, the necessary test data will be available and the process 
will move faster. Congressional attention toward assuring availability 
of test resources would be welcome.
---------------------------------------------------------------------------
    Nevertheless, while the industry is rightfully pleased with its 
accomplishments thus far, much work needs to be done to make these 
alternative fuels commercially available and economically competitive.

Sustainable Aviation Fuel Plays an Important Role in the Commercial 
        Aviation Industry's Environmental Commitments
    We recognize that the aviation sector, as a key contributor to 
global GDP, must continually strive to lessen its environmental impact 
in line with industry growth. To be effective these improvements must 
be made on a global basis. Over the next 20 years, we expect the global 
aircraft fleet to more than double, from the current fleet of 17,000 
airplanes to more than 35,000. This rapid growth not only presents 
economic opportunity, but also environmental concerns if that growth is 
not offset by emission reductions.
    It is for this reason that the commercial aviation industry, 
through work with the International Civil Aviation Organization 
(ICAO)--the United Nations body that governs all aspects of commercial 
aviation--has committed to carbon-neutral growth from 2020 and aspires 
to a 50 percent net reduction in aircraft emissions by 2050 (relative 
to a 2005 baseline).
    To get there, the commercial aviation industry has developed a 
three-part strategy that we call ``planes, practices and fuels.'' It 
involves:

   Technology innovation--manufacturers continuing to make more 
        fuel efficient planes through weight reduction programs, 
        aerodynamic improvements and other measures;

   NextGen--accelerating the implementation of advanced air 
        traffic management practices that reduce delays and allow 
        aircraft to fly shorter and more efficient routes; and

   Developing and promoting the commercialization of 
        sustainable aviation fuel as an alternative to conventional jet 
        fuel.

    The Boeing 787 Dreamliner and 747-8 are great examples of the 
industry's technology innovation; each will increase fuel efficiency 
over predecessor aircraft by approximately 20 and 16 percent, 
respectively.\3\ At Boeing, our strategy is to lead the way in 
pioneering new technologies for environmentally progressive products 
and services, and these two aircraft are examples of that effort.
---------------------------------------------------------------------------
    \3\ Today's jet planes are 70 percent more fuel efficient, which 
means they produce 70 percent fewer emissions than aircraft produced a 
mere 50 years ago.
---------------------------------------------------------------------------
    While full build-out and implementation of NextGen will also be a 
key contributor to reducing aircraft emissions by 12 to 15 percent, 
neither NextGen nor greater innovative technology will get the 
commercial aviation industry to a 50 percent reduction in emissions by 
2050. That is where sustainable aviation fuels come in--they are so to 
speak, where the ``rubber hits the runway.'' Sustainable aviation fuel 
is our industry's sole alternative energy source for the foreseeable 
future. Unlike other transport sectors, airplanes cannot use plug-in 
electricity or hybrid power systems.
    Specifically, with regard to developing the commercialization of 
sustainable aviation fuel, Boeing has taken action because we see it as 
an enabler of greater growth in the commercial aviation industry and 
therefore in our long term business interest. Our strategy is not 
however aimed at becoming a fuel producer. We believe that our 
interest, and frankly the public interest, is better served if Boeing's 
unique expertise and position in the aerospace industry is focused on 
accelerating the broad availability of sustainable aviation fuel. That 
means not just one supply chain success, not just one feedstock 
success, not just one processing method success--instead it means 
enabling multiple successes to drive broad commercial availability 
around the world.
    At Boeing, our focus is on sustainable alternatives that have the 
potential to provide greatly reduced lifecycle greenhouse gas emissions 
and greater economic benefits associated with increased fuel 
availability. By sustainable fuels we mean those that comply with 
robust criteria to ensure that they have significantly better life 
cycle emissions than traditional fuels, and do not adversely impact 
food supply, ecosystems, or communities.
    It is important to recognize that no one feedstock or processing 
method will supply all of the aviation industry's needs. Instead, a 
variety of feedstocks and processing methods will be necessary and they 
will need to be diversified based upon what is commercially available 
in the locality where the fuel is being produced.\4\ It is for this 
reason that we are participating in a broad range of projects around 
the world. The central goal of these projects is to develop the 
scientific, economic and environmental information necessary to develop 
sustainable aviation fuel resources. (A summary of those projects is 
attached to my testimony.)
---------------------------------------------------------------------------
    \4\ In the Pacific Northwest, for example, we have identified 
oilseed crops, algae, municipal solid waste and woody biomass from 
forest waste as potential sources for the development and production of 
sustainable aviation fuel.
---------------------------------------------------------------------------
A Blueprint for the Commercial Viability of Sustainable Aviation Fuels
    There are more than 20 U.S. renewable fuels projects in various 
stages of development, several of which have the potential to produce 
sustainable aviation fuel. These projects cover a wide range of 
feedstocks and process technologies, but all have one thing in common--
the need for additional support for near-term development. Funding for 
production has been slowed by the troubled economy and the perception 
of risk associated with investing in emerging technologies. Just as 
with the development of the Internet, rural electrification, and 
technological advances growing from the space program, a strong 
governmental role is essential in assisting the sustainable aviation 
fuels industry through its embryonic development. Obtaining safe, 
reliable and environmentally preferred aviation fuels sustains not only 
the aviation industry, but also builds new agricultural and fuel 
processing economies as well, all the while providing an important 
national security hedge against political instability in oil producing 
regions.
    There are a number of actions that the government could be doing to 
spur the production of sustainable aviation fuels. Of particular 
importance, Boeing encourages the adoption of:

   Legislation (S. 1079) to allow the Department of Defense 
        (DOD) and branches of the U.S. military to enter into long-term 
        contracts for the purchase of sustainable aviation fuels. 
        Current law does not provide attractive conditions for private 
        investment into production facilities. Providing DOD with the 
        authority to enter into longer term contracts of 10-15 years 
        would assist producers in obtaining necessary private 
        financing. Financiers are looking for a commitment of at least 
        10 years by a party with a AAA credit rating as a prerequisite 
        for underwriting;

   Legislation to extend the tax credit under Section 40A of 
        the Internal Revenue Code for producers of biodiesel, renewable 
        diesel and certain aviation fuels derived from biomass; and

   Funding for research and development on the next generation 
        of sustainable aviation fuels. Boeing has already begun work 
        with the FAA, the USAF and other industry partners on ASTM 
        approval of new technology pathways to make a bio-derived jet 
        fuel. One of the most promising technologies is the conversion 
        of alcohols to jet fuel. Alcohol-to-jet production processes 
        can work with the existing ethanol and conventional chemical 
        and petroleum production facilities to covert these fuels into 
        aviation fuel. At last count, there were over 150 ethanol 
        facilities in the United States, and for a small capital 
        investment (compared to a new facility), once the fuel is 
        approved by ASTM, they can convert some of the ethanol into 
        aviation fuel.

    Madam Chair, it should be no surprise if these recommendations 
sound familiar; you have been a strong supporter of these legislative 
initiatives, and we greatly appreciate your efforts. I would also note 
that these recommendations come directly out of the Sustainable 
Aviation Fuels Northwest (SAFN) report on sustainable aviation fuels in 
the Pacific Northwest.\5\ SAFN is the Nation's first stakeholder effort 
to explore opportunities and challenges surrounding the production of 
sustainable aviation fuels. The report reflects more than 10 months of 
work and the perspectives of more than 40 stakeholders, and is just one 
example of the projects that Boeing is involved in around the world.
---------------------------------------------------------------------------
    \5\ SAFN was convened by regional leaders in the aviation industry, 
including Boeing, Alaska Airlines, the operators of the region's three 
largest airports--Port of Seattle, Port of Portland and Spokane 
International Airport--and Washington State University, a leader in 
sustainable fuel research. The regional energy nonprofit, Climate 
Solutions was retained to facilitate and prepare the report. Full 
report available at www.safnw.com.
---------------------------------------------------------------------------
    No discussion of incentives for the production of sustainable 
aviation fuels would be complete without mentioning programs 
administered by the United States Department of Agriculture (USDA).\6\ 
The 2008 Farm Bill provides a number of important programs aimed at 
encouraging the production of biofuels. For example:
---------------------------------------------------------------------------
    \6\ In July 2010, Boeing, the Air Transport Association (ATA) and 
USDA signed a resolution memorializing their commitment to work 
together on a ``Farm to Fly'' initiative to accelerate the availability 
of a commercially viable sustainable aviation biofuel industry in the 
United States. The ``Farm to Fly'' effort has been a very productive 
forum creating a better understanding of industry potential as well as 
understanding of how the existing USDA authority can be used to enhance 
development and use of energy crops to create fuel and jobs. A summary 
report is being finalized for publication.

   The Biorefinery Assistance Program (Section 9003)--Provides 
        loan guarantees for the construction or retrofitting of rural 
        biorefineries to assist in the development of new and emerging 
---------------------------------------------------------------------------
        technologies for the development of advanced biofuels;

   The Biomass Crop Assistance Program (Section 9011)--Provides 
        eligible farmers with matching payments for the sale and 
        delivery of energy crops to biomass conversion facilities;

   Crop Insurance Coverage for Energy Crops (Section 12023)--
        Requires the Risk Management Agency to develop policies to 
        ensure dedicated energy crops in the same manner as crops used 
        for food and fiber.

   The Bioenergy Program for Advanced Biofuels (Section 9005)--
        allows the Secretary of USDA to provide production payments to 
        advanced biofuel producers to support expansion of advanced 
        biofuels.

    These are just a few of the programs administered by USDA aimed at 
spurring the growth of energy crops and the production of sustainable 
fuels. And while we recognize and understand that issues concerning the 
budget and Federal deficit are paramount, we would hope that Congress 
would find a way to continue to support these important programs as 
they apply to advanced biofuels during reauthorization of next year's 
Farm Bill.

Conclusion
    Madam Chair, this concludes my prepared testimony. I am happy to 
answer any questions you may have.
                                 ______
                                 
Regional Solutions: Global Success
    Boeing has initiated and participated in a wide variety of projects 
around the world. Participating in such a wide variety of projects 
gives us the opportunity to engage with stakeholders, gain perspective, 
develop scientific, economic and environmental data, and encourage 
practical steps forward. A summary of projects includes:

   Algal Biomass Organization--Boeing is a founding member of 
        the Algal Biomass Organization, a trade association for algae-
        to-energy companies and initiatives. Boeing serves on the board 
        of directors and also participates in regular technical and 
        policy projects.

   Commercial Aviation Alternative Fuels Initiative--This 
        partnership among the Air Transport Association, Federal 
        Aviation Administration, Airports Council International-North 
        America and the Aerospace Industries Association explores new 
        U.S. opportunities for sourcing fossil and bio-derived fuels. 
        Boeing initiated the public meeting that led to the formation 
        of CAAFI and participates in technical, research and policy 
        teams.

   ``Farm to Fly''--The U.S. Department of Agriculture, Boeing, 
        and the Air Transport Association collaborate to promote 
        development of renewable fuels for aviation. Based on a working 
        together resolution, several key policy recommendations have 
        been proposed to the U.S. Government, with follow-on activities 
        currently underway.

   Latin America Jatropha Sustainability Study--Yale University 
        received funding from Boeing to do the first sustainability 
        assessment of jatropha, a plant suitable for use as an aviation 
        fuel. The peer-reviewed results, based on field data from 
        actual jatropha farms, were released in March 2011.

   Sustainable Aviation Biofuel Evaluation Study--Boeing and 
        PetroChina are leading a comprehensive evaluation for 
        establishing a sustainable aviation biofuels industry in China 
        including agronomy, energy inputs and outputs, lifecycle 
        emissions, infrastructure and government policy support. Other 
        U.S. participants include Honeywell's UOP and United 
        Technologies Corporation, while Chinese participants include 
        the Civil Aviation Authority of China, the State Forestry 
        Administration and Air China.

   Sustainable Aviation Fuels Northwest--Sustainable Aviation 
        Fuels Northwest is sponsored by Alaska Airlines, Boeing, the 
        Port of Seattle, the Port of Portland, Spokane International 
        Airport and Washington State University. Boeing initiated and 
        co-funded the project, which convened a diverse stakeholder 
        group looking at the feasibility of developing regionally 
        sourced, sustainable aviation fuels in a four-state region. A 
        final report released in May 2011 is available at http://
        www.safnw.com/.

   Sustainable Aviation Fuels Roadmap--The Sustainable Aviation 
        Fuels Road Map project was developed in collaboration with the 
        Australasian section of the Sustainable Aviation Fuel Users 
        Group (Air New Zealand, Boeing, Qantas, and Virgin Blue) and 
        the Australian Defence Science and Technology Organisation. 
        Boeing initiated and co-funded the regional project, which 
        looked at all phases of developing a sustainable biofuel 
        industry and was coordinated by The Commonwealth Scientific and 
        Industrial Research Organisation. A report issued in May 2011 
        can be found at: http://www.csiro.au/files/files/p10rv.pdf.

   Sustainable Aviation Fuel Users Group (SAFUG)--SAFUG is a 
        global airline coalition accounting for approximately 25 
        percent of annual commercial aviation fuel consumption. Its 
        members are driving the development of commercial supply chains 
        and supporting the implementation of sustainability standards 
        via the Roundtable on Sustainable Biofuels' global multi-
        stakeholder processes. Boeing is a founding affiliate and helps 
        coordinate global activity. More information is available at 
        www.safug.org.

   Plan de Vuelo--A multi-stakeholder process in Mexico led by 
        SAFUG member Aeropuertos y Servicios Auxiliares (ASA). As part 
        of Mexico's Inter-Ministerial Biofuel Development Commission, 
        ASA is guiding the creation of a Mexican biofuels industry, 
        compliant with global sustainability standards. Boeing worked 
        closely with the Mexican government to facilitate this process 
        and the project report will be released during summer 2011.

   Sustainable Biomass Consortium--Boeing and the Ecole 
        Polytechnique Federale de Lausanne created the Sustainable 
        Biomass Consortium, a research initiative for increasing 
        harmonization between voluntary standards and regulatory 
        requirements for biomass for jet fuel. The Consortium aims to 
        lower sustainability certification costs collaborate with civil 
        society and governments on research help, align regional and 
        regulatory requirements, and independently verify the 
        sustainability and traceability of biomass sources.

   Sustainable Bioenergy Research Center--Boeing, the Masdar 
        Institute, Etihad Airways and Honeywell's UOP have established 
        a research institution and demonstration project in Abu Dhabi 
        devoted to sustainable energy solutions. The Sustainable 
        Bioenergy Research Project uses integrated saltwater 
        agricultural systems to develop and commercialize aviation 
        biofuel sources and co-products. Saltwater is used to create an 
        aquaculture-based seafood farming system in parallel with the 
        growth of mangroves and salicornia, a species of saltwater-
        tolerant plants that offers potential as a sustainable biofuel 
        feedstock.

    Senator Cantwell. Thank you, Mr. Glover. And thank you for 
being here 2 years ago and pioneering on. We appreciate it.
    Mr., is it Todaro? Mr. Todaro, welcome. Thank you very much 
for being here.

        STATEMENT OF TOM TODARO, CEO, AltAir FUELS, LLC

    Mr. Todaro. Thank you for having me.
    So, my name is Tom Todaro. I'm the CEO of a company called 
AltAir Fuels, based in Seattle, Washington. This is a company 
that evolved out of an agricultural biotechnology company that 
we've been running for almost a decade.
    If you understand that 90 percent of the cost of a gallon 
of gasoline, whether it's renewable jet fuel, whether it's 
renewable is the cost of the feedstock going in. Ours is a 
company that works with farmers in technology to improve yields 
to more crops and crop locations into areas that are not 
environmentally sensitive, and allows probably the most 
realistic reduction in the cost of fuel over a reasonable 
period of time.
    So, we work today on a variety of crops, but the one that's 
most widely known is one that's called camelina, which is 
really just the blue-collar relative of canola. It's been bred 
to take much less water, much less nitrogen and fertilizer. We 
can grow it in fallow rotation with wheat, so the farmers can 
receive a little extra income on land that was otherwise going 
to be fallowed. We grow them in Washington State, the Dakotas, 
and other parts of the West Coast.
    One of the things that was so important to us was that the 
life cycle analysis was complete and peer-reviewed from, you 
know, farm to fly. We've got about an 80 percent reduction in 
greenhouse gasses related to the fuels we produce, meaning you 
can fly almost five miles on an airplane powered by fuel we 
create and have equivalency to emissions as one mile on fuels 
flown today.
    Today, we've produced over 500,000 gallons of this fuel. 
We've done several dozen military certification flights with 
the Air Force, with the U.S. Navy, and with the U.S. Army. 
We've done quite substantial engine testing and commercial 
flight testing as well. And we're involved, obviously, in the 
certification of these fuels. You know, we powered an F-18. We 
broke the sound barrier.
    These fuels are molecularly comprehensibly quality tested 
and can be used in all warfighter and domestic applications for 
commercial aviation.
    The things that we need as a producer--so, we make jet 
fuel. We do it all the way from the farm. We do the genetic 
work inside the seeds; we contract with farmers; we move this 
through a traditional farming infrastructure; we crush out the 
oil; we convert that oil in collaboration with Honeywell into 
drop-in fuels.
    The things that will surprise people is how close we can 
get to jet parity in terms of pricing, how quickly we can do 
it. It's simply an issue of scale.
    The things that farmers need is to know that there is a 
customer that's going to buy their crop. First they need to 
know the crop is going to exist. So they need crop insurance 
related to bad weather that affects all other crops that are 
primarily grown in the U.S.
    There is a biomass crop assistance program under the U.S. 
Department of Agriculture. AltAir Fuels was a happy recipient 
of an announcement related to that just a couple days ago. But, 
the long-term renewal of this project is the type of thing that 
will get farmers to farm. It will give them the support and the 
comfort they need to take land that was otherwise going to be 
empty, but they still have to get up and, you know, and, run 
their tractors, and operate the rest of their farm 
infrastructure. It allows them what they need to do that until 
they have a couple of years of data that makes them comfortable 
that the representations customers are making are accurate.
    It would be very helpful to reinstate the requirement with 
DOD under 526--it was mentioned earlier by Mr. Yonkers. If we 
want to promote renewable aviation fuel, it would be a shame, 
in my opinion, to produce such fuels that actually had carbon-
negative effects on emissions.
    The economic model is really important to understand. Every 
thousand acres you farm gives you a full-time equivalent job. 
The projects we're looking at in Washington State and the West 
Coast--one single facility is a 1,000 farm-related jobs; it's a 
couple hundred construction jobs; and then, obviously, several 
dozen to staff the refinery.
    So, I guess my concluding point is, we're pretty close to 
being able to get this done, and if we can get through the next 
couple of years, we'll prove to all of you and the rest of the 
country that these fuels are sustainable, they're ready, 
they're scalable, and they're price efficient.
    Thank you.
    [The prepared statement of Mr. Todaro follows:]

        Prepared Statement of Tom Todaro, CEO, AltAir Fuels, LLC

    Thank you for the opportunity to be here today.
    My name is Tom Todaro and I am the founder and CEO of AltAir Fuels, 
a vertically-integrated refiner of renewable aviation and 
transportation fuels, as well as renewable chemicals. We are 
headquartered in Seattle, Washington.
    Today I will focus on our approach to producing aviation biofuels, 
the benefits of this fuel to our land, our farmers, our security, and 
our ability to pay back our debts, and finally I will discuss ways that 
Congress can help accelerate the commercialization of these fuels.
    First, let's talk about our approach. As an integrated refiner, we 
secure the raw materials, or feedstock, for our fuels from the most 
sustainable and economic sources. We refine the feedstock at our 
facilities and we enter into offtake sales agreements for the finished 
fuels. Our technology allows us to use many different types of 
sustainable feedstocks.
    Today, our chosen feedstock is an oilseed called camelina, a member 
of the mustard seed family. Camelina grows in rotation with wheat and 
other grains in the western United States, including the Dakotas, 
Montana, Washington, Oregon and California.
    Because camelina is designed to be grown on fallow land, in 
rotation with wheat or other grain crops, it does not displace food 
crops. In fact, camelina can actually improve soil and water quality 
compared with the chemical treatments that are typically used on fallow 
land. After we crush the seeds for the oil, the remaining meal can be 
fed to livestock and dairy. Camelina has relatively low demands for 
water or other nutrients, so it is a low-cost crop which helps lower 
the cost of the finished fuel.
    Because of these factors, a peer-reviewed lifecycle analysis of the 
carbon emissions footprint of camelina-based jet fuel shows an 80 
percent reduction compared to petroleum fuels.
    To date, we have produced more than 500,000 gallons of renewable 
jet fuel from camelina. Our fuels have powered numerous aircraft and 
engines, including: Boeing 747s for Japan Airlines and KLM and engines 
made by Pratt & Whitney, Rolls Royce and GE. Last month, camelina 
powered two historic flights--the first transatlantic passenger 
flight--a Gulfstream owned by Honeywell and the first transatlantic 
cargo flight--a Boeing 787.
    We have also powered numerous military aircraft, including the A10 
Warthog; the F-22, F-16 and FA-18, which last spring made history by 
breaking the sound barrier on camelina-based jet fuel. The military 
flights were part of a comprehensive test program with the Air Force, 
Navy and Army. As Secretary of the Navy, Ray Mabus has said, for our 
men and women serving in Afghanistan and Iraq, producing renewable fuel 
at scale is not just an environmental or economic imperative, it is an 
operational imperative, and all too often, a matter of life and death. 
The Department of Defense's mission, which we are proud to advance, is 
to protect our men and women in uniform and make us better warfighters.
    One reason camelina-based jet fuel can accomplish this mission is 
that it can be dropped directly into existing infrastructure--our jet 
engines and diesel generators can't tell the difference between 
AltAir's renewable jet fuel and petroleum. The recently created 
specification for renewable jet fuel approved by the ASTM confirms the 
viability of our drop-in fuel process, (ASTM D7566-11: Specification 
for Aviation Turbine Fuel Containing Synthesized Hydrocarbons). When we 
begin production of our fuels next spring, we expect airlines to be 
flying on renewable jet fuel from airports on the west coast.
    Our long-term plan is to develop Renewable Jet Fuel production 
facilities across the US, using the locally-sourced, sustainable 
feedstock. Earlier this week, the USDA approved AltAir Fuels project 
under the Biomass Crop Assistance Program, or BCAP. This crucial 2008 
Farm Bill program is designed to spur the growth of sustainable, non-
food energy feedstocks across the country. BCAP provides critical 
feedstock risk mitigation and will help break the chicken-and-egg 
problem facing companies like mine that are aiming to build 
biorefineries to produce homegrown American fuel without enough 
certainty as to the price and availability of feedstock supply to 
secure financing. We applaud Secretary Vilsack and his staff's tireless 
efforts in revising BCAP to make the program more efficient and more 
workable. Their efforts will empower farmers across the country to 
reduce our dependence on foreign oil and grow our way out of the 
national debt while creating jobs in rural America.
    As I speak, we are engaging with farmers in Washington, California 
and Montana to immediately enroll up to 50,000 acres of existing 
cropland that would otherwise be fallowed to produce camelina with 
annual funding from BCAP.
    The economic impact of our model is significant. We estimate the 
creation of roughly 400 construction jobs and about 50 full time jobs 
for each biorefinery. Those numbers soar when you include the increased 
opportunities for farmers, crushers and transportation-related 
industries need to support the increased production of camelina. We 
estimate about 1 job for every 1,000 acres planted; at an estimated 
5,000,000 potential acres for camelina, about 5,000 new or retained 
jobs could be created in rural America.
    Given our commercial plans, and our vertically-integrated model, we 
believe that we can, and will, be producing homegrown renewable jet 
fuel at the same, or possibly slightly below, the current cost of 
conventional jet fuel derived almost entirely from foreign oil.
    Perhaps more importantly, because we are securing ample supplies of 
feedstock, we can enter into long-term contracts at fixed prices that 
bring predictability and stability to customers, whether they are 
commercial airlines or military combat vehicles.
    That said, there are a number of challenges facing this nascent 
industry. I want to spend my remaining time highlighting ways that 
Congress can help reduce or remove some of these obstacles to 
widespread commercialization.
    First, we need to continue supporting farmers who choose to grow 
camelina. Funding for BCAP, which is currently at risk, must be 
reauthorized if we are going to grow our way out of the national debt, 
break our foreign oil dependence and create jobs in rural America. We 
also recommend that Congress consider the use of crop insurance for 
camelina to help overcome resistance from farmers who can't afford to 
take a risk on a relatively new energy crop.
    Second, we need to ensure that EPA makes a clear determination that 
camelina-based jet and renewable diesel fuels qualify under the 
existing Renewable Fuel Standard.
    Third, we should enable the U.S. military to enter into long-term 
contracts--15 years or more--for advanced biofuels. This allows 
investors to more easily fund production facilities because it lowers 
their risk.
    In summary, let me say that renewable aviation fuel is a reality. 
There are no technological barriers for either the production or use of 
these domestic, renewable fuels. This homegrown energy is fueling our 
jetfighters and commercial planes in the U.S. today. And I look forward 
to working with this Committee, the Congress and the Obama 
Administration to ensure that camelina-based fuels and other advanced 
biofuels continue to propel us toward a more prosperous, energy 
independent future.
    Thank you again for the opportunity to be here today. I am happy to 
answer questions.

    Senator Cantwell. Thank you very much.
    And last, Ms. Pinkerton, thank you very much for being 
here, and we look forward to your comments.

           STATEMENT OF SHARON PINKERTON, SENIOR VICE

        PRESIDENT OF LEGISLATIVE AND REGULATORY POLICY,

        AIR TRANSPORT ASSOCIATION OF AMERICA, INC. (ATA)

    Ms. Pinkerton. Good morning, and thank you for the 
opportunity to testify on the impact of fuel policy on our 
industry, as well as our efforts to develop safe and cost-
effective alternatives.
    For the Nation, a vibrant alternative fuels industry would 
mean more jobs, greater national security, and cleaner air.
    My name is Sharon Pinkerton, and I'm the Senior Vice 
President of Policy for the Air Transport Association, 
representing major passengers and cargo airlines in the United 
States.
    It's really hard to identify any other single product 
that's more important to the airline industry than jet fuel. 
Jet fuel touches every aspect of commercial aviation, 
facilitating our work as we connect people and goods in the 
global economy, efficiently and safely.
    The steady rise of jet fuel prices in the last decade, and 
the unprecedented price volatility in recent years, has had a 
tremendous negative impact--not just on the airlines and their 
employees, but also on the customers and the communities they 
serve throughout the Nation.
    And at this point, Madam Chair, I'd like to thank you for 
your leadership on that issue of oil speculation. You helped us 
pass provisions to try to control excessive speculation and, 
just as importantly, holding the administration accountable to 
continuing to implement position limits and other of those 
policies.
    Fuel is our largest cost center, representing about one 
third of our operating expenses. Although U.S. airlines 
consumed 3.1 billion gallons of jet fuel less, in 2010 than in 
2000, they spent a staggering $22 billion more for fuel. And 
the industry's total fuel spend is expected to rise from $39 
billion in 2010, last year, to an estimated $53 billion this 
year. That's a $14 billion year-over-year increase.
    As an industry we're doing everything we can to operate as 
fuel efficiently as possible and to promote homegrown 
alternatives to petroleum-based jet fuel. We applaud this 
subcommittee for holding this hearing and focusing on what the 
Government can do to help us meet these vital objectives.
    What are ATA members doing? We believe we have significant 
successes to report. U.S. airlines have more than doubled fuel 
efficiency since 1978. Today, we carry more than twice as many 
passengers and cargo per gallon as we did then. DOT statistics 
show that on a system-wide basis, U.S. airlines carried 7.3 
percent more passengers and cargo in 2009 than we did in 2000, 
but we reduced fuel burn and emissions by 14 percent over that 
same period.
    These successes directly reflect our success in leveraging 
every strategy and technology we can to save fuel. ATA's 
members have invested billions in advanced airframes and 
engines; in updating existing equipment with fuel-saving 
enhancements like winglets, better fan blades, and advanced 
avionics. As a result of these and many other initiatives, U.S. 
airlines account for only 2 percent of the Nation's greenhouse 
gas emissions inventory.
    We're also advancing with other industry partners, a global 
framework for further fuel efficiency and greenhouse gas 
improvements under the International Civil Aviation 
Organization, or ICAO. While fuel efficiency enhancements are 
critical to both our business bottom line and our environmental 
bottom line, so, too, are commercially available and 
sustainable alternative aviation fuels that can help put 
pressure on petroleum-based fuel.
    As a co-founding and leading member of CAAFI and other 
initiatives like Farm to Fly, we're helping lead the way to 
deployment of alternative fuels. ATA has helped lead the 
successful effort for specifications certifying two new 
alternative jet fuels--Fischer-Tropsch and hydroprocessed 
esters and fatty acids, or HEFA fuels, which can now be used in 
blends of up to 50 percent with traditional jet fuels, allowing 
producers to convert a variety of feedstocks into jet fuel. 
There are other conversion technologies that are underway that 
you've heard about today, such as alcohol-to-jet.
    Our vigorous pursuit of alternatives has sent an 
unmistakable signal to potential fuel producers and investors--
U.S. airlines are committed to making alternative jet fuels 
viable, and will do their part to overcome the obstacles that 
may stand in the way. Through pre-purchase agreements, ATA 
members and airlines have agreed with alternative jet fuel 
producers to support a number of specific projects, including 
the production of jet fuel derived from camelina oils or 
comparable feedstock in the Pacific Northwest, and from 
agricultural waste and other biomass in California. Such 
agreements are enabling new business development and jobs 
across the country.
    Despite the significant progress and momentum, we still 
have challenges. Much needs to be done to bring alternative 
fuels to commercial viability, and the Government has a central 
role to play. But here I want to focus on five specific 
recommendations.
    First, commercial aviation should be identified as a top 
priority for alternative transportation fuels. This is because, 
while other modes of transportation have other options 
available, aviation is going to be dependent on liquid, high-
energy density fuels for the foreseeable future. At the same 
time, however, high demand, airport operations in each region 
of the United States offer a unique opportunity for successful 
deployment of such alternatives.
    Second, existing programs that have been effective in 
supporting development of alternative aviation fuels must be 
maintained and, if possible, expanded. Now is the time that we 
have to move to scalable production and distribution of cost-
effective alternative aviation fuels.
    Recognizing the need for Government support, Congress has 
enacted critical programs, such as the biofuel production tax 
credit, the Biorefinery Assistance Program, and the Biomass 
Crop Assistance Program. We could lose everything we've 
achieved if these programs are not maintained.
    Third, specific financial support should be provided for 
promising alternative jet fuel projects to get out, to get off 
the ground. Even a limited Government commitment would jump-
start this industry and build the necessary bridge to a future 
industry that is entirely funded by private capital. To get 
there, coordinated government support is needed to establish a 
proof of concept in the near term.
    Fourth, we believe that Congress should encourage near-term 
environmental benefits. Government policy should be technology 
and feedstock-neutral. Policy should encourage development of 
fuels that provide near-term emission benefits, even if GHG 
reductions are more modest than may be expected in the future 
development of the biofuels industry. In short, the perfect 
must not be the enemy of the good.
    Fifth, and finally, Congress must ensure that the agencies 
charged with leading on alternative aviation fuels have the 
tools to do so. This includes further steps to encourage and 
empower interagency coordination. With respect, with specific 
respect to the U.S. military, the DoD should be authorized to 
enter into long-term contracts for alternative fuels and 
renewable energy.
    In sum, ATA and its members are taking action on all fronts 
to secure and shepherd our energy supply to good use as we 
power the economy and take the U.S. to global markets. We urge 
Congress to continue to work with us on this issue that's so 
critical for our Nation.
    [The prepared statement of Ms. Pinkerton follows:]

   Prepared Statement of Sharon Pinkerton, Senior Vice President of 
    Legislative and Regulatory Policy, Air Transport Association of 
                          America, Inc. (ATA)

Introduction
    As jet-fuel touches virtually every aspect of the commercial 
aviation business, policies affecting jet-fuel are a core concern for 
the U.S. airline industry. Recognizing that commercial aviation is an 
essential driver of the U.S. economy, those policies also should be a 
core concern for our Nation's policymakers. The Air Transport 
Association of America (ATA) applauds the Subcommittee for holding this 
hearing today.
    The steady rise of jet-fuel prices in the last decade and 
unprecedented price volatility in more recent years have had a 
tremendous negative impact, not only on the U.S. airlines and their 
employees, but also on the customers and communities they serve 
throughout the Nation. Congressional action to enhance the level and 
reliability of fuel supplies and the integrity of aviation fuel markets 
will help meet those challenges.
    Alternative-fuels hold the promise of new, homegrown sources of 
transportation energy. For the nation, a vibrant alternative-fuels 
industry would mean more jobs, greater national security and cleaner 
air. For our industry, a reliable new supply of alternative jet-fuels 
would help moderate the level and volatility of fuel prices and offer 
the prospect of further reducing our environmental impact. Our armed 
forces, with whom ATA is strategically allied in the development and 
deployment of alternative aviation fuels, would derive similar 
benefits, further enhancing national security. Everyone wins--except 
the purveyors of foreign oil.
    ATA is working to support development and accelerated commercial 
deployment of ``drop-in'' alternatives (fuels that can be used without 
changing infrastructure) that are safe and deliver environmental, 
economic and operational benefits, such as supply reliability. We co-
founded and co-lead the Commercial Aviation Alternative-fuels 
Initiative (CAAFI), a diverse coalition of leading aviation 
stakeholders dedicated to facilitating alternative aviation fuels. We 
also are working closely with government agencies, for example, in the 
Farm to Fly initiative, to bring available tools to bear to support 
aviation biofuels. And our member airlines have executed several pre-
purchase agreements for alternative jet-fuel that is soon to be 
produced.
    We have made huge strides, but obstacles remain. Government has a 
key role to play in helping us overcome them. In terms of general 
policy matters, it is essential that the government adopt energy 
policies that increase U.S. energy security, reduce greenhouse gas 
(GHG) and other emissions, and result in more predictable and stable 
energy supply and prices. In terms of measures directly relevant to 
development of alternative-fuels, aviation should be considered a top 
priority. The aviation industry and would-be alternative jet-fuel 
suppliers are on the cusp of creating a viable alternative jet-fuel 
industry. But government support is needed in the near team to provide 
financial bridging and other tools necessary to help us get over the 
cusp. We are providing detailed recommendations for how the U.S. 
Government can--quite literally--help us get the alternative aviation 
fuels industry off the ground and ensure a future where clean, 
homegrown jet-fuel is available in significant quantities.

Context for Consideration of Policies to Advance Aviation Fuels
Airlines Are Vital to the American Economy
    Commercial aviation is a cornerstone of the economy, driving more 
than 5 percent of U.S. Gross Domestic Product (GDP). Airlines are at 
the heart of this, ultimately being responsible for nearly 11 million 
U.S. jobs and some $370 billion in personal earnings. According to the 
most recent Federal Aviation Administration (FAA) analysis, every 100 
airline jobs help support some 388 jobs outside of the airline 
industry. In 2010, airlines enplaned 720 million passengers and 18 
million tons of cargo on more than 10 million flights. In the same 
year, U.S. exports by air topped $392 billion and accounted for 31 
percent of exports by value.
    Commercial aviation also is a key driver of innovation and 
efficiency. As stated by FAA, ``the air transport network contributes 
added efficiency, technological advancement and versatility that 
enhance the overall quality of life for U.S. residents and the world as 
a whole.'' \1\ This not only enhances economic productivity but also 
enables significant environmental benefits; for example, allowing the 
production of more goods with fewer warehouses and factories. In turn, 
this means fewer GHG emissions associated with building and maintaining 
infrastructure.
---------------------------------------------------------------------------
    \1\ FAA, The Impact of Civil Aviation on the U.S. Economy (December 
2009) at pp. 6-7.
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Fuel Touches Virtually Every Aspect of Commercial Aviation
    No matter what issue or challenge we face, airlines never lose 
sight of their core mission: safety. Our fuels must meet rigorous 
specifications that ensure safe operation, whether in the icy cold at 
30,000 feet or while filling tanks on the ground at airports crowded 
with activity.
    From a purely business perspective, fuel also plays a critical 
role. Every penny per gallon costs the industry some $175 million 
annually, depending on levels of flight activity. The average price of 
jet-fuel paid by U.S. airlines rose from an average of $0.82 per gallon 
in 2000 to $2.24 per gallon in 2010. The impact of that dramatic 
increase is reflected in the fact that although U.S. airlines consumed 
3.1 billion fewer gallons in 2010 than they did in 2000, they 
nonetheless spent a staggering $22 billion more for fuel. Now, in 2011, 
the U.S. Energy Information Administration (EIA) is projecting Gulf 
Coast jet-fuel prices to average $3.06 per gallon (or $128.52 per 
barrel) for all of 2011, leading ATA to project industry fuel 
expenditures of $53 billion this year. See Figure 1.



    Price level, however, is not the only concern. Especially in recent 
years, supply disruptions, demand shocks, petroleum futures speculation 
and other factors have culminated in unprecedented jet-fuel price 
volatility. See Figure 2. A look at recent Gulf Coast prices 
illustrates the point: From January 2008 through June 2011, monthly 
average jet-fuel prices ranged from a high of $3.89 per gallon (in July 
2008) to a low of $1.26 per gallon (in February 2009)--a span of $2.63 
per gallon or 209 percent over just 7 months. On an annualized basis, 
this difference translates to $46 billion in airline-industry fuel 
expenditures, rendering business planning extraordinarily difficult, 
especially for such a capital-intensive operation. And EIA reported an 
average price of $3.14 for the week ending July 15, 2011, the most 
recent period for which data is available. Among other consequences, 
the general trend of rapidly rising prices coupled with large, 
unpredictable price swings has made it increasingly challenging to 
maintain adequate profitability on a wide number of the routes served 
by U.S. airlines, resulting in significant scale-backs in seating 
capacity for many communities and associated job cuts. In the first 
quarter of 2011, at 33 percent of operating expenses, fuel constituted 
the industry's top cost; it is estimated to have risen further in the 
second quarter, although several airlines have yet to report results 
for that period.



    Fuel also is central to managing our environmental impact. As 
detailed below, airlines have a superb environmental record, 
particularly in reducing carbon dioxide (CO2) emissions. 
This performance is closely linked to the financial incentive airlines 
have to minimize fuel consumption: Lower fuel consumption has the dual 
benefit of lower costs and lower emissions. The public has benefited 
from the airlines' relentless efforts to reduce costs and emissions in 
the deregulated environment, as data compiled by the Department of 
Transportation show that the average round-trip domestic fare, adjusted 
for U.S. inflation, was 43 percent lower in 1979 than in 2010 (from 
$559 to $316 in 2010 dollars).\2\ Simply put--airlines deliver 
tremendous economic and environmental bang for the customer's buck.
---------------------------------------------------------------------------
    \2\ ATA analysis of data compiled by the U.S. Department of 
Transportation in the Origin-Destination Survey, more commonly known as 
Data Bank 1A.
---------------------------------------------------------------------------
Commercial Aviation Has a Superb Environmental Record
    Our environmental record is particularly strong with respect to the 
impact most closely related to combustion of jet-fuel: emissions. For 
example, the latest EPA GHG inventory shows that commercial aviation's 
domestic GHG emissions declined 18 percent from 1990 to 2009, even 
though we transport far more cargo and passengers today. Bureau of 
Transportation Statistics data show that on a systemwide basis, U.S. 
passenger and cargo airlines carried 14 percent more passengers and 
cargo in 2009 than in 2000 while reducing fuel burn and emissions by 
7.3 percent. Similarly, fuel efficiency (measured by revenue ton miles 
per gallon) has more than doubled since 1978; stated differently, for 
every mile flown, today we carry more than twice as many passengers and 
cargo per gallon than we did in 1978. And EPA GHG inventory shows that 
commercial aviation's share of GHG emissions in the United States is 
only 2 percent of the Nation's GHG emissions today.
    The U.S. airlines have accomplished this tremendous record by 
investing billions in new equipment, infrastructure and technology to 
maximize fuel efficiency. This includes purchasing advanced airframes 
and engines and updating existing equipment with fuel-saving 
enhancements like winglets, better fanblades and advanced avionics. We 
also seek to maximize efficiency of operations in the air by taking 
advantage of new procedures like continuous descent approach (CDA), 
required navigation performance procedures (RNAV) and reduced vertical 
separation minima (RVSM). Other measures maximize fuel efficiency while 
on the ground, like taxiing on one engine where operationally feasible 
and utilizing electric gate power instead of our planes' auxiliary 
power units (APUs) while parked at the gate. Measures as banal as 
reducing aircraft weight by eliminating unneeded magazines and 
replacing catering carts with new light-weight carts or washing fan 
blades more often also can result in small but cumulatively significant 
fuels savings.
    It bears emphasis that implementation of some of these measures are 
not fully within the control of airlines, but require government 
action. For example, fuel-saving procedures must be approved by FAA, 
and broad access to these procedures will depend on full and cost-
effective implementation of NextGen, which encompasses the suite of 
technologies and initiatives required to transform today's antiquated 
ground-based air traffic navigation and surveillance system into a 
state-of-the-art satellite-based system. Utilizing this system, FAA and 
the airlines will be able to route flights more efficiently, precisely 
and directly, leading to lower fuel consumption and emissions while 
increasing safety by enhancing situational awareness for pilots and 
controllers.
    And the industry is not stopping with these measures. ATA and its 
members are part of a worldwide aviation coalition that has put a 
strong proposal on the table for further addressing aviation 
CO2 under the International Civil Aviation Organization 
(ICAO), the United Nations body charged by treaty with setting 
standards and recommended practices for international aviation. Our 
focus is on getting further fuel efficiency and emissions savings 
through new aircraft technology, sustainable alternative aviation fuels 
and improvements to air traffic management and infrastructure.
    Under our proposal, all airline emissions would be subject to 
collective emissions targets requiring industry and governments to do 
their part. The emissions targets include collective industry 
commitments to:

   Continue the industry's fuel (and, hence, CO2) 
        efficiency improvements, resulting in an average annual 
        CO2 efficiency improvement of 1.5 percent per year 
        on a revenue ton mile (RTM) basis through 2020;

   Cap industrywide CO2 emissions from 2020 (carbon-
        neutral growth) subject to critical aviation infrastructure and 
        technology advances achieved by the industry and government; 
        and

   Contribute to an industrywide goal of reducing 
        CO2 emissions by 50 percent by 2050, relative to 
        2005 levels.

    Significantly, at its 2010 Assembly, ICAO adopted much of the 
industry's framework. While more work is needed to flesh out this 
framework, the global aviation industry is moving forward with its 
emissions-savings initiatives.

Airlines Are Uniquely Positioned to Benefit from and to Facilitate the 
        Emergence of Alternative Fuels
    While other sectors and modes of transportation can be powered via 
a variety of energy sources, including electricity, nuclear, solar, 
hydrogen and wind, to name a few, airlines will be flying aircraft and 
engines requiring liquid, high energy-density fuels for the foreseeable 
future. There simply is no realistic prospect for the next several 
decades that commercial aircraft will be powered by batteries, solar 
cells, fuel cells, hydrogen or other alternatives. This is primarily a 
function of the reality that the useful life of aircraft and aircraft 
engines is very long, and that the pipeline for development of new 
aeronautics technologies is even longer. As a result, airlines will be 
flying aircraft designed to operate on fuels that meet the performance 
characteristics of traditional petroleum-derived jet-fuel for decades 
to come. Consequently, while other modes and sectors may benefit from 
the emergence of other energy and fuel alternatives, commercial 
aviation can benefit only if it has access to significant supplies of 
liquid alternative-fuels that meet the rigorous safety and performance 
criteria required of current petroleum-based fuels.
    Commercial aviation, however, also offers unique benefits to 
prospective fuels producers. First, fuel demand is highly concentrated. 
The 40 largest airports account for an estimated 90 percent of all jet-
fuel U.S. demand while the top 10 airports account for about half of 
demand. The country's largest airports--Los Angeles (LAX), New York-
Kennedy (JFK), Chicago O'Hare (ORD) and Atlanta (ATL)--each demand more 
than one billion gallons of jet-fuel annually. Demand from Air Force 
bases and Navy installations is also highly concentrated. Thus, 
airports essentially compose a network of markets that alone could 
support all the output from alternative-fuels production facilities. In 
addition, with high-demand nodes across the country, the aviation 
industry can support production from the full gamut of potential 
producers, who will rely on different feedstocks, depending on where 
they intend to operate.

Alternative Jet-fuels Offer a Rare Opportunity
    Development of alternative jet-fuels offers a rare opportunity to 
meet disparate but beneficial objectives. A vibrant alternative jet-
fuels industry would create American jobs and spur economic development 
in areas most hit by the recession. Rural America would benefit greatly 
from access to new markets for new agricultural biomass crops while 
industrial areas would be revitalized through construction of new or 
revitalization of mothballed refinery operations. At the same time, a 
stable, domestic supply of alternative jet-fuel would improve our 
Nation's security by reducing our dependence on foreign oil and improve 
national economic security by improving our trade balance. In turn, 
stable, homegrown production of alternative jet-fuels will introduce 
competition to petroleum-based jet-fuels and a moderating force on 
price levels and volatility. This would be a very welcome change for 
airlines that have struggled to manage their businesses as prices 
driving their number-one cost center have steadily risen and fluctuated 
sharply in recent years. Undoubtedly, the conditions necessary to 
foster a financially healthy, vibrant and growing commercial aviation 
sector--so vital to the overall health and vitality of U.S. commerce--
would improve, further benefiting the broader economy as airline-driven 
growth is known to generate numerous jobs beyond the aviation sector.
    Sustainable alternative-fuels also will allow our industry to grow 
while reducing its emissions of GHGs and emissions with local air-
quality impacts. Such fuels also could be used in our ground support 
equipment (GSE), removing costs associated with management of separate 
fuels and further reducing emissions.
    The U.S. military, which has been a very active ATA partner in the 
pursuit of jet-fuel alternatives, shares many of these same interests. 
To formalize this working relationship, on March 19, 2010, ATA and the 
Defense Logistics Agency's Defense Energy Support Center (now known as 
DLA Energy) signed a ``Strategic Alliance for Alternative Aviation 
Fuels.'' \3\ Like airlines, jet-fuel represents a significant share of 
costs to the U.S. military, particularly the U.S. Air Force. Rising and 
volatile prices wreak havoc on military budgets and present significant 
challenges for military planners, especially as combat logistics become 
increasingly complex and supply lines extend over often mountainous or 
desert terrain. At the same time, GHG emissions from military jet 
operations represent a large portion of the Federal Government's carbon 
footprint. Access to stable, domestically produced supplies of low-
carbon alternative-fuels would allow the armed services to address all 
of these concerns in the same manner it would enable commercial 
aviation to address the parallel concerns as discussed above.
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    \3\ http://airlines.org/News/Releases/Pages/news_3-19-10.aspx.
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    The opportunities presented by the prospect of viable alternative 
jet-fuel are reflected in the four specific requirements we set out as 
conditions for use: \4\
---------------------------------------------------------------------------
    \4\ http://airlines.org/Energy/AlternativeFuels/Pages/
CommercialAviationAlternativeFuelsTheATACommitment.aspx.

        1. Safety/Fuel Quality: To ensure safety, commercial jet-fuel 
        must meet precise technical and operational specifications, and 
        jet engines are designed to work with jet-fuel having these 
        specific characteristics. The fuel must meet regulatory and 
        standards-making organization specifications including, but not 
        limited to, ASTM D1655 and others referenced and required by 
---------------------------------------------------------------------------
        the FAA.

        2. Environmental Benefit: We seek alternative-fuels that will 
        meet accepted criteria to be more environmentally friendly than 
        traditional jet-fuel, in particular resulting in a reduced 
        emissions profile on a life-cycle basis, without compromising 
        critical uses of relevant feedstocks.

        3. Supply Reliability: Alternative jet-fuels must be ``drop 
        in'' fuels, meaning they must satisfy technical and functional 
        criteria that make them fungible with traditional, petroleum-
        based jet-fuel and allow them to be commingled within the 
        existing national fuel transport, storage and logistics 
        infrastructure, as well as within individual airport and 
        airline systems.

        4. Economic Feasibility: Alternative jet-fuels must be 
        economically feasible from the perspectives of both suppliers 
        and purchasers.

Airlines Have Been Working Diligently to Support Development of 
        Alternative Fuels
    ATA and its member airlines are committed to finding safe, 
environmentally preferred, operationally reliable and economically 
feasible alternatives to conventional petroleum-based jet fuel. This is 
no easy task. Realizing the deployment of significant quantities of 
viable alternative jet fuel will require overcoming significant 
technical and financial hurdles. To meet this challenge, we are 
proactively addressing the commercial, environmental and safety issues 
associated with developing and commercializing promising technologies 
that can meet our needs.
    Five years ago, together with the Federal Aviation Administration 
(FAA), Airports Council International--North America (ACI-NA) and the 
Aerospace Industries Association (AIA), we founded CAAFI, a coalition 
that brings together leaders in the aviation community (including 
airlines, airframe and engine manufacturers and airports), alternative-
fuels providers, universities and government stakeholders to exchange 
information and work to make alternative aviation fuels a reality.
    ATA also has directly engaged government stakeholders. Specific 
engagement with the U.S. military includes the aforementioned alliance 
with DLA Energy. On March 30, 2011, in a bellwether speech on America's 
energy security, President Obama recognized the role of precisely this 
type of partnership by issuing the following directive:

        . . . our Air Force used an advanced biofuel blend to fly an F-
        22 Raptor faster than the speed of sound. In fact, the Air 
        Force is aiming to get half of its domestic jet-fuel from 
        alternative sources by 2016. And I'm directing the Navy and the 
        Departments of Energy and Agriculture to work with the private 
        sector to create advanced biofuels that can power not just 
        fighter jets, but trucks and commercial airliners.\5\
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    \5\ http://www.whitehouse.gov/the-press-office/2011/03/30/remarks-
president-americas-energy-security.

    ATA also has joined Boeing and USDA in putting together and leading 
the Farm to Fly \6\ initiative aimed at advancing a comprehensive 
sustainable aviation biofuels rural development plan. To achieve this, 
we have engaged the U.S. agencies with authority to spur development of 
aviation biofuels (including USDA, DOE, DOT, FAA and DOD) and academia 
to ensure that Federal programs are aligned and modified to recognize 
and enhance the eligibility of feedstocks, conversion technologies and 
supply chains most conducive to the production of aviation biofuel.
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    \6\ http://airlines.org/News/Releases/Pages/News_07-21-10.aspx.
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    The Sustainable Aviation Fuels Northwest (SAFN) initiative,\7\ led 
in part by ATA member Alaska Airlines, together with the Port of 
Seattle, Port of Portland, Spokane International Airport, Boeing and 
Washington State University, is another example of a coalition effort 
in which we have been engaged to enable sustainable alternative 
aviation fuels. More than 40 organizations representing a broad range 
of stakeholders participated, including aviation, biofuels producers, 
environmental NGO's, agriculture, forestry, Federal and state 
government agencies, and academic institutions. This effort culminated 
in a report that detailed opportunities for and measures needed to 
foster the development and deployment of alternative jet-fuels derived 
from sustainable biomass grown in the northwestern United States.
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    \7\ http://www.safnw.com/.
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    An extremely important step in alternative aviation fuel 
development is fuel certification. Accordingly, ATA and other 
stakeholders such as FAA have made great strides in this area. Before 
the fuel can be approved for commercial use, it must meet rigorous 
safety and performance standards set out in the applicable 
specification, which is controlled by ASTM International, an 
organization devoted to the development and management of standards for 
a wide range of industrial products and processes. This specification, 
in turn, is included in FAA product approvals and required air-carrier 
manuals. The process for securing new specifications for alternative 
fuels is exacting. Supporting test data is referred to ASTM 
Subcommittee D02J to review and the sponsors of the new fuel write a 
new specification for that fuel. The specification and required 
research reports are then reviewed and voted upon by the technical 
experts. The specification allowing use of Fischer-Tropsch (FT) in 
blends of up to 50 percent with traditional jet fuels was approved in 
September 2009 \8\ and the specification for hydroprocessed esters and 
fatty acids (HEFA) jet fuels (again in up to 50/50 blends) was formally 
approved just a few weeks ago, on July 1.\9\ FT is a chemical process 
that can convert a variety of feedstocks (including fossil-fuel sources 
like coal and natural gas, as well as biomass) in liquid fuels. HEFA 
fuels can come from many regionally grown and processed sustainable 
feedstocks. Both types of fuels can offer significant GHG reductions 
relative to conventional jet fuel. The successful conclusion of the 
specification approval process for these two fuels has paved the way 
for additional fuels to be examined and approved in the future.
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    \8\ http://www.astmnewsroom.org/default.aspx?pageid=1895.
    \9\ http://www.astmnewsroom.org/default.aspx?pageid=2524.
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    ATA also is working to confirm agreed-upon methodologies for 
determining the emissions profile of alternative fuels. This can be 
extremely complicated, requiring close analysis of the emissions 
associated with each link in the ``life cycle'' of a fuel, including 
production of the feedstock, transportation of the feedstock, 
processing and refining, and transportation of the final product. 
Significant work has been done in this area, including by agencies 
implementing alternative-fuels programs like EPA (which evaluates fuels 
in implementation of the Renewable Fuels Standard established under the 
Energy Policy Act of 2005 and expanded under the Energy Independence 
and Security Act (EISA) of 2007) and the California Air Resources Board 
(CARB, which evaluates fuels under its Low Carbon Fuels Standard--
LCFS). While these programs establish basic methods and criteria for 
life cycle analysis, ATA is working through CAAFI to confirm jet-fuel-
specific applications. Other, broader criteria for assessing the 
``sustainability'' of fuels also have been considered by various 
entities, which address environmental and other impacts beyond 
emissions. CAAFI also is working to identify issues relevant to 
alternative jet fuels and reach acceptable resolutions.
    The airlines' initiative in tackling these issues with our partners 
has sent a clear unmistakable signal to potential fuels producers and 
investors: airlines are committed to making alternative jet-fuels a 
reality and will do our part to overcome the obstacles that may stand 
in the way. Scores of companies eager to meet our demand have emerged 
and are themselves helping to resolve these issues, again largely 
through participation in CAAFI. The fruits of this labor are apparent 
in that ATA member airlines have agreed with alternative-fuels 
producers to support a number of specific projects, including:

        1. On December 15, 2009, 15 airlines from the United States, 
        Canada, Germany and Mexico signed memoranda of understanding 
        (MOU) with:

     AltAir Fuels LLC (``AltAir''), involving camelina and 
            potentially other crops in the western United States for 
            the production of 75 million gallons per year, over a 10-
            year period, of jet-fuel and diesel fuel derived from 
            camelina oils or comparable feedstock, refined in the State 
            of Washington.\10\
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    \10\ http://airlines.org/News/Releases/Pages/news_12-15-09.aspx.

     Rentech, Inc. (``Rentech'') contemplating the production 
            of approximately 250 million gallons per year of synthetic 
            jet fuel at a facility in Adams County, Miss. (``Natchez 
            Project''). The fuel will be derived from coal or petroleum 
            coke, with the resultant carbon dioxide sequestered. This 
            drop-in synthetic jet-fuel will have lower regulated 
            emissions and a lower carbon footprint than traditional jet 
            fuel. Rentech intends to potentially further reduce the 
            carbon footprint by integrating biomass as a feedstock.\11\
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    \11\ http://airlines.org/News/Releases/Pages/news_12-15-09.aspx.

        2. On August 18, 2009, eight U.S. airlines--Alaska Airlines, 
        American Airlines, Continental Airlines, Delta Air Lines, 
        Southwest Airlines, United Airlines, UPS Airlines and U.S. 
        Airways--signed an agreement with Rentech and Aircraft Service 
        International Group (ASIG) to purchase up to 1.5 million 
        gallons per year of renewable synthetic diesel for use in 
        ground service equipment at LAX beginning in late 2012 or 2013, 
        with urban woody green waste from the Los Angeles area.\12\
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    \12\ http://airlines.org/News/Releases/Pages/news_8-18-09.aspx.

        3. On June 20, 2011, a core group of airlines signed letters of 
        intent with Solena Fuels, LLC (``Solena'') for a future supply 
        of jet-fuel derived exclusively from biomass to be produced in 
        northern California. Solena's ``GreenSky California'' biomass-
        to-liquids (BTL) facility in Northern California (Santa Clara 
        County) will utilize post-recycled urban and agricultural 
        wastes to produce up to 16 million gallons of neat jet fuel (as 
        well as 14 million gallon equivalents of other energy products) 
        per year by 2015 to support airline operations at Oakland 
        (OAK), San Francisco (SFO) and/or San Jose (SJC). The project 
        will divert approximately 550,000 metric tons of waste that 
        otherwise would go to a landfill while producing jet-fuel with 
        lower emissions of greenhouse gases and local pollutants than 
        petroleum-based fuels.\13\
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    \13\ http://airlines.org/News/Releases/Pages/news_6-20_11.aspx.
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    And more such projects are in the works.
Government Has an Essential Role to Play in the Success of Alternative 
        Fuels
    Commercial aviation is doing all that it can to minimize fuel burn, 
reduce emissions, enhance stability of supply and foster the production 
of alternatives. But we cannot do it alone. We need sustained 
leadership and support from the U.S. Congress and administration. We 
applaud the leadership already provided by the Department of 
Transportation-commissioned Future of Aviation Advisory Committee 
(FAAC), which under the direction of Secretary of Transportation Ray 
LaHood, reached consensus on several recommendations regarding what 
government needs to do to help ensure the viability and global 
competitiveness of the U.S. aviation industry,\14\ including:
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    \14\ http://www.dot.gov/faac/docs/faac-final-report-for-web.pdf.

   Accelerate NextGen implementation by providing government 
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        financial incentives to airline operators for equipage;

   Expedite the most cost-beneficial elements of NextGen, 
        including ADS-B and performance-based procedures;

   Ensure that the Federal aviation tax burden does not 
        undermine the viability and competitiveness of the airline 
        industry;

   Mitigate jet-fuel price volatility by supporting Federal 
        regulatory efforts to mitigate the impact of speculative 
        activity on the price of oil; and

   Reduce the impact of aviation on the environment through the 
        use of sustainable fuels and improved aircraft technology.

    Many of these points are echoed in our recommendations for action, 
which fall into two categories: (1) general policies affecting energy 
and fuel and (2) measures directly relevant to development of 
alternative-fuels.

Recommendations Regarding General Policies Affecting Energy and Fuel
    A. Government must adopt energy policies that increase U.S. energy 
security, reduce GHG and other emissions, and result in more 
predictable and stable energy supply and prices. The enactment of the 
Dodd-Frank Wall Street Reform Act was an important step toward 
eliminating speculation-driven price volatility in oil markets. But it 
is equally important now that the Commodity Futures Trading 
Commission's implementing regulations to curb speculation that distorts 
oil markets are consistent and meet the objectives of the law.
    B. Congress must support programs that enable ever-increasing fuel 
efficiency in the aviation sector. This includes:

        a. Funding and encouraging a business-case approach to 
        implementation of NextGen. Cost-effective implementation of 
        NextGen, in addition to many other benefits (including 
        reduction of delays even as capacity of the system is 
        increased) will save fuel and Congress needs to fully support 
        it.

        b. Restoring funding for basic aeronautics research and 
        development at the National Aeronautics and Space 
        Administration (NASA) and FAA. With the airlines' support, 
        commercial aircraft and engine manufacturers have succeeded in 
        consistently improving the safety, reliability and performance 
        of commercial aircraft. Improvements in fuel efficiency have 
        been accompanied by improvements in noise and emissions. 
        Unfortunately, in the near future, no major breakthrough in 
        either aircraft or engine design is expected because of the 
        enormous effort and cost of engineering research and 
        development. Over the past several years, the Federal 
        Government has significantly reduced funding for FAA and NASA 
        aeronautics research and development programs, which are 
        critical in moving airframe and engine technologies forward. 
        Countering this trend requires the Federal Government to 
        restore and increase funding for aeronautics research.

        c. Supporting a global sectoral approach to regulation of 
        aviation GHG emissions to be overseen by ICAO. As discussed 
        above, U.S. airlines have joined the global aviation industry 
        in adopting an ambitious set of near-, mid- and long-term 
        targets to further mitigate GHG emissions from our industry 
        under a global sectoral approach. Congress should endorse this 
        approach.

Recommendations for Measures to Support Development and Deployment of 
        Alternative Fuels
    A. Commercial aviation should be identified as a top priority for 
alternative transportation fuels. As previously discussed, while other 
sectors and modes of transportation have other options available, 
aviation will be dependent on liquid, high energy-density fuels for the 
foreseeable future. At the same time, however, with concentrated demand 
nodes in each region of the United States and an industrywide 
commitment to ensure that alternative aviation fuels are successful, 
aviation presents a unique opportunity for successful deployment of 
such alternatives. We ask the Subcommittee to support policies and 
initiatives that prioritize alternative-fuels for aviation.
    B. Government law and policy should not discriminate among 
alternative-fuel technologies. Commercial aviation will use any 
alternative fuel that meets the four criteria laid out above concerning 
safety, environmental benefit, supply reliability and economic 
feasibility. The appropriateness of using certain feedstocks or 
processes must not be prejudged or disqualified for use based on other 
agendas.
    C. Congress should encourage near-term environmental benefits. 
Policy should encourage development of fuels that provide near-term 
emissions benefits, even if GHG reductions are more modest than may be 
expected in the future development of the biofuels industry in the 
United States. Policies that require fuels to meet elevated emission-
reduction targets as a precondition to receiving government support 
risk erecting unnecessary barriers to achieving greater reductions in 
the future. In short, the perfect must not be the enemy of the good--
especially where ``the good'' has the potential to mature into ``the 
great.''
    D. Government policy must ensure coordination among various 
government agencies with authority to provide support to alternative-
fuels development, including the DOT/FAA, USDA, DOE and DOD. In our 
experience, these agencies are doing what they can within their 
existing authorities and mandates to coordinate activities and leverage 
mutually reinforcing programs. Congress should take further action to 
encourage and empower this type of interagency coordination and 
commingling/aggregation of fiscal and human resources.
    E. To support our military and the development of alternative-
fuels, we also ask Congress to authorize DOD to enter long-term (up to 
20-year) contracts for alternative-fuels and renewable energy. To 
secure investment in capital-intensive alternative-fuel production 
facilities, providers must be able to demonstrate revenue streams 
extending out at least 10 years but ideally more on the order of 20 
years. Without long-term contracting authority, the military simply 
will not be able to participate meaningfully in efforts to spur 
construction of alternative-fuel production capacity. Congress needs to 
remedy this.
    F. It is critical that existing programs that have been effective 
in supporting development and deployment of alternative aviation fuels 
be maintained and, if possible, expanded. First, it is vital that 
cellulosic biofuel producer credit be extended. Second, programs 
direction Federal agencies to help America transition to alternative-
fuels need to be funded. These include the Biomass Research and 
Development Initiative, Biorefinery Assistance Program, Bioenergy 
Program for Advanced Biofuels, Marketing Assistance Loans and Loan 
Deficiency Payment Programs, Biomass Crop Assistance Program, Crop 
Insurance Coverage for Energy Crops, and National Institute of Food and 
Agriculture.
    G. Many projects with the potential to produce alternative jet-
fuels already have been developed and tested but need additional 
funding for near-term development. Economic conditions have made credit 
and investment difficult to come by--it is even more difficult for 
emerging technologies. In this environment, government support is 
essential to assist the alternative-jet-fuels industry through this 
early stage in its development. Marshaling existing funding and other 
mechanisms across agencies to support one or more projects with the aim 
of proving production of significant quantities of alternative-fuels is 
possible will go a long way toward demonstrating commercial viability 
to reluctant private capital. A limited government commitment would 
``jump start'' this industry and build the necessary bridge to a future 
in which the industry is entirely funded by private capital. To be 
clear, ATA is not calling for perpetual government funding. For an 
industry that is self-sustaining to emerge, however, requires ``proof 
of concept'' in the near term and this is where government support is 
necessary and should be focused.
    A final point deserves emphasis: The last thing we need is more 
taxes on commercial aviation. Also particularly relevant here is the 
European Union's Emissions Trading Scheme (EU ETS), which imposes a 
steep tax on jet-fuel consumed by U.S. airlines for flights to or from 
Europe, even when they are in U.S. airspace, on the ground in the 
United States or over the high seas. Such taxes are counterproductive--
siphoning slim resources from airlines and compromising our ability to 
make the types of investments in technology that have enabled us to 
transport more and more people and goods, even as we reduce our 
environmental impacts. Commercial air transportation already is one of 
the most heavily taxed businesses in the country, facing rates 
comparable to those of alcohol and tobacco, which are designed to 
discourage their consumption. Discouraging air transportation, which 
drives the global economy with still more taxes is the last thing we 
should be doing, particularly in these economic times. We urge the 
Subcommittee to join the administration's opposition of the application 
of the EU ETS to U.S. airlines, and to oppose new or increased taxes 
here at home.

Conclusion
    We will continue to do everything we can to minimize fuel burn, 
reduce emissions, enhance stability of supply and foster the production 
of alternatives. ATA looks forward to working with the Subcommittee to 
help spur government actions and leadership necessary to realize these 
objectives.

    Senator Cantwell. Thank you very much, Ms. Pinkerton. And 
we appreciate your giving us those specific recommendations.
    I want to start with questioning.
    Mr. Yonkers, you talked about 2016 in, your goal to achieve 
a 50 percent domestic aviation fuel requirement, and then you 
alluded to, maybe you could do it even sooner, and it may be 
rosier than even that projection. Can you talk about what are 
the milestones to getting to 2016? What you think those 
challenges are, how you might see us proceeding to achieve that 
goal.
    Mr. Yonkers. Well, Senator Thune talked about the initial 
Fischer-Tropsch certification, and we're 99 percent of the way 
there. There are two platforms that we're, you know, still 
looking to complete that final touch on the Fischer-Tropsch 
alternative synthetic fuel approach, and that's Global Hawk and 
Reaper, the remotely-piloted aircraft.
    When we turn over and look at the HRJ, we're going to be 
completed with that certification program probably by the end 
of 2013. Then as we look down the road at the next pathway, the 
alcohol-to-jet, probably the 2014-2015 timeframe.
    So, essentially what I think we're on a glidepath to 
achieve here is a full certification for all three pathways by 
the year 2014 and 2015. As we go down this road, we learn, we 
get better at what we do. We have a pathfinder approach, so 
that we're not going and re-certifying, or certifying every 
aircraft platform; that we can by extension and extrapolation 
look at the family of particular biofuels or synthetic fuels 
and arrive at the same conclusion, because if they fly on one 
aircraft without problems they can fly on another.
    Senator Cantwell. And what is the mix? You know, obviously, 
we hear about synthetic fuels. How green are these synthetic 
fuels that you're talking about?
    Mr. Yonkers. Well, there's certainly a drawback with the 
synthetic fuels in particular, whether it's coal-derived or 
whether it comes from natural gas. And in some cases, the coal, 
I think our results are showing that from a greenhouse gas 
point of view, it's probably twice of what conventional fuel 
is. The biofuels, as you've heard from some of the members on 
the panel today, are upwards to 80 percent better. Our results 
show that 60 to 70 percent. So, pretty close parity with what 
we're seeing out in the private sector.
    Senator Cantwell. Ms. Pinkerton, could you talk about the 
EU and how important it is that we move forward on a green 
source of synthetic fuel, or, how is the airline industry 
looking at this from a commercial side?
    Ms. Pinkerton. Well, let me address your question about the 
EU. As I think most of you know, the EU is proposing a 
unilateral cap-and-trade system on U.S. airlines, starting in 
U.S. airspace. They are proposing to move forward with this. 
They've already started collecting data. There was a hearing 
yesterday on the House side in which the Administration, 
thankfully, testified in opposition to that unilateral 
approach.
    But, I have to say, alternative fuels are absolutely a 
critical element of the airlines' ability to meet their global 
commitments through ICAO. We've committed to 1.5 percent fuel 
efficiency improvements; to carbon-neutral growth starting in 
2020. And we can't get there by ourselves. We're going to need 
to implement NextGen, but even with NextGen, alternative fuels 
are clearly a critical part of our ability to meet our 
international goals.
    Senator Cantwell. What happens if the EU continues to act 
unilaterally?
    Ms. Pinkerton. Well, I think there are a variety of 
options. Legislation has been introduced in the House side. It 
was introduced last week--bipartisan legislation to essentially 
prohibit U.S. airlines from participating in the EU ETS scheme. 
But that being said, the administration has taken the lead to 
sit down with the Europeans. They did so in June of this year 
and, essentially, laid out the U.S. Government's position--and 
by the way, we don't stand alone. Latin America, the Chinese, 
essentially the rest of the world is with us in opposing the EU 
scheme.
    We're hopeful that through these diplomatic channels we're 
going to be able to convince the Europeans to stand down, to 
work with us in ICAO in achieving a global framework to address 
climate change, because climate change is a global issue.
    But it's unclear. There's potential for litigation in the 
U.N. process. That's certainly one option. But we hope it 
doesn't come to that.
    Senator Cantwell. Thank you.
    I want to go to Senator Thune, and then I'll come back to 
the panel.
    Senator Thune. Thank you, Madam Chairman.
    Mr. Yonkers, what's the average that the Air Force now pays 
for a gallon of alternative fuel?
    Mr. Yonkers. Right now, Senator, we're paying about $35 for 
the HRJ-derived fuels. That's down from $65 and $200 for when 
we started. So, the price is dropping. And, again, keeping in 
mind that we're buying batches of about 30,000 gallons or so. 
So, it's not full production by any stretch. On the Fischer-
Tropsch side it's much more reasonable--$3 to $4 is the current 
cost.
    Senator Thune. Does that price-per-gallon take into account 
the funding for research and development and testing and 
evaluation?
    Mr. Yonkers. Certainly on the supply side it does. The Air 
Force is also spending about $20 million a year for our Air 
Force Research Laboratory and others that are involved in the 
fuel certification process, and some of these other things that 
I talked about in my opening remarks.
    Senator Thune. What price range per gallon would 
alternative aviation fuel need to be at so it's affordable for 
the Air Force to use it in a majority of its fleet?
    Mr. Yonkers. Well, certainly lower is better.
    Senator Thune. Yes.
    Mr. Yonkers. You know, and that's what's promising about 
the discussion we're having today, particularly with the 
alternative fuels and the biofuels, and the alcohol-to-jet, 
which is even more promising, I think. But I think, you know, 
our position has always been, we're realistic here so that, you 
know, we're going to be willing to pay whatever the market 
price is for jet fuel.
    Senator Thune. Can you explain the importance to national 
security for commercial aviation and DOD to partner in the 
development of alternative fuels?
    Mr. Yonkers. Well, certainly, when we partner together, you 
know, our 10 percent added to their 90 percent sends a very 
strong demand signal to the producers and suppliers. Certainly, 
looking at it from the point of view of having multiple 
suppliers enhances our ability to make sure we have secure, 
reliable, sustainable sources of fuel, and that adds, 
certainly, to our ability to get our mission done.
    Senator Thune. I, in 2009, sponsored an amendment to the 
defense authorization bill that allowed for multi-year 
procurement for alternative fuels. It ended up getting stripped 
out in conference. But it basically specified that DOD would be 
able to enter into contracts for up to 10 years if the fuel was 
cost-effective and environmentally friendly.
    I guess right now with the 5-year limitation that you have 
on contracts, I'm curious in knowing what your thoughts are, 
and perhaps as well might be able to comment on this--Would it 
benefit the Air Force and industry if they were allowed to 
enter into multi-year contracts that exceed 5 years, on the 
order of 10, 15 and 20 years? And would multi-year procurement 
authority help to obtain lower energy prices, and increase 
energy resources?
    Mr. Yonkers. Well, the Defense Logistics Agency is the one 
that buys our fuel for us. But I will comment that I think it 
will. And we put a legislative initiative in I believe a year 
or so ago to do exactly what you're talking about, Senator. And 
I think anytime we can have price stability, it helps in our 
budgeting, and certainly in our planning and our programming 
for dollars that we're going to need to operate our Air Force. 
And it reduces the risk, as I think you've heard from some of 
our other panel members. And anytime we can do that, I think 
the cost of fuel is going to drop. But I will certainly defer 
to the other members.
    Senator Thune. Let me just expand on that if I might, with 
Mr. Yonkers, Mr. Glover, and Mr. Todaro. As you know, renewable 
energy and alternative fuel projects are very capital-intensive 
in terms of investment. Would that sort of expanded multi-year 
contracting authority for alternative fuels enhance developers' 
ability to secure financing, to get those types of projects 
going?
    Mr. Todaro. Well, I can certainly speak from our point of 
view. It depends on the process you use. You know, certainly, 
longer is better, as cheaper is better. The processes we use 
tend not to be quite as capital-intensive, so, while 10 years 
would certainly be welcome, you know, numbers of years longer 
than that aren't necessary for us.
    For us the issue more is a simple indexing system. So, just 
the same way military and commercial aviation today know what 
the price of their jet fuel is with high reliability based on 
the price of crude oil, so we know what the price of renewable 
jet fuel will be based on the price of our feedstocks. So, if 
we have long-term contracting authority, that's terrific. But 
even more important from our point of view is a simple index 
system. There'll be some years where we may be more expensive 
than jet, and some years where we may be less. But that non-
correlated hedge with domestically grown crops, in my opinion, 
ought to be something that we're actively pursuing.
    Senator Thune. OK. You, I think, recently were designated 
one of these BCAP sites. Secretary Vilsack just recently 
announced four additional projects. And I think you mentioned, 
in your opening statement, that you were chosen to receive BCAP 
assistance. BCAP is the Biomass Crop Assistance Program which 
was authorized in the last Farm Bill.
    I'm wondering maybe if you could talk a little bit about 
how BCAP would be used by AltAir and other companies to 
specifically develop alternative aviation fuels, how you think 
it can be used to stimulate growth in the alternative fuels 
industry, and whether or not you would have any recommendations 
as we look at the next farm bill, about how to improve that 
program.
    Mr. Todaro. Thank you. That's----
    Senator Thune. There were a lot of questions there.
    Mr. Todaro.--right. I was going to say, sort of taking the 
reverse order.
    Senator Thune. I'm trying to get through this----
    Mr. Todaro. Sure. And so, I'll answer them quickly. Yes, we 
were a recipient. It's a terrific program for companies like 
ours, because we're out in the farming community. And farmers 
are conservative people. They make their living based on the 
weather, and they take risk related to the crops that they have 
to take. And if someone comes up to them and says, ``We'd like 
you to grow this new energy crop,'' and the reality is going to 
be, they'll grow it worse the first year than the second, and 
worse the second than the third, and by the fourth or fifth 
year, they'll be experts at it, the same way they are in their 
regular crops.
    That bridge ability, to defer some of their risk, is 
critical in farmer adoption--whether it's for my program or, 
really, any others. In terms of, you know, it would certainly 
be my hope that people understood that, if you're going to 
create a job an acre, and we're going to do a hundred-million-
gallon facility, you're creating a thousand rural jobs in the 
area of the country where you should most want to create them.
    It has a multiplier positive profit-related effect to the 
Government in ways I've rarely seen in other potential programs 
under the Government. Thank you.
    Senator Thune. Thank you, Madam Chair.
    Senator Cantwell. Thank you.
    Senator Lautenberg. Under the--he was here earlier and 
returned. Very well.
    Senator Klobuchar. Of course.
    And then we'll go to Senator Klobuchar next.
    Senator Lautenberg. OK. Thank you very much. I'm sorry to 
come in for a landing like this second one, I'm----
    Senator Cantwell. We know you're waiting in the wings just 
for your moment. Senator Klobuchar, would you like to go next?
    Senator Thune. Your side of the isle is so polite.
    Senator Cantwell. Well, if one of you would like to 
proceed----
    [Laughter.]
    Senator Lautenberg. I promised Senator Klobuchar an ocean. 
She complained when she first got here that Minnesota didn't 
have one.
    Senator Klobuchar. And I was on the Oceans subcommittee, so 
that's a little bit of a problem.
    Senator Lautenberg. I'm sorry to----
    Senator Klobuchar. And he said I could come back to the 
Committee and ask for one. So, there you go.
    [Laughter.]
    Senator Lautenberg. Sorry to take the Committee's time, 
Madam Chairman.
    We're looking at things, Mr. Maurice, that, where we see 
refusal by the Republicans to pass a clean extension of the FAA 
authorization. The result--650 people, workers, in New Jersey 
have been furloughed. And their work on the NextGen system has 
been, ground to a halt.
    Now, what impact do we have with an extended shutdown to 
get on with our modernization of the air traffic control 
system? We're looking at runway safety items. And also, to 
reduce congestion. What are the effects of furlough there now?
    Dr. Maurice. Thank you, Senator, for your question.
    Certainly, as you well know, the FAA has 4,000 employees on 
furlough, and certainly, this is impacting moving forward with 
the Next Generation Air Transportation System. And certainly, 
we look forward to a resolution. And being able to move forward 
with the work is certainly very relevant to the discussions 
that we're having here today, given that the alternative fuels 
work is performed under the auspices of NextGen.
    And also, keeping in mind that NextGen will make us more 
efficient--the more efficient you are, the less fuel you need, 
so the fewer alternatives you need. So, efficiency, and 
creating an alternative fuel supply work hand-in-hand, and we 
hope to get back to work as soon as possible.
    Senator Lautenberg. Thank you.
    And I regret that I read exactly what we had, you certainly 
don't look like a Mr., and we're pleased to have you here.
    And I noted before that you come in with a wonderful 
accent, and the fact that you're here doing what you can 
suggests that we have to be more inviting in many cases to get 
the people that we need to do the job, or expand our education 
process very quickly in this country. Thank you very much.
    Now, we're, I think, fair to say, that these rushed 
arrivals are not very good for orderly process.
    Mr. Yonkers, in 2007, 11 former military high-ranking 
admirals, generals, issued a report that climate change is a 
threat with the potential to create sustained, natural and 
humanitarian disasters.
    Now, in 2008, General Anthony Zinni warned that if we don't 
global warming we, he said, will pay the price later in 
military terms. Can you describe what climate change, how it 
might affect the Air Force's decisionmaking?
    Mr. Yonkers. Well, thank you, Senator. First of all, I read 
that report from the Center of Naval Analysis many times. I've 
talked to a number of those general officers. I found the 
recommendations and observations to be thought-provoking and 
compelling.
    As you probably know, last year, for the first time, 
climate change energy was put into the Quadrennial Defense 
Review, so we're now beginning to integrate that into our 
overall war planning and thought processes.
    On a more local level, we're looking at the potential in 
our master planning areas on our installations of, you know, 
things like flood control and flood plains.
    I would say that in terms of the observations that the 
general officers and the military advisory board came up with 
in that report, are, we're just beginning to integrate that 
into our overall planning.
    Senator Lautenberg. Ms. Pinkerton, airlines have been 
creative in finding ways to pass costs along to consumers as, 
through fees that can account for an additional 20 percent of 
the ticket price. But with the expiration of the FAA's 
authority to collect taxes, most of ATA's airline members have 
elected to pocket the passengers tax revenue instead of 
lowering ticket prices.
    Why aren't these savings being passed on to the consumers?
    Ms. Pinkerton. Well, Senator, first I wanted to thank you 
for your opening remarks, which would, you talked about the 
importance of the aviation industry in connecting people and 
goods. And we share your frustration with the situation now.
    But that said, I think the message that we want to leave 
is, we'd like Congress, we're urging Congress to get together 
to meet and resolve their difference in order to get a long-
term FAA bill.
    I have to tell you, Senator, the airline industry is sick. 
It's anemic. In the last 10 years, we've had to shed 150,000 
jobs due to our $55 billion worth of losses. Now, we have to be 
able to cover the cost of flying folks. Our revenues have to be 
able to cover our costs. And we haven't been doing that in a 
sustained way.
    The reason that's important--it's not just so that we can 
make a profit, but we have to be able to reinvest--reinvest in 
creating jobs; reinvest in alternative fuels; reinvest in 
buying Boeing planes. These things are all very important, and 
we can't do them unless we make some type of sustained profit 
over some amount of time, which we simply have not been doing.
    I want to leave you with one thing: Yes, some carriers made 
individual decisions to keep the ticket price, the total ticket 
price, the same. Customers are paying this week exactly what 
they paid last week, before the funding lapsed.
    Senator Lautenberg. Well, I thank you.
    And Madam Chairwoman, just indulge for one minute, please.
    And that is, that I think a principal thing that can be 
helpful and, is to let the consumer know very directly what 
these extra charges are going to be. And I think that we see 
some airlines doing very well compared to the others. And I 
think we ought to look to the best and try to take it a little 
bit easier on the consumers. The fares are going up at a time 
when incomes have not followed.
    So, thank you very much, Madam Chairwoman.
    Thanks, Mr.----
    Senator Cantwell. Thank you.
    Senator Klobuchar. Senator Klobuchar----

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you. Thank you, Madam Chair. Thank 
you for holding this important hearing.
    Air service is incredibly important in my state. We're a 
major Delta hub. We're also the home of Sun Country Airline. 
And we also have a number of smaller carriers. I couldn't agree 
more, Ms. Pinkerton, when you talk about the problems of the 
airline dealing--right now we've got locations in northern 
Minnesota where Delta is cutting back service because of jet 
fuel costs. They are working with us to try to keep, find 
alternative carriers, and then, just, some of them may simply 
just be a reduction in one flight. But these are areas that 
need service. They're International Falls, you may have heard 
of, which is a thriving town, but it is pretty isolated out 
there. And we need service to those places.
    I think the problems you've identified--we import 61 
percent of our oil, making our entire economy vulnerable to 
swings in the market, and also to politics, oil shortages, 
upheavals, you name it. And that's why I've, I, in part--one of 
the most important reasons for developing biofuels. The other 
is that these are jobs in our country. We can be investing in 
jobs in the Midwest instead of oil cartels in the Mideast.
    And I really appreciate the leadership of the military, Mr. 
Yonkers, in realizing this, and not only with aviation, but 
also with some of their other vehicles, their use of biofuels.
    I guess my first question would be a local one. We just 
converted a biofuel plant in southern Minnesota to isobutanol, 
in Luverne, Minnesota. Is anyone familiar with that? I know 
that--there are many people in the audience that are familiar 
with that. But I know it's, one of its uses, in addition to 
being used for scotch, is also for jet fuel. So, could anyone 
comment about that? Does anyone--yes, Dr. Maurice.
    Dr. Maurice. Right. I was not aware of the plan in your 
specific state. But, certainly, the conversion of butanol 
plants is something that we have been looking at. And in fact, 
the next class of jet fuels that are being looked at by ASTM 
International, and that we're looking at--the properties and 
such--are alcohols-to-jets. And certainly, the butanol 
conversion to jet would be one of those classes. So, moving 
that specification through would facilitate and induce the use 
of the product from your state's new plants. So, that's very 
exciting.
    Senator Klobuchar. And from what I understand, it can also 
be used, I think, in rubber and other things. So it's very 
versatile, so that if one market is slow, it can be used in 
other markets. And that was a big opening that we had down 
there.
    And also, Mr. Yonkers, I'm encouraged by the success, as I 
mentioned, of the Department of Defense in producing use for 
alternative aviation fuel from feedstock, or camelina. And I 
wondered, are you sharing your breakthroughs in results with 
the wider scientific community? It would seem that creating 
that domestically produced biofuel source isn't just good for 
the military directly, but has beneficial, indirect benefits as 
well.
    Mr. Yonkers. Thanks for the questions, Senator. Yes, 
everything that comes out of our research laboratories is 
widely dispersed and available to all those in the private 
sector, whether they're in the biofuels production area, or 
whether they're in the aviation and commercial aviation sector.
    And I would just add one thing in the remarks to the 
alcohol-to-jet. I mentioned that this is probably, from my 
perspective, one of the more promising pathways, because you 
can use waste product. Anything that has cellulose in it is 
available for this particular pathway. So----
    Senator Klobuchar. I would think you would think that 
continuing that cellulosic tax credit will be important going 
forward.
    Mr. Yonkers. That will be a decision for you all to make.
    Senator Klobuchar. All right. Very good.
    Mr. Todaro, you mentioned that you predict that you'll be 
able to produce the camelina--am I saying that right?--based on 
aviation fuel at or slightly below the cost of petroleum-based 
jet fuel. And is there a possibility, with the expansion of the 
aviation biofuel industry, that the cost could fall, making it 
even more profitable and easier to produce?
    Mr. Todaro. Well, let me be clear. That at the moment is 
somewhat aspirational. I think that Senators on the panel have 
disclosed some of the prices for the early test batches that 
we've done. There is something called Zeno's paradox. We have 
been able to have our prices every time we've made a delivery 
to the Department of Defense or commercial aviation. That trend 
will continue for quite some time.
    To know whether or not it costs more or less than jet fuel, 
you need to be able to answer questions that none of us can 
answer--What's the price of crude oil? If you can tell me that, 
I can tell you whether or not we're likely to be able to beat 
it.
    But I can tell you that these, the fuels we're working on 
today, at any reasonable scale, will be much closer to jet 
prices than you would think. So, you're not talking about 
something that's twice as expensive, or even 50 percent more. 
You're talking about something that, at scale, should be 
competitive.
    Now, look, we're a business. If we produced it at prices 
cheaper than jet, it will always be priced at jet, because 
that's what sets the market. But in conversations we've had 
with airlines, the most progressive among the airlines are 
looking at negotiating with us so that they can actually lock 
in some of the potential savings on fuel that we think we'll be 
able to deliver in the next 5 years. And those carriers will 
receive that economic benefit.
    Senator Klobuchar. Thank you.
    And then, last, Ms. Pinkerton--maybe Mr. Glover can answer 
this too--but, the role of speculation that you see. I know 
I've talked to Richard Anderson, the CEO of Delta many times 
about this. And he's very concerned about that and how that 
affects their projections, and affects their ability to fly 
people. Could you talk about speculation? Because we've been 
trying to get the Commodity Future Trading Commission to put 
forward the rules.
    Ms. Pinkerton. That's correct. And I complimented Senator 
Cantwell earlier for her leadership, and we appreciate your 
leadership as well on this issue.
    As you know, there's 17 times more speculative activity in 
the oil trading market than there is bona fide physical hedgers 
like us. We supported the provisions in the Dodd-Frank Act, 
that essentially gave the CFTC and mandated the CFTC to apply 
position limits, to try to reduce excessive speculation in the 
market. That's taking a frustratingly long time for those rules 
to come out.
    We continue to work together with many other impacted 
industries who are, unfortunately, like consumers, on the 
losing end of excessive speculation.
    Senator Klobuchar. Mr. Glover, do you want to add anything? 
You don't?
    Mr. Glover. Nothing to add.
    Senator Klobuchar. OK. Thank you.
    Senator Cantwell. Thank you, Senator Klobuchar.
    And I thank the panel very much for their testimony, and 
particularly because you came with specific recommendations. We 
always appreciate that. And paths to follow, particularly, Mr. 
Glover, Mr. Todaro, thank you so much for your leadership on 
this issue. I appreciate it very much, as representative of 
Washington State. And thank you to this panel.
    I'm going to call up the next panel, because we certainly 
want to hear from them as well.
    And I just want to point out that we will leave the record 
open for further questions, if you'd be so happy to, anything 
that members submit to you, be happy to have your answers 
supplied to those questions. Thank you all very much.
    We're next going to hear from Mr. John Plaza, President and 
Chief Executive Officer of Imperium Renewables; Mr. Richard 
Altman, Executive Director of Commercial Aviation and 
Alternative Fuels Initiative; and Ms. Judy Canales, 
Administrator for Rural Business and Cooperative Programs with 
the U.S. Department of Agriculture.
    So, if the second panel could make their way up to the dias 
there.
    And if we could make a somewhat orderly transition out of 
the room, it would be much appreciated.
    All right. Ms. Canales, we'll start with you. Thank you 
very much for being here.

          STATEMENT OF JUDITH CANALES, ADMINISTRATOR,

                    RURAL BUSINESS SERVICE,

            UNITED STATES DEPARTMENT OF AGRICULTURE

    Ms. Canales. Chairwoman Cantwell, Ranking Member Thune, and 
members of the Subcommittee, I appreciate the opportunity to 
appear before you today and testify on the USDA's role in 
addressing the needs, challenges, and alternatives to aviation 
fuels.
    I have submitted full testimony for the record, and will 
briefly summarize my comments before you today.
    In July 2010, the U.S. Department of Agriculture, Air 
Transport Association of America, and the Boeing Company signed 
a resolution formalizing our commitment to work together on a 
``Farm to Fly'' effort to accelerate the availability of a 
commercially viable, sustainable aviation biofuel industry in 
the United States, increase domestic energy security, establish 
regional supply chains, and support rural development.
    This effort was created in response to President Obama's 
directive to meet our obligations under the Energy Independence 
and Security Act of 2007 to produce 36 billion gallons of 
biofuel annually by 2022.
    Since July 2010, USDA has joined with the U.S. aviation 
community and the United States Departments of Energy, 
Transportation, Defense, and Commerce to examine how aviation 
biofuel can become, in the near future, an economical and 
environmentally preferred alternative to petroleum-based jet 
fuel.
    Our coalition's strong commitment of resources to research, 
development, demonstration and deployment, using public sector 
leadership and financial incentives will bring production 
online. This commitment includes the creation and 
implementation of programs and incentives to assist American 
farmers and foresters in the selection and cultivation of 
energy crops and feedstocks that can be converted into 
affordable and sustainable aviation biofuels.
    USDA has several programs authorized in the 2008 Farm Bill 
which support the Farm to Fly effort across the supply chain. 
For my oral testimony here today, I will focus on two of these 
complementary programs.
    The Biomass Crop Assistance Program, known as BCAP, 
administered by my sister agency, the Farm Service Agency. BCAP 
is the only energy program primarily dedicated to the expansion 
of the diversity of feedstock for commercial conversion. The 
program has demonstrated through project area proposal 
submission and matching payment distribution that demand for 
feedstock support exists. Just this past Tuesday, as you well 
know, the U.S. Department of Agriculture announced a BCAP 
project area for one of the companies that was in the earlier 
panel today, AltAir, a company formed to manufacture bio-based 
jet fuels from camelina grown on up to 50,000 acres in Oregon, 
Washington and Montana.
    A program that I operate in my agency, the Biorefinery 
Assistance Program, Section 9003 of the 2008 Farm Bill, is 
administered within the Rural Business Cooperative Programs. 
This program provides loan guarantees for the development, 
construction and retrofitting of commercial scale biorefineries 
that produce advanced biofuels. To date a total of $390 million 
has been awarded in loan guarantees, including one to Sapphire 
Energy for $54.5 million. The Sapphire Energy facility will 
produce algal oil to be refined into aviation biofuel.
    Additionally, we are currently reviewing at this time 10 
applications in the 9003 program which will include some 
projects that pertain to aviation biofuel production. The total 
of 10 projects requests roughly $1 billion in loan guarantees. 
They are competing for $463 million that are available for this 
program today.
    But why commercial aviation? Among transportation modes, 
aviation is unique in its complete dependency upon liquid 
fuels. This biofuel production will support our Nation's rural 
economy, create employment opportunities, and provide stability 
to the aviation industry with its 19 billion gallon per year 
commercial jet fuel market. There are currently dozens of U.S. 
aviation biofuel projects waiting in the wings in various 
stages of development.
    As with many emerging technologies, a strong governmental 
role is essential to build the financial bridges needed to 
assist the aviation biofuel industry through its nascent 
development. Expediting the commercial production of aviation 
biofuel sustains not only the aviation industry, but also 
strengthens the competitiveness of the American farmer and 
creates thousands of jobs across America by processing the 
biomass and building the logistical infrastructure that is 
needed to support renewable fuel processing economies.
    Thank you for your time and your leadership, Madam Chair 
and members of the Subcommittee.
    USDA is committed to promoting aviation fuel through the 
Farm to Fly effort, and will continue to promote rural 
development and job creation to support this growing effort.
    Thank you.
    [The prepared statement of Ms. Canales follows:]

         Prepared Statement for Judith Canales, Administrator, 
    Rural Business Service, United States Department of Agriculture

    Chairman Cantwell, Ranking Member Thune and members of the 
Committee, I appreciate the opportunity to appear before you today and 
testify on the USDA's role in addressing the needs, challenges and 
alternatives to aviation fuels. In July 2010, the U.S. Department of 
Agriculture, Air Transport Association of America and The Boeing 
Company signed a resolution formalizing their commitment to work 
together on a ``Farm to Fly'' initiative ``to accelerate the 
availability of a commercially viable sustainable aviation biofuel 
industry in the United States, increase domestic energy security, 
establish regional supply chains and support rural development.'' In 
addition, USDA has an MOU with the FAA on the development of research 
related to aviation biofuels, but I will defer to the FAA to cover the 
details of that arrangement.

The Opportunity
    In his State of the Union address on Jan. 25, 2011, President Obama 
reaffirmed the administration's commitment to government investment in 
clean-energy technology research, development, and deployment, ``an 
investment that will strengthen our security, protect our planet, and 
create countless new jobs for our people.'' The President's remarks 
underscored the ``promise of renewable energy,'' building on his pledge 
to develop a commercially viable biofuels industry in America.
    Just a year earlier, on February 3, 2010, President Obama had 
announced a series of steps that the administration was taking to boost 
biofuels production in the United States. The Biofuels Interagency 
Working Group released a report spelling out ways to promote the 
development of the biofuels industry in the United States in connection 
with the Energy Independence and Security Act target of 36 billion 
gallons per year of U.S. biofuels production by 2022. The report, 
``Growing America's Fuel,'' laid out the situation and called for ``an 
outcome-driven re-engineered system.'' The strategies include 
supporting the development of first- and second-generation biofuels and 
accelerating the development of third-generation biofuels--including 
aviation fuels. These strategies were further highlighted in the USDA 
Biofuels Strategic Production Report and regional roadmap released in 
June of 2010.

Farm to Fly
    As a result of the Farm to Fly initiative, the U.S. aviation 
community has come together with government stakeholders, including 
USDA, the Department of Energy, the Department of Transportation, the 
Department of Defense, and the Department of Commerce to express 
unified support for the President's goals of environmental stewardship 
and energy security. The coalition was formed to help aviation biofuels 
become an economical and environmentally preferred alternative to 
petroleum-based jet fuels. In pursuit of that goal, the initiative is 
coordinating exchanges of information to inform research and 
development activities while capitalizing on the existing efforts 
across the government to spur innovation. For example, DOE's research, 
development, and deployment activities on technologies for biomass 
handling and conversion to fuel, power, and products are complementary 
to USDA's activities and are increasingly focused on hydrocarbon 
advanced biofuels such as jet fuel.

Why Commercial Aviation?
    In 2010 the U.S. produced approximately 13 billion gallons per year 
of biofuels, mostly corn grain ethanol. However, in comparison to the 
investments made in surface transportation fuels like ethanol and 
biodiesel, government efforts to date have not emphasized research, 
development, or commercialization of alternative fuels for aviation. 
Yet, commercial aviation is a central contributor to the modern 
American economy and, among transportation modes, aviation is unique in 
its complete dependence on liquid fuels.
    Moreover, rather than delivering this fuel to tens of thousands of 
gas stations and convenience stores around the country, the largest 35 
U.S. airports account for about 80 percent of the jet fuel used by 
commercial aviation. Thus, if aviation biofuel producers can deliver to 
these 35 airport ``gas stations,'' they have access to virtually the 
entire 17-to-19 billion gallon-per-year commercial jet-fuel market. The 
production of environmentally preferred aviation biofuels by U.S. 
companies also will support the President's goal of reducing imported 
oil by 1/3 by 2020 and increasing U.S. exports to support our Nation's 
rural economy and to win the future.

Synergy with the U.S. Military
    The U.S. Air Force is working to have one-half of its jet fuel be 
nonpetroleum-based by the year 2016. The Department of the Navy (DON) 
has announced a goal of supplying 50 percent of its total energy 
consumption from alternative sources by 2020. USDA and the DON 
announced on January 21, 2010 that Secretary Vilsack and Secretary 
Mabus signed a Memorandum of Understanding (MOU) to help meet these 
goals and encourage the development of advanced biofuels and other 
renewable energy systems. The military services have implemented robust 
programs to reach these goals. Significant collaboration and 
coordination on research and development and on fuel approval and 
deployment by commercial aviation and military efforts has allowed for 
significant mutual benefit and more rapid progress.
USDA Programs which can Support Aviation Biofuel
    There are several programs related to alternative fuels production 
under the 2008 Farm Bill. These programs provide additional 
opportunities for access to credit in rural America and jump-start the 
biofuels industry. The following 2008 Farm Bill programs were designed 
to support the biofuels industry and have contributed to our efforts.

   Biorefinery Assistance Program (Section 9003 of the 2008 
        Farm Bill). The Biorefinery Assistance Program (BAP), 
        administered by USDA-Rural Development, provides loan 
        guarantees for the construction or retrofitting of rural 
        biorefineries to ``assist in the development of new and 
        emerging technologies for the development of advanced biofuels 
        . . . made from renewable biomass, other than ethanol from corn 
        kernel starch.'' It does so by guaranteeing up to 90 percent of 
        a private loan (not to exceed $250 million) to construct first 
        of kind/scaled to commercial level or retrofit commercial-scale 
        biorefineries producing advanced biofuels. To date, a total of 
        $390.1 million has been obligated in loan guarantee authorities 
        to leverage an estimated $1.5 billion in total project costs 
        toward the construction of commercial scale advanced biofuel 
        facilities, including Sapphire Energy for $54.5 million which 
        will have the capability of producing aviation biofuel from 
        algal oil. The Rural Business-Cooperative Service Agency is 
        currently reviewing 10 applications, including multiple 
        aviation biofuel projects, for the remaining $463 million 
        available at the program level.

   The Bioenergy Program for Advanced Biofuels (``BPAB''--
        Section 9005 of the 2008 Farm Bill): BPAB gives the Agriculture 
        Secretary broad discretion--and $300 million--to create a 
        program to provide production payments to eligible advanced 
        biofuel producers, ``to support and ensure an expanding 
        production of advanced biofuels.''

   Biomass Crop Assistance Program (``BCAP''--Section 9011 of 
        the 2008 Farm Bill): BCAP is the only energy program primarily 
        dedicated to the expansion of the diversity of cellulosic 
        feedstock for commercial conversion. The program has 
        demonstrated, through project area proposal submission and 
        matching payment distribution, that demand for feedstock 
        support exists.

    Just this last Tuesday, USDA announced a BCAP project area for 
        AltAir, a company formed to manufacture bio-based jet fuels 
        from camelina grown on up to 50,000 acres in Oregon, Washington 
        and California.

   Crop Insurance Coverage for Energy Crops (Section 12023 of 
        the 2008 Farm Bill): The 2008 Farm Bill directed the Risk 
        Management Agency (RMA) to research and develop ``a policy to 
        insure dedicated energy crops,'' defined as crops ``grown 
        expressly for the purpose of producing a feedstock for 
        renewable biofuel, renewable electricity or biobased product, 
        and is not typically used for food, feed or fiber.'' RMA has 
        recently awarded a contract to conduct this research.

   National Institute of Food and Agriculture (NIFA): NIFA was 
        created by the 2008 Farm Bill to fund competitive, peer-
        reviewed research efforts. For example, the Biomass Research 
        and Development Initiative (Section 9008 of the 2008 Farm Bill) 
        made $118 million available for uses that include advanced 
        research on feedstock development, biofuels, and bio-based 
        product development and biofuels development analysis. In 
        addition to BRDI, NIFA offers a series of Sustainable Bioenergy 
        grants through its Agriculture and Food Research Initiative, 
        and also operates the Plant Feedstock Genomics for bioenergy 
        program, both competitive grant programs support research and 
        development of bioenergy.

Flying into the Future
    Expediting the commercial production of aviation biofuels will 
strengthen those elements of the agricultural sector involved in the 
growth of biomass, the ``green'' technologies that process the biomass, 
and those who build the logistical infrastructure that is needed in 
select areas. Over time, the investments made today will lessen our 
reliance on petroleum-derived fuels. The Farm to Fly effort aims to 
``accelerate the availability of a commercially viable, sustainable 
aviation biofuel industry in the United States, increase domestic 
energy security, establish regional supply chains and support rural 
development.'' We look forward to working with the Congress to reach 
these goals and to fly into the future.

    Senator Cantwell. Thank you very much.
    Next, Mr. Altman. Welcome. Thank you for your testimony.

STATEMENT OF RICHARD L. ALTMAN, EXECUTIVE DIRECTOR, COMMERCIAL 
         AVIATION ALTERNATIVE FUELS INITIATIVE (CAAFI)

    Mr. Altman. Thank you, Madam Chair. Thank you for the 
invitation to the Commercial Aviation Alternative Fuels 
Initiative.
    Those testifying before you earlier are all parties to the 
CAAFI coalition, a supply chain initiative. Boeing, FAA and ATA 
are key sponsors of the Commercial Aviation Alternative Fuels 
Initiative. AltAir and Imperium are prominent among the 60 fuel 
company stakeholders and are at the cutting edge of that group 
in advancing deployment. Together in, some dozen U.S. biofuel 
companies are responsible for nearly 80 percent of the aviation 
biofuel programs now resident in a dozen countries around the 
world.
    The Research Lab at Wright Patterson Air Force Base in Ohio 
predates CAAFI and remains at the core of aviation research and 
qualification efforts. CAAFI would never have started and will 
not be completed in a timely manner without Air Force support.
    I would like to single out two individual and groups that 
are part of our activity. First is to cite again the FAA Office 
in Environment and Energy, Dr. Maurice, and very specifically, 
leaders of our process, Nate Brown at FAA and Dr. Kristen Lewis 
at DOT and Volpe. If my right arm seems dangling off here at 
the moment, it's because Nate isn't here because he was 
furloughed as part of the current funding lapse. So, our number 
one goal is to get the FAA and the 4,000 employees--at least, 
for me, the dozen in Dr. Maurice's office--back to work.
    The centroid of sustainable aviation fuels with 
commercially viable off-take agreements between buyers and 
sellers. I'm pleased that in the audience today are 
representatives of not only ATA, but also American Airlines and 
United Airlines, who are sitting behind me here. Together, U.S. 
aviation comprises over 85 percent of total U.S. jet fuel 
demand.
    Critical to the progression of alternative fuels is our 
fourth sponsor--the airports through which these fuels do flow. 
The emerging industry offers unique opportunities and projects 
occur now in your region. In Spokane, Sea-Tac, Portland, and 
also other locations such as in New York City. The Aerotropolis 
of Detroit is another area where we have fuel projects. These 
are just a few examples.
    The CAAFI coalition are active in some 20 states in the 
United States. The progress is reflected in the President's 
energy policy announcement of March 30 targeting our industry. 
Aviation peers have also recognized CAAFI in that the progress 
that has been made in aviation alternative fuels. CAFFI was 
awarded the Air Transport World's Industry Service award in 
2010.
    As for current projects, it's not a question, as Mr. Glover 
pointed out, of if, but it's now when and how we progress. So, 
that is my stated focus, and as the Chair has asked, we have 
five specific recommendations in this regard. One, increase 
supply; two, drive down costs; three, reduce environmental 
uncertainty; and four, ensure commercial success for the 
suppliers to the aviation enterprise.
    First, and most critical, and within the authority of this 
committee, is that we now leverage the new ASTM protocols to 
enable qualification of fuels emerging from catalytic 
processes--you've heard about alcohol-to-jets--synthetic 
biology, and from pyrolysis as well as other technologies that 
are emerging at a fast pace. Lipid seed crops, such as what Mr. 
Todaro discussed, while a great start, simply cannot assure 
adequate supply in the target time-frames. Such success 
requires the support of FAA, NASA, the Air Force and the Navy.
    The Committee's funding of advanced biofuel programs at FAA 
last year is a good start, but it is only a start. As one who's 
spent 39 years in this career, I am intimately familiar with 
the challenges of reducing cost--I was in the manufacturing 
sector. No new technology--not computers, not aircraft--had 
mature costs at the very initial product that was launched. 
Success comes from learning, and the needed infusion of 
production technology to enable acceleration of that learning 
through accepted methodologies.
    Such programs to reduce are in place in USDA, in 
coordination with FAA, and at DOE. We are helping, and we have 
seen these programs as quite effective.
    The third are questions of financing. Clearly, USDA's suite 
of products under Section 9003, loan guarantees and BCAP, are 
the kind of near-term and finite lived programs that need to 
continue to ensure jobs and energy independence. And, thank 
you, Administrator Canales, for those programs.
    Beyond first-of-a-kind funding in USDA we simply need to 
emphasize allowing institutions that lend overseas as part of 
their charter to support aviation biofuel projects. Aviation 
biofuels are a real industry that should be supported by our 
overseas financial support from institutions that support U.S. 
companies, and, by ``Invest in U.S.'' programs just started at 
the Department of Commerce.
    Fourth, certainty and quantification of certifying 
environmental performance is extremely critical for both carbon 
life cycle and sustainability. In this regard, aviation has 
benefited from a comprehensive peer review analysis of carbon 
life cycle executed by the Air Force, DOE, and the FAA. We need 
to continue that process of adding to the data base, as 
processes and feedstocks mature, and to ensure full coverage.
    Last, the tools that we use to assess alternative fuel 
projects and permit their analysis by airlines and airports, as 
well as by fuel producers and stakeholders from the 
agricultural community, as defined by ACRP, need to be kept up 
to date.
    So, in closing, I would again like to thank you, Madam 
Chair, and the Subcommittee members for giving CAAFI coalition 
as a whole the opportunity to present its views today.
    [The prepared statement of Mr. Altman follows:]

     Prepared Statement of Richard L. Altman, Executive Director, 
        Commercial Aviation Alternative Fuels Initiative (CAAFI)
    Madam Chair, Senator Thune, and members of the Subcommittee:

    Thank you for the invitation to the Commercial Aviation Alternative 
Fuels Initiative (CAAFI) and me as its Executive Director to testify at 
today's hearing on ``Aviation Fuels: Needs, Challenges, and 
Alternatives.''
    CAAFI is a U.S. based supply chain coalition that has been a leader 
in the push toward the development and deployment of Aviation 
Alternative Fuels having Economic, Environmental and Security of Supply 
benefits.
    Formed on the basis of a Boeing hosted meeting of the 
Transportation Research Board held in Seattle in May 2006 CAAFI was 
founded to propel commercial aviation to a position of leadership in 
the quest to secure, clean, and economic alternative transportation 
fuel supplies. In forming CAAFI its founders addressed the challenge of 
being a- a minority player (10 percent) of the transport market by fuel 
use. CAAFI sought to transform aviation from an afterthought in 
alternative fuel thinking to a ``first mover". As a unique minority we 
needed to do so or run the risk of being left without alternatives. We 
built CAAFI using aviations inherent attributes (concentrated 
distribution, unified, rationale, technically skilled customers) and 
turning our unique characteristics into strengths (e.g., dependency on 
liquids, high qualification barriers).
    Those who testified before you earlier are all parties to the CAAFI 
supply chain coalition. . . . Boeing as a leader among Aerospace 
Industry Association manufacturers, the FAA office of Environment and 
Energy, and the Air Transport Association of North America are key 
CAAFI sponsors and founders.
    Altair along is prominent among some 60 fuel company stakeholders 
and is at the cutting edge of that group in advancing deployment. 
Together some dozen U.S. biofuel suppliers have been responsible for 
nearly 80 percent of the aviation biofuel programs now resident in a 
dozen countries around the world.
    USAF through its Research Lab at Wright Paterson AFB in Ohio 
predates CAAFI and remains at the core of aviation research and 
qualification efforts. None of what you are hearing today would have 
started without the Air Force's outstanding contributions at a time 
when there were few believers in aviation. The job of CAAFI would never 
have started and will not be completed in a timely manner without the 
Air Force.
    CAAFI sponsor, AIA and its members Boeing and engine manufacturers 
General Electric, Pratt and Whitney and Honeywell, in combination with 
the FAA have led CAAFI Certification team in a way that has transformed 
an ASTM approval process. The process that took a decade and ten's of 
million dollars to qualify fuel from a single producer and process 
location has now evolved into a robust methodology that has produced 
qualification of two new process categories in the 2009 to 2011 period 
for global supply. In so doing, time to qualification has been cut by 
two thirds. Qualification costs by similar amounts. Together we have 
enabled the formation of an Aviation alternative fuels supply industry.
    The FAA Office of Environment and Energy in addition to the 
discrete accomplishments outlined by Dr. Maurice has been the focal 
point for some seventeen different government agencies having 
complementary responsibilities from crop growth to technology formation 
and through Commercial program development. In my 44 years of industry 
participation and government interaction the alternative aviation fuels 
initiative within government has had both the most dimensions and been 
the most successful of any intra-governmental activity that I 
personally have been witness to. Particular credit goes to FAA/DOT 
members of CAAFI leadership team, Nathan Brown of FAA and Dr. Kristin 
Lewis of DOT/Volpe. Nate and Kristin have been instrumental in forming 
this cooperation and the programs which they include, and, deserve much 
of the credit for that success.
    The Air Transport Association of North America represents 90 
percent of North American Airlines and nearly a quarter of aviation 
fuel consumption worldwide. Their roles at the top of the supply chain 
as buyers (ATA) has now progressed to the forefront as the issue of 
sustainable alternative fuels moves to the deployment phase. Clearly 
the centroid of the sustainable aviation alternative fuels resides with 
commercially viable off-take agreements between buyers and sellers at 
this point in time. I am pleased that in the audience today are 
representatives of American Airlines, United Airlines as well as ATA. 
Separately AA and UA purchase as much fuel as the U.S. Air Force. 
Together U.S. commercial aviation comprises over 85 percent of total 
U.S. Jet fuel demand. This year global commercial aviation will consume 
over 70 Billion gallons of jet fuel.
    CAAFI member Airlines are committed to motivate development and 
deployment of alternatives that are both environmentally advantaged and 
that provide for improved economics. ATA and its members have been 
active in cultivating agreements among airline buyers for fuel 
purchases that include four MOU's that form the basis for long term 
offtake agreements on fuels ranging from Altair's camelina based fuel 
to a recent agreement with MSW to Liquid suppler Solena in Gilroy, 
California. Along with Boeing, ATA is a CAAFI sponsor signatory to the 
July 2010 ``Farm to Fly'' agreement that is accelerating and focusing 
Biofuels initiatives for Commercial Aviation. Across the public/private 
purchasing communality ATA are teamed with DLA Energy to afford 
producers the prospects for alignment among military and Commercial 
purchasers.
    Together with CAAFI Stakeholders in some 20 U.S. States ATA are 
helping to organize State initiatives which are linking agriculture, 
energy, business development and aviation interests in these states. 
For these states ATA member airlines provide buyer focals to help focus 
state interests around real and substantive buyers. ATA and its global 
partner IATA are committed to seeking Carbon neutral growth for the 
airlines globally by 2020.
    Also critical to the progression of alternative fuels are the 
Airports which these fuels flow through. The emerging industry can be 
seen to offer unique business opportunities deployment of these fuels 
can offer airport business growth and environmental gain at the same 
time, and also can afford similar benefits for the communities in which 
they reside. 80 percent of all jet fuel flows through some 35 airports 
in the U.S. Such concentrated distribution offers a unique opportunity 
for Airport business interests and for fuel suppliers alike.
    ACI North America airports are becoming increasingly important and 
significant participants in the progression toward aviation alternative 
fuels. Seattle, Portland, Spokane, in SAFN have been joined by ACI 
members large and small in recent months. The Port of New York 
Authority has been working with CAAFI stakeholders to evaluate MSW to 
liquid opportunities for its supply. Detroit through DTW and three 
universities are evaluating the opportunity to turn the Aerotropolis 
linking the airport with other state owned lands into the origin of 
home grown biofuels opportunities both in the Aerotropolis and 
subsequently into bordering communities. Such developments offer 
economic and environmental benefits as part of the revival of that 
region.. Smaller airports such as Tulsa are moving to explore new 
options with local entrepreneurs and universities.
    As the evaluation of specific fuel projects requires extensive and 
quantitative analysis the Airport Cooperative Research Program . . . 
under the Transportation Research Board jurisdiction, with FAA and ATA 
support, has launched a series of three programs to lay out 
methodologies to calculate benefit and cost assessments of individual 
projects. These projects offer detailed analyses of emissions 
reductions for small particles, aviation user and airport planning 
tools, and a just launched multi-modal assessment tools that will allow 
the 50 percent or biofuel plant output that is not jet fuel to be 
evaluated for distribution potential through the airport and its 
clients. Many additional airports beyond those mentioned serve on ACRP 
the panels overseeing these projects. New candidates are coming forward 
all the time as momentum grows toward sustainable, secure aviation 
alternative fuel deployment.
    The potential for a whole new business for airports, capitalizing 
on the concentrated distribution afforded by our industry and producing 
not only economic but environmental gains could well be a major 
``fringe benefit'' of the emerging aviation alternative fuels 
infrastructure development. Biofuels programs supported by USDA, DOE 
and State and Local communities are an addition to those programs 
supported by the Aviation sector and offer a once in a generation 
opening for our industry to lead the country toward a new and promising 
future.
    Collectively Aviation Alternative Fuels have shown great progress 
as has been reported to you today.. This progress is reflected in the 
President's Energy Policy announcement of March 30 targeting our 
industry. That decision is backed by a poll by Biofuels Digest who in 
October, 2010 polled 40 percent of the Biofuels industry indicated that 
there expectation was that there would be 1 Billion gallons of biojet 
produced annually by 2020. Business publications such as ``the 
Economist,'' in that same time period, suggested that the future of 
biofuels was now metaphorically, ``looking up.'' Aviation peers have 
also recognized CAAFI and the progress that has been made in Aviation 
Alternative fuels through the award of Air Transport World's 
prestigious Joseph S. Murphy Industry Service award in 2010 to CAAFI 
and its sponsors, FAA, ATA, ACI-NA and AIA.
    Indeed much has been done. Industry/government in partnership are 
clearly focused, unified and dedicated to making an environmentally 
friendly, economic and secure future for aviation alternative fuels 
industry practical near term. Such success enables us to more narrow 
the focus of needs, and challenges for alternatives. This charge from 
the Committee for this session is the clear focus for the remainder of 
my remarks.
    Aviation accomplishments with favorable environmental, economic and 
security of supply implications places us passed a key inflection 
point. The issue is no longer what or if aviation alternative 
alternatives can serve as a spinoff of an energy supply sector such as 
oil. The needs and challenges are now when and how aviation leads not 
only aviation but the transport biofuels sector to success are the 
focus of the needs and challenges that I personally would like to focus 
upon as areas of emphasis across all CAAFI sponsor and stakeholder 
interest.
    In this regard I would like to focus on five areas that will 
increase supply, drive down cost, reduce environmental uncertainty, and 
ensure commercial success for the suppliers and aviation enterprise. 
With success in all five of these areas in parallel aviation will not 
only lead the transport sector but the Nation to create a tremendous 
economic and environmental asset. That is a role we have played many 
times.
    First, it is critical and within the authority of this committee 
that we leverage new ASTM protocols to enable qualification of fuels 
emerging from catalytic processes, synthetic biology and from pyrolysis 
as well as other technologies that are emerging at a fast pace. Lipid 
seed crop production (HRJ, HEFA) while a great start simply cannot 
provide an adequate supply in the target time frames. Such success 
requires ongoing support of FAA, NASA, USAF, Navy. With the breadth of 
the opportunity so large cooperation with international partners with 
proven capability and with whom both the agencies and private sector 
have considerable experience working is in order. Such an effort can be 
guided via an upgrading of our R&D roadmaps and use of our globally 
accepted risk management (Fuel Readiness level) methodology to ensure 
aligned and complimentary efforts with little overlap. With the 
possibility of three paths at a minimum to be pursued in parallel 
through the 2013-15 we can vastly increase candidate supplies to 
include cellulosic sources that grow in lands that do not conflict with 
food production much as the targeted seed crops do. Commitments that 
offer one year of such research while a good start, without needed 
follow-up from the inevitable questions that they produce will not 
provide the needed outcome in my personal view. We simply need an 
ongoing commitment to Advance fuels R&D through current funding 
sources. This committee's funding of the Advance Biofuels program at 
FAA last year is a good start.
    Second, is the question of cost. As one who spent the first 39 
years of his career I am intimately familiar with challenges of 
production learning. No new technology, not computers, not the material 
we use today in our households and very especially aircraft with which 
this room is most familiar with ever produced learned out, mature, 
costs at the outset of production. Those citing the cost of limited 
supplies in the short term as the true state of affairs should ask 
computer makers what the first computer cost, or perhaps aircraft 
makers what the fist of a kind aircraft cost. Success comes from 
learning and the needed infusion of production technology to enable 
acceleration of that learning through accepted methodologies.
    No one is better at that than the agriculture sector. Working with 
the CAAFI R&D community and FAA we have now created a Feedstock 
Readiness level methodology via a unique intergovernmental MOU with 
USDA. Aviation systems technology and learning combined with well 
structured USDA efforts at its new research centers combines the best 
know how in the world to speed learning for fuels from oilseed sources. 
Qualified HRJ/HEFA fuels are dominated 80 percent or more by feedstock 
costs.
    For other advanced processes is driven through process cost 
reduction. This is the sanctuary of DOE biofuels research. I personally 
have seen in detail DOE's plan to attain $2 a gallon cost for pyrolysis 
oil. It depends primarily on increasing the life of catalysts used in 
pyrolysis production to that of similar catalysts in oil refineries. 
The DOE programs have finite plans with check points along the way. It 
is a challenge to attain similar life under higher pressures and 
temperatures but it is a challenge that I know aviation engine 
manufacturers successfully addressed during my tenure in manufacturing 
sector. It is doable and the plans are sound ones.
    Third are questions of financing. Clearly USDA's suite of products 
under section 9003 loan guarantees and the Biomass crop assistance 
programs (BCAP) are the kind of near term and finite lived programs 
needed to ensure jobs and energy independence for America. Having been 
a part of programs in Europe and those that are seeking to be formed in 
other places I can advise that they are truly the envy of the world. 
Such incentive-based approaches clearly produce positive results. 
Without these first of a kind programs private sector participation, 
particularly after the crisis that we just encountered in the financial 
sector will not keep pace with technical achievements. Retaining such 
programs will enable reduction in the costs of protecting access to 
foreign supplies. That cost is a much smaller order of magnitude in 
dollars and human sacrifice and as such is an excellent national 
investment.
    Beyond first of a kind funding via the USDA programs a simple 
emphasis in allowing institutions that lend overseas as part of their 
charter to encourage investments from overseas in our country to fund 
aviation biofuels projects as real commercial efforts are in order and 
are now enabled for USDA programs. Aviation biofuels is a real industry 
that should be supported by our overseas financial support institutions 
that support U.S. companies, and by ``Invest in U.S.'' programs just 
started by the Commerce Department. CAAFI fuel stakeholders were 
invited by DOC Undersecretary Sanchez and Assistant Secretary Nicole 
Lamb-Hale to engage in discussion of these matters and other follow-on 
measures to what was a highly successful Paris Airshow CAAFI showcase. 
We are proceeding to develop that direction with DOC and our government 
stakeholders.
    Fourth, certainty and quantitative means of certifying 
environmental performance of future facilities for both carbon life 
cycle and sustainability is a critical need for fuel producers and 
buyers alike. In this regard Aviation has benefited from a 
comprehensive, peer reviewed analysis of carbon life cycle outcomes 
executed by the Air Force and DOE with the aid of quantitative carbon 
life cycle analysis from ground to wake funded by FAA Partner. We need 
to continue the process of adding to the database as processes and 
feedstocks mature and to ensure full coverage. In addition the benefits 
of carbon savings need to be attributed equitably to all who purchase 
the fuel in calculating economic benefit.
    Lastly, the tools that we use to assess alternative fuels project 
and permit their analysis by airlines, airports as well as fuel 
producer and grower stakeholders that are being defined by ACRP need to 
be kept up to date. While the ACRP projects, of which I personally am a 
party to constructing, are excellent in scope and purpose the 
methodology must be fed by an up to date database of information 
regarding feedstocks and processes. Currently, ACRP executes its work 
at a given point in time. Shelf life of the data bases is inversely 
proportional to the speed that the space is growing. The aviation 
alternative fuels space is growing rapidly. A mechanism should be found 
to keep these tools up to date and relevant for the intended use.
    In closing, I would again like to thank you, Madam Chair, and the 
Subcommittee members for giving the CAAFI coalition as a whole the 
opportunity to present its views today. I would also like to take the 
opportunity to invite the members of the Committee and your staff to 
gain more comprehensive exposure to the both our Coalition and our 
sponsors and stakeholders through attendance at the CAAFI bi-annual 
meeting and CAAFI Expo to be held at Georgetown on Nov. 30 and Dec. 1. 
At Georgetown, our full complement of sponsors and stakeholders will 
demonstrate the breadth and depth of what has been achieved and what, 
with the assistance of the Committee, we can achieve in the future.

    Senator Cantwell. Thank you, Mr. Altman. And thank you for 
your work on this association. It is a broad coalition, and we 
appreciate that.
    Mr. Plaza, welcome. Thank you for being here, also from 
Washington State. We very much appreciate your testimony.

     STATEMENT OF JOHN PLAZA, PRESIDENT AND CEO, IMPERIUM 
                        RENEWABLES, INC.

    Mr. Plaza. Thank you, Madam Chair.
    My name is John Plaza. I'm the President and CEO of 
Imperium Renewables. We're headquartered in Washington State.
    I greatly appreciate the chance to appear before the 
Subcommittee today to discuss commercialization of renewable 
jet fuels, as well as the importance of long-term purchase 
commitments by the Department of Defense.
    I also want to thank you, Senator Cantwell, for your 
continued support for the biodiesel industry. As you know, 
that's critical to our success.
    A little bit about Imperium Renewables, who we are. This is 
our facility here. We own and operate one of the largest 
biodiesel facilities in the world--it's 100 million gallons of 
capacity. We produce using exclusively canola from the northern 
tier of the United States, as well as Canada. We rail and ship 
it in, and have the ability to ship biodiesel around the world.
    We spent about $90 million building this facility. It was a 
green field state-of-the-art facility, our own technology. We 
currently employ about 42 people in the company, five of which, 
who are veterans who've returned from Iraq and Afghanistan and 
found a job in our company, and they're very excited about that 
for a multitude of reasons.
    Since this is a Commerce committee, I wanted to point out a 
few economics. One of the things that we hear a lot are the 
value benefit of renewable energy in our Nation. Our company 
alone has invested $135 of direct economic benefit into the 
Pacific Northwest, namely, Washington State. We have done that 
through both labor, payroll, taxation, investment to vendors, 
construction, and a number of different things.
    Before I really get into what we think we need to do, I 
want to tell you a little bit about the background of the 
company. We've been around since 2005. Prior to starting the 
company I was an airline pilot. I flew for Northwest Airlines, 
a number of other airlines. I've flown everything from small 
bush planes in Alaska to 747s across the Pacific. I have a deep 
understanding of the critical importance of fuel quality, the 
safety of aviation, and the importance of the price of fuel for 
aviation.
    We're the first commercial producer of renewable jet fuel. 
We partnered with Virgin Atlantic, General Electric, and, most 
importantly, Boeing, in a demonstration on a 747 from Amsterdam 
to London in 2008.
    What we want to do--we have a state-of-the-art facility. As 
you see in this picture, there's a number of acreage, or, 
there's a large area of acreage next to us that we can build 
additional capacity. We'd like to build a renewable jet fuel 
facility adjacent to our existing site. We think renewable jet 
fuel using vegetable oils and the HRJ process is ready for 
commercialization now.
    Obviously, you've heard that ASTM approvals happened 
already this year for up to 50 percent blends. This means it's 
allowed in any aircraft globally. This really takes the 
industry out of the R&D phase that it has been in for the last 
4 years and into the commercialization phase.
    By building this facility at our existing site, we'd create 
over 300 construction jobs over a 3-year period, and increase 
our workforce by an additional 50 permanent employees, and 
since we're in a rural area, jobs are hard to find, and a 
family wage job is a big deal in our community.
    With the construction and operation of this new facility, 
an additional $250 million will be invested into the state with 
this project alone. Once in operation, there would be another 
2,000--excuse me--$20 million of annual direct economic benefit 
to the region as well.
    We have an aggressive plan. We think we can produce 
significant amounts of jet fuel by 2014 using vegetable oils 
that are commercially available now. We will certainly continue 
to provide additional jobs. We'll work toward the effort to 
displace over $1 billion that we, as a Nation, borrow from 
China every day to import petroleum from overseas. This is a 
huge drain of our economy, and we think this is an industry 
that can help reduce that. And it certainly increases our 
military's operational energy security needs, which is key to 
the success of our Nation.
    What do we need? For our industry to move forward, we've 
got the facility; we've got the supply feedstock agreements; 
we've got the market, we think, with the commitments from the 
military. However, we don't have the investment. We need $300 
million to build, start, commission and operate this facility. 
And to get that type of investment, we need commitment from a 
significant off-take.
    We think the most important market off-take that is not 
solely dependent, but an important key first start, is the 
Department of Defense. With our plans, what we need to succeed, 
the military to increase its operational security, collectively 
we need the ability to obtain long-term contractual commitments 
from the military to purchase these fuels. This would justify 
to the investment community the significant capital to build 
this facility. The Department of Defense is ideally situated to 
purchase these fuels, both from the region, as well as all 
throughout the country. All other aspects of our industry are 
in place except for this purchase commitment.
    To point out a few reasons why we think the Pacific 
Northwest is critical, the combined use of military commercial 
aviation fuel in the Pacific Northwest is over 100 million 
gallons a year, annually. We have advised the Pentagon that we 
can supply up to 80 million gallons a year of renewable drop-in 
fuels by 2014, with no technology risk, using existing 
feedstocks that exist now today for the same things that we use 
for biodiesel production, as well as providing an initial key 
market for crops like algae, crops like camelina as they scale 
and grow.
    We are working with USDA on a number of different fronts. 
We have submitted for a loan application under the 9003 
program, and we do think that continued support of USDA's 
bioenergy programs are critical for the biofuel industry to 
move forward. They're very important. We use those programs now 
in the biodiesel industry, and for the renewable jet fuel 
industry in the future.
    We think the best path forward for advanced biofuel such as 
renewable jet fuel would be enable the Department of Defense to 
enter up to 15-year contract opportunities to purchase these 
fuels.
    The commitment of the Defense Department will drive the 
entire renewable fuel--aviation fuel industry, which will help 
meet the demand on the civilian side, as well. As Navy Security 
Ray Mabus has stated, biofuels are a huge asset in providing 
the U.S. Navy, not just in promoting our Nation's defense, but 
in saving the lives of our soldiers.
    I'd like to recommend to the members of the Committee a 
September 27 report from the Center for a New American Security 
entitled, Fueling the Future, Preparing the Department of 
Defense for a Post-Petroleum Era. This report outlines in great 
detail how the military should transition to a future that does 
not depend on petroleum, which currently supplies over 70 
percent of the Department of Defense's energy needs.
    By facilitating the development of advanced biofuels for 
the military with purchase commitments, this industry can 
become a major source of energy for both the military and 
civilian fleets. It also ensures the Department of Defense can 
continue to meet its mandate to protect the energies--protect 
the Nation's energy by reducing its dependence on petroleum 
supplies from Venezuela, from Iraq, from other places that we 
are certainly concerned about.
    I would like to submit this copy of the report for the 
record, as well.
    [The information referred to is contained in the Appendix.]
    I want to thank you, Madam Chair, and Senator Murray, for 
sponsoring legislation that enabled the Department of Defense 
to enter into 15-year contracts to purchase renewable fuels. I 
recognize any contract will be competitively bid, but I am 
confident that Imperium is well-situated to prevail.
    In closing, I appreciate the Committee's focus on the 
important issue. I certainly think advanced biofuels such as 
renewable jet fuel are a key to a cleaner, more sustainable, 
and most importantly, a more secure aviation industry. Like all 
forms of energy production that exist in America today, 
renewable aviation fuels needs a long-term, stable set of 
Federal policies that support this industry, and are critical 
to commercializing this fuel. This will assist in fulfilling 
the U.S. military's renewable fuel needs and promoting our 
Nation's security.
    I do strongly believe that the success of biofuels for 
aviation will provide a tremendous benefit for generations of 
all Americans to come.
    Thank you for your time and the opportunity to speak today.
    [The prepared statement of Mr. Plaza follows:]

         Prepared Statement of John Plaza, President and CEO, 
                       Imperium Renewables, Inc.

    Madam Chairwoman, my name is John Plaza. I am the President and CEO 
of Imperium Renewables, headquartered in Seattle, Washington. I very 
much appreciate the opportunity to appear before the Subcommittee today 
on the important issue of renewable aviation fuels. I also want to 
thank you, Senator Cantwell, for your continued leadership on renewable 
fuels.
    Imperium Renewables owns and operates one of the largest biodiesel 
facilities in the world, located in the rural community of Grays 
Harbor, Washington. We have invested over $90,000,000 in our state-of-
the-art biodiesel production facility at this site. We currently employ 
42 people, five of whom are veterans who, after having served in Iraq 
and Afghanistan, have returned home to find family wage jobs in their 
community. Since 2007, our company has provided over $125,000,000 of 
direct economic benefit inclusive of payroll, taxes and revenue to 
other small businesses around Washington State.
    We are planning to construct an advanced biofuel facility that will 
produce renewable jet fuel adjacent to our existing site in Grays 
Harbor. This new facility will create over 300 construction jobs during 
the first three years, and increase our workforce by an additional 50 
permanent employees. With the construction and operation of this 
additional facility, over $250,000,000 will be invested by Imperium 
into Washington State during the construction phase, and once in 
operation, we will provide over $20,000,000 of annual direct economic 
benefit to the state. We are committed to the Grays Harbor community 
and believe that the Pacific Northwest, along with the entire nation, 
will benefit economically and environmentally from the development and 
use of renewable jet fuels.
    Developing and deploying renewable aviation fuels has long been a 
dream of mine. Before founding Imperium Renewables, I was an airline 
pilot for over 20 years, having flown everything from small bush 
airplanes in Alaska to Boeing 747s around the world. I have a deep 
understanding of the critical importance of fuel quality, security and 
price for the aviation industry. Imperium Renewables was the first 
commercial producer of renewable aviation fuel. We produced the bio jet 
fuel that was used in a 2008 demonstration flight by a Boeing 747 
operated by Virgin Atlantic Airlines. With additional successful 
demonstration flights since 2008, along with the recent approval by the 
American Society for Testing and Materials for renewable jet fuel to be 
used at a 50/50 blend, it is clear that renewable aviation fuels are 
ready for commercialization now. The market potential for these 
advanced biofuels is significant in our region. The combined use by 
military and commercial aviation in the Northwest creates more than 800 
million gallons of jet fuel demand annually.
    At Imperium, we have an aggressive plan that will enable us to 
produce significant amounts of renewable jet fuel by 2014. Importantly, 
this plan is contingent on obtaining long-term contractual commitments 
to purchase the fuel in order to justify the significant capital 
investment of over $250,000,000 required to build this new facility. 
The Department of Defense is ideally situated to purchase these fuels, 
which will facilitate the ability to raise the capital required to 
build advanced biofuel facilities. We have been in discussions with the 
Department of Defense concerning supplying multiple renewable jet fuel 
solutions to meet the military's needs in the Pacific Northwest region. 
We have advised the Pentagon that Imperium can supply up to 80 million 
gallons of ``drop-in'' renewable fuel by 2014, with no technology risk, 
while using existing feedstocks that are commercially available now and 
future dedicated energy crops that are in development.
    The best path forward for advanced biofuels such as renewable jet 
fuel would be to enable the Defense Department to enter into 15-year 
contracts for fuel supplies to meet the demands of its facilities in 
the Pacific Northwest and around the nation.
    The commitment of the Defense Department to renewable fuels will 
drive the entire renewable aviation fuel industry for the nation. It 
will also provide the Department of Defense a critical and important 
path forward in obtaining operational security of energy supplies right 
here at home. By its commitment to purchase renewable aviation fuels, 
all branches of our Nation's military can have secure regional sources 
of ``drop-in'' renewable fuels to better facilitate national security, 
as well as providing economic development and job creation for America, 
in America. As Navy Secretary Ray Mabus has stated, biofuels are a huge 
asset in providing the U.S. Navy operational security, not just in 
promoting our Nation's defense, but in saving the lives of our 
soldiers.
    I would commend to the members of the Committee a September 27, 
2010 report from the Center for a New American Security entitled 
``Fueling the Future Force: Preparing the Department of Defense for a 
Post-Petroleum Era.'' This report outlines in great detail how the 
military should transition to a future that does not depend on 
petroleum, which currently supplies over 70 percent of the Department 
of Defense's energy needs. By facilitating the development of advanced 
biofuels for the military with innovative technologies and fuel source 
diversification, along with improved efficiency, the Department of 
Defense can deal with future instability in petroleum supplies, reduce 
volatility of price spikes, and ensure it can continue to meet its 
mandate to protect the nation's security. I would like to submit a copy 
of this report for the record.
    I want to thank you, Madam Chair, and Senator Murray, for 
sponsoring legislation to enable the Department of Defense to enter 
into 15-year contracts to purchase renewable fuels. I recognize that 
any contracts will be competitively bid, and am confident that Imperium 
is well situated to prevail.
    In closing, I appreciate the Committee's focus on this important 
issue. Advanced biofuels such as renewable jet fuels are the key to a 
cleaner, more sustainable, more secure aviation industry. Like all 
forms of energy production that exist in America today, renewable 
aviation fuels need stable long-term federal policies that support this 
industry and are critical to commercializing the fuel. This will assist 
in fulfilling the U.S. military's renewable fuel needs, and promoting 
our Nation's security. The success of biofuels for aviation will 
provide tremendous benefits for generations of Americans in the future.

    Senator Cantwell. Well, thank you, Mr. Plaza.
    And I thank all the panelists for their testimony.
    I'm going to start with a question in general about the 
feedstock. We've heard from the first panel and, obviously, Ms. 
Canales about what USDA is doing.
    Can you comment on the variety of feedstocks that could be 
used in this? Obviously, there's a lot going on in the Pacific 
Northwest, but there's opportunity all across the country for 
this product, I guess from the input to produce uniform output, 
I guess, is the best way to say it. Is that correct? And could 
you comment on what those opportunities are?
    Ms. Canales. Senator, thank you, and I can speak to some of 
the feedstocks that USDA is currently looking at. These are, 
again, not the completely inclusive list. But, oilseeds in the 
Midwest and Great Plains, and Pacific Northwest; poplar and 
pine, found in the American Southeast; sorghum, found in Texas 
and Oklahoma, and the lower Midwest; sugarcane, found in 
Florida and the Southeast; switchgrass in the Midwest and 
Southeast; soon to be announced will be others pertaining to 
Douglas fir, alder, hemlock, and eucalyptus; perennial and 
prairie grasses other than switchgrass; and then, of course, 
algae.
    Senator Cantwell. And so, are these in the end product an 
interchangeable source? Or are we talking about picking winners 
and losers here?
    Ms. Canales. Those are all prospects. Those are all 
opportunities for feedstock. So, this is not in any type of 
order of priority.
    Mr. Plaza. So, from Imperium's perspective, the technology 
that's ready for scale and commercialization now is using 
lipids, such as existing oilseed crops, future oilseed crops, 
like algae and camelina. We specifically have invested, as you 
heard from Secretary Yonkers, in the technology and development 
of converting alcohols into jet fuel, and have partnered with 
Pacific Northwest National Labs and the Tri Cities to develop a 
technology that will allow us to use feedstocks like municipal 
solid waste and wood residue.
    Just using Seattle as an example, we produce enough trash 
every day to make 200 million gallons of jet fuel if our 
technologies can scale. So, the importance of, I think, this 
industry cannot be dependent on any one feedstock or any one 
technology, but dependent on the finished product. It's 
important that the end result be approval of these products, 
and acceptance of these products, and long-term policies that 
support multiple pathways.
    And we actually believe longer-term, as Secretary Yonkers 
mentioned, that alcohol-to-jet fuel is a better pathway in the 
long run than lipids.
    Senator Cantwell. Mr. Altman, did you want to comment on 
that?
    Mr. Altman. Yes. All of these feedstocks are applicable, 
and from the CAAFI point of view, we are neutral to process. 
From the certification point of view, we have chosen to group 
these together in processes. So, camelina, algae, renewable jet 
has been explained to you, alcohol's process can come from 
anything from woods to giant Miscanthus, which is prominent in 
the Southeast. It's really a matter of what grows locally, and 
what can be harvested and produced economically.
    From our point of view, we're qualifying all of them. And 
as Mr. Yonkers and others have identified, we should have a 
full family, through alcohol-to-jet, through synthetic biology, 
using sugars, especially those from cellulosic sources and 
through pyrolysis. I would expect all of these to be qualified 
by 2015.
    Senator Cantwell. And so, that is what your fuel readiness 
level is, and is identifying as an industry, what fuels are at 
those levels?
    Mr. Altman. Yes. What fuel readiness level does is, it uses 
the accepted Defense Department gated risk management approach 
to manage how we bring along technology from the very, earliest 
research base through certification, and then through 
production. And this is something that has been globally 
accepted by ICAO, and we use this to track process.
    CAFFI/FAA also have with USDA a variation of that called 
feedstocks readiness. We've taken aerospace techniques for 
project management, and are applying that with the research 
centers of USDA to mature feedstocks on a similar scale, and to 
communicate their status, as we do with the fuels qualification 
process for aircraft use.
    Senator Cantwell. Thank you.
    I just want to try to get to this point, if I could. And 
maybe our panel is not the panel to ask this question. But, I'm 
talking about, now we're talking about a completed system here. 
And does, you're talking, you know, very near-term when members 
can see 2016 or something of that nature. But, you're talking 
about people being able to contribute a variety of feedstocks 
to produce one fuel source.
    So, we're not talking about one of these winning as a 
concept. We're talking about each region producing fuel from a 
feedstocks that all goes into an aviation fuel. Is that 
correct? So that the scalability here is an issue of the, I 
guess, the, I don't want to call it magic. But, the scientific 
process of getting an alcohol-based product out of a variety of 
different fuel sources, and----
    Mr. Altman. That's absolutely correct.
    Senator Cantwell.--and then, still being able to supply 
that on a uniform basis across the United States.
    Mr. Altman. Absolutely correct. We refer to this concept as 
something other than the silver bullet. We refer to it as 
silver buckshot----
    Senator Cantwell. OK.
    Mr. Altman.--and that means, the buckshot applies to 
everyplace locally. As I mentioned, we ourselves are working 
with some 20 different states, all of whom have different 
approaches to the process. And it's going extremely well. We 
just need a continuation of the programs which USDA has and 
which DOE has to allow these processes and feedstocks to 
mature.
    You know, one thing I've mentioned and just second to what 
Tom Todaro was telling you, is if you look at the history of 
food crops, like corn, and look back around 50 years, you'll 
see a 400 percent gain in yield per acre. Price is market-
driven. Yield is something that we can work on, and work on 
together. And that's what we're doing with USDA.
    Senator Cantwell. Well, I think the buckshot analogy is 
appropriate. And I think to Mr. Plaza and Mr. Todaro's point is 
that then this becomes a very, very viable rural economic 
development strategy for the U.S. Because if every region is 
then providing feed source to an eventual end product, you 
know, everybody is, you know, everybody is contributing to the 
code of the operating system, if you will. And I think that's 
very, very positive.
    I don't know, Ms. Canales, how you're dealing with that in 
your choices at USDA. But I'm assuming that you're looking to 
get regional viability.
    Ms. Canales. Yes, ma'am. Indeed. And, thank you, Senator. 
And what I would say to you, though, I've been onboard now 
almost two and a half years in this role, is that I have been 
promoting geographic diversity in the role of USDA rural 
development in my agency, and in utilizing the funds that have 
been made available by the Congress to incite, and to be able 
to incentivize these types of projects.
    What we're seeing already right now is a complete 
diversification. Certainly, regarding 9003, as I mentioned to 
you, you know, there are 10 projects that we're looking at 
individually, and each one is separate. And they're coming from 
different parts of the country. There were five prior to that 
that we've already issued a conditional commitment to. And 
they, too, are in different parts of the United States.
    And then, I should also say, within our other programs, 
Rural Energy for America program, that has become completely 
diverse. And that's notable, because that's getting initial 
momentum at the local level--businesses engage; the producers 
engage. And that has become a true national program.
    Senator Cantwell. Mr. Plaza, did you want to add to that?
    Mr. Plaza. Yes. I think, going back to a question a moment 
ago. The key, I think, for the industry is to focus on the end 
product being consistent, being molecularly identical to 
petroleum, or what's called commonly now drop-in fuels. That 
allows multiple production technologies, multiple feedstocks, 
and a, definitely a regional platform.
    One of the things that we communicate to the Department of 
Defense as they develop strategies for renewable fuels is, in a 
long-term purchase commitment, don't pick a technology. Pick an 
ASTM-approved fuel that meets the, either the emissions under 
526, which is an important category, the price, or a number of 
other important aspects, and allow the producer to develop a 
platform that provides that. And in our case, it's a multitude 
of platforms--one using the existing lipids that are available 
now, and then developing additional technologies that would 
make an equivalent drop-in replacement.
    As you know, in the Pacific Northwest we have huge amounts 
of wood residue that go left unused, or have little to no 
value. That's the type of feedstocks that we're developing 
technologies to access, along with municipal solid waste, 
agricultural wastes. That works in the Southeast, but maybe it 
doesn't work in other parts. So, there'll be a combination of 
all of these. The key component is, we all make the same 
product, through various technologies.
    Senator Cantwell. And so, where do we think we are with 
woody biomass or algae as a source?
    Mr. Plaza. Well, I'll speak to woody biomass, and maybe let 
the others speak to algae, because they're probably more 
familiar.
    I think woody biomass is quickly becoming a very viable 
feedstock. Whether it's, you know, 5 years away or 10 is still 
up in the air. I think it's important that we see more research 
and development from DOE; we see support in the funds provided 
to USDA, who are supportive of woody residues as part of their 
agricultural process; and we see long-term purchase commitments 
for these fuels that allow companies like Imperium to invest 
and, in fact, invest more to accelerate the development of 
that.
    Senator Cantwell. Mr. Altman or Ms. Canales?
    Mr. Altman. Well, let me deal with the algae part for you. 
We are very supportive of Sapphire. They're a stakeholder 
member as is Helia and a number of different companies.
    There are two different approaches. One is a process used 
by a company called Solazyme, which actually uses algae as a 
catalyst or an enzyme to process fuel that is actually a HEFA/
HRJ fuel. That process is commercial, and it's commercially 
viable now.
    The issue with open pond and closed pond systems is to get 
the cost and economic benefit under control. Typically, there 
is significant requirement for energy use to extract water from 
algae. And we are tracking very closely with those companies to 
help make sure that within a period of 5 to 10 years we're able 
to get competitive costs from algae.
    Ms. Canales. I would just speak to Sapphire Energy as being 
one of the projects that we're so keen on, because of the fact 
that it pertains to exactly what we're trying to do here, is to 
develop an alternative source for aviation fuel. And Sapphire 
is online. You know, what we deal with within my agency, 
really, is the financing. And then we work with NREL and--
National Renewable Energy Laboratory, as you're familiar with--
to review the capacity, the technology, the, is this going to 
work? And so, we combine all of that. From our end, it's about 
trying to get these projects financed, and utilization of the, 
our loan guarantee program.
    Senator Cantwell. And does the ASMT have the capacity to, 
if you would bring together such a standard, I mean, obviously, 
they're investigated in the testing and approval of this. But, 
if you, if, one element of this is the standardization. Are 
they equipped to guide this next phase, Mr. Altman, in coming 
up with what that lipid standard or----
    Mr. Altman. Absolutely. And the thing that has happened in 
the last 5 years has been ASTM took a process that used to take 
10 years to qualify fuel for one process from one factory, to 
approve fuel within a period of 3 years. We've been able to 
qualify both HRJ/HEFA and Fischer-Tropsch in 3 years. So we've 
learned how to manage the qualification process.
    The issue that we're dealing with now is that we have three 
processes running in parallel toward qualification. When I 
mention the requirement for research funds, it is noted that 
the Committee was kind enough to bring the advanced biofuels 
research effort up to snuff at FAA for the one-year funding to 
pursue that potential. But when we look at having to do three 
processes in parallel, yes, ASTM has the capacity, but it's, 
requires that we progress through the FRL levels to make that 
happen. And it's a much more complex process when you're doing 
three than it is when you're doing one. But can we do it by 
2013, 2015? The answer is, yes, we have that capacity.
    Senator Cantwell. So, they will end up approving three 
different processes? Or do you think a standard will----
    Mr. Altman. Well, we're--you're asking a very good 
question, because that's what the Committee is working on right 
now, is to establish how many different processes do they 
actually have to have. I mentioned three, because one's 
biological, from a synthetic biology process. The other is 
catalytic, to get the alcohols. And the third is pyrolysis. So, 
my mind categorizes them that way.
    Whether the next time that the ASTM committee meets, 
they'll have three processes or one process is really up to the 
technical committee to establish that. But I think we have to 
be prepared to look at multiple pathways at this point, and not 
count on, as we did in the past, on having a single pathway, 
like HRJ, HEFA or Fischer-Tropsch.
    Mr. Plaza. If I could add a couple things.
    First of all, with respect to funding agencies to do the 
work to develop these new requirements, I think AFRL, the Air 
Force Research Laboratory, is critical. They do a lot of work 
with CAAFI, with both the civilian and military with the OEMs. 
Their funding has been challenged, obviously, with many other 
areas. But the AFRL group is a really important group out of 
Wright Patterson to continue to get funding.
    I do want to step back and talk about where we are now, 
though, and point out that there are billions of gallons of 
lipids available to make this HRJ product that we and others 
would like to make. So, it's important that we recognize, there 
is significant quantities of oilseed crops that exist that we 
use for biodiesel today that don't interrupt food supply, have 
great life cycle emissions, tremendously valuable--and priced 
economically. And divergent to the previous panel, there is 
some significant speculation in that market as well. Equally 
damaging to the ability for biodiesel to be competitive against 
petroleum, and any future biofuels that would use commodity-
based index pricing for the feedstock is the speculation that 
occurs there. So, just like petroleum, that occurs in grain 
products. It's much of what drives grain product pricing.
    So, I think the more that we can broaden that commodity 
speculation concern against all things that folks--because if 
you kick them out of petroleum, they're going to go into 
grains. And that's going to cause even a bigger problem.
    Senator Cantwell. Well, I've certainly heard from a variety 
of commodity producers about the concern there. So, obviously, 
we are working very hard to try to commence the CFTC to broaden 
their efforts.
    And then, just one last question, because I know we're 
getting close to the noon hour here.
    And, Mr. Plaza, could you just give us an idea of what kind 
of scale we need to have for producing aviation fuel? What 
level of facility?
    Mr. Plaza. Well, it's an interesting point. I think that 
the military's commitment for the U.S. Navy, for example, 366 
million gallons of renewable jet fuel by 2016, the U.S. Air 
Force's commitment, which is quite significant for alternative 
fuels, which is obviously more than just biofuel. We belief 
that the appropriate scale and the application we submitted to 
USDA is for 100-million-gallon-a-year capacity, which puts out 
about 80 million gallons of renewable jet fuel.
    The market in the Pacific Northwest is certainly that size. 
The feedstock is available now from traditional oilseed crops 
used in biodiesel. It's the appropriate size and scale for 
where we are today. It certainly doesn't amount to a meaningful 
amount to displace significant amounts of petroleum. But I 
think it's a great commercial start to get all of these 
strategies and feedstocks to the table. And I think there's 
opportunity for us to see those replicated five to ten times 
across the country. And so, I think that's the appropriate 
scale. It can be done smaller. But like with anything, the 
smaller you go, the more expensive it is on a per gallon basis 
scale.
    Senator Cantwell. So, you're saying--and I know this is a 
hard question to answer, just as Mr. Todaro was saying, you 
know, tell me whether I'm viable or not. And he said, obviously 
it depends on what the price of oil is. And we've seen a lot 
happening in that marketplace. And obviously, we want something 
that's far more predictable for the future.
    But, you're saying 100 million? Is that what you are saying 
is the single----
    Mr. Plaza. 100 million gallons a year scale is an 
appropriate scale to bring the costs to commercial levels. For 
example, the Defense Logistics Agency just had an RFPL for 
about 450,000 gallons of a combination of renewable diesel and 
renewable jet. We submitted a response to that that was a 
little bit of a unique idea. But the pricing we put in was for 
a smaller scale unit.
    But the prices with today's policy, which is an important 
component--taking into account the renewable fuel standard, as 
you heard from Mr. Glover, the long-term extension of biodiesel 
credit which applies to renewable jet fuel--inclusive of those 
policies we're looking at commercial fuel prices in the $5 to 
$6 a gallon range, which is still more than petroleum. But for 
a nascent industry at commercial scale, I think it's 
significant. I think we can drastically reduce that with new 
technologies.
    Senator Cantwell. Mr. Altman, is your association looking 
at these issues of scalability?
    Mr. Altman. We're obviously very concerned with that. And I 
would agree with your remarks.
    I think the important thing is, when you get that 100 
million gallon facility going, we're looking at a very large 
opportunity, I think, for the investment community to say, yes, 
we can participate in this. Potentially oil companies, also 
other individual investors will jump in with investments. And 
what's really holding back the industry right now is 
investment.
    So, to have that 100 million gallon facility, that will be 
a very important element for us in terms of triggering that 
next round of significant investments. That is what USDA has 
been trying to achieve.
    Senator Cantwell. And, this may again be a question, maybe, 
not for this panel. But in general, I think the Europeans have 
a jet fuel SPRO, do they not? So, they are basically reserving 
jet fuel as a way to help build stability. And I, if we're 
looking at our current situation here, another way to look at 
this is just to say, you know, that you're going to produce an, 
you're going to produce green jet fuel as a way to even help 
mitigate price in the future. If we're already doing a SPRO, 
why not help stabilize prices by having an alternative source 
that you could be producing?
    Mr. Altman. That is a good question for me to answer, 
because I was part of the swathee European SWAFEA biofuels 
initiative, which is the path that the EU pursued.
    Until a year ago, they had effectively no jet alternative 
fuel program. They really ran a program to establish if ETS was 
sufficient to achieve their goals. And quite frankly, it held 
back their jet fuels program.
    They now have a program, and it's really sprung up in three 
different places--in Germany, in France and in Spain. CAFFI had 
an exhibition at the Paris Air Show. We were privileged to have 
Secretary Vilsack there, Secretary LaHood. And at that 
particular show we had each of those international initiatives 
come into play. But, I can tell you, what USDA is doing, what 
DOE is doing, what FAA is doing are the envy of all the groups 
in Europe. And they don't really have a process.
    That's why 80 percent of the fuel projects around the world 
in biofuels for aviation come from U.S. companies. It's a great 
export opportunity for us.
    Senator Cantwell. I think we are exporting. So----
    Mr. Altman. Yes.
    Senator Cantwell. Anyway. Well, thank you very much to the 
panel. Appreciate everybody's testimony today.
    We'll leave the record open. If my colleagues have 
questions, we hope you'll respond to those and submit those for 
the record.
    Senator Cantwell. But, thank you for pioneering in this 
very important area of green aviation fuel.
    This hearing is adjourned.
    [Whereupon, at 12:02 p.m., the hearing was adjourned.]

                            A P P E N D I X

  Prepared Statement of Jim Rekoske, Vice President/General Manager, 
             Renewable Energy and Chemicals, Honeywell/UOP

    Senator Cantwell, Senator Thune, and distinguished members of the 
Subcommittee; thank you for allowing me to testify today on behalf of 
Honeywell UOP's Renewable Energy and Chemicals business. As Vice 
President and General Manager of the business unit, I am very excited 
to submit the following progress report to the Aviation Operations, 
Safety, and Security Subcommittee.
    In 2007, Honeywell UOP leveraged its nearly 100 years in refining 
technology and process expertise to form its Renewable Energy and 
Chemicals business. Tasked with providing new and adapted technology 
for processing renewable energy sources in petroleum refineries, the 
business unit has grown considerably in the past 5 years, and is a 
clear leader in the drop-in renewable transportation fuels market.
    Since its inception, our team has successfully developed and tested 
multiple forms of transportation fuel including renewable diesel, 
renewable gasoline, and renewable jet fuel made from a variety of 
sustainable feedstocks available around the globe. The robust processes 
that have enabled our team to so rapidly jump over the technological 
hurdles that we have faced have also enabled our supply chain partners, 
and the entire renewable fuel segment to grow to a point where we are 
on the precipice of providing real volumes to end use customers.
    The cornerstone of these achievements has been the successful 
production and test of Honeywell Green Jet Fuel.TM From our 
initial contract with the Defense Advanced Research Projects Agency 
(DARPA) for the development of jet fuel from renewable sources, we have 
been a willing partner of both private industry and the Department of 
Defense. Our Green Jet Fuel has been proven in 17 military and 
commercial applications to date, and the more than 700,000 gallons we 
have produced have performed exceptionally. Notable features include:

   True feedstock flexibility as our fuels have been made using 
        a variety of purpose grown inedible crops, algal oil, and 
        animal fats

   Performance at or above all flight specifications, including 
        running with a higher energy density in flight than petroleum 
        fuel

   A reduction in net carbon emissions up to 85 percent lower 
        than petroleum jet fuel

   Powerful enough to fuel the first renewable supersonic 
        flight of the Navy F/A 18 Green Hornet

   Precise enough to power the Air Force's premier 
        demonstration team, the Thunderbirds, in acrobatic performances

   Robust enough to fuel the world's first renewable 
        transatlantic flight of a Gulfstream G450

    These achievements are notable as we are at a critical point in the 
developmental history of the renewable fuels industry. We owe the 
members of this committee and your colleagues in the defense community 
a debt of gratitude for your partnership and support over the last 5 
years.
    Honeywell refining technology has been used to produce 100 percent 
of the fuel used by the Department of Defense in seven demonstrations 
conducted on various Army, Navy, and Air Force platforms including 
final certification of the Air Force C-17 and F-16 aircraft. Fuel made 
from Honeywell technology has also been used in ten commercial 
demonstration flights to date. These flights, along with collaboration 
with the FAA, ASTM International, and other industry leaders, helped to 
establish the proper specifications for aviation fuel made from natural 
oils and fats and resulted in the recent approval of this product by 
ASTM International for commercial flight.
    Thanks to the efforts of the Federal Government, we are one step 
closer to realizing commercialization of these products for both 
defense and domestic use. However, we at Honeywell (like everyone in 
this room) are not satisfied with the progress made to date. Only when 
we are refining and selling volumes measured in millions of barrels, 
rather than thousands of gallons, will we be pleased with the state of 
the industry.
    It is for this reason that we are writing today. We urge the 
members of this committee to support and heed the advice of those 
testifying. It is because of the efforts of those on the panel that we 
have taken such a strong position. It is worth mentioning instrumental 
partnerships:

   Leading aircraft manufacturer, Boeing has been a significant 
        partner to Honeywell both for the testing of feedstock 
        sustainability and in multiple in-flight tests. A leader in the 
        aviation field, their cooperation and input has been critical 
        throughout our development process. Boeing's commitment to 
        sustainable fuel is proof that industry leaders are dedicated 
        to growing this field. We will continue our partnership with 
        both large and small industry players, on programs that promote 
        commercial use of biofuels and increased energy independence as 
        well as the creation of ``green'' jobs to support a new 
        biofuels infrastructure.

   Future customer, The United States Air Force has conducted 
        five demonstration flights with Honeywell Green Jet and has 
        been a key partner in helping our team learn how best to design 
        fuels for defense aviation.

   Feedstock provider, Sustainable Oils has played an important 
        role in the growth and acceptance of Camelina as a feedstock 
        for renewable jet fuel. Honeywell and Sustainable Oils have 
        collaborated on every demonstration of camelina-based renewable 
        jet fuel to date. Acting as the harvester and processor of 
        camelina oil, Sustainable Oils has provided Honeywell with high 
        volumes of oil, which we have successfully converted into jet 
        fuel. Without sufficient feedstock, Honeywell Green Jet Fuel 
        cannot be a reality, and we believe that in the near term, 
        camelina offers the promise of providing real volumes for 
        commercial use. It is thanks to companies like Sustainable Oils 
        that we have been able to perfect our refining process, and 
        deliver needed gallons to both private industry and the defense 
        community.

   Finally, regulatory and technological enabler, the Federal 
        Aviation Administration (FAA) has funded the development of 
        mature technology for Fuel Burn Reduction and test aviation 
        biofuels for use in the Gas Turbine Engines from our aerospace 
        division. This is enabling emissions benefits and cost savings 
        for both the hardware of flight and the fuel used to power it.

    I mention every company testifying because nearly the entire supply 
chain is represented in today's pane. We at Honeywell are working 
across the spectrum for solutions to our Nation's energy needs, 
believing that only through an honest appraisal of how we consume 
energy, can we make a real impact, and rise to the energy demands of 
the future while maintaining sustainability.
    Thank you for taking the time to hold this hearing and consider our 
testimony. We stand ready to push this industry toward 
commercialization, and will continue to act as the turnkey solution 
provider for the multitude of renewable fuels companies that will meet 
the demand of the aviation industry and beyond.
                                 ______
                                 
 Response to Written Question Submitted by Hon. John D. Rockefeller IV 
                         to Dr. Lourdes Maurice

    Question. What are the primary activities the FAA supports to 
foster the development of alternative fuels?
    Answer. The FAA is engaged in a number of activities. The major 
ones include:

        a. The FAA has the responsibility to make sure that any 
        aircraft, aircraft engine or part, or fuel that is used in 
        aviation is safe and performs to set standards. The FAA does 
        not directly approve fuel but rather approves aircraft to 
        operate with fuel that meet specifications, such as those set 
        by ASTM International. The FAA is very engaged in participating 
        in the process to set specifications--FAA staff participates in 
        ASTM International and FAA has sponsored testing to support the 
        ASTM international process. The FAA works very closely with our 
        sister departments and agencies as well as industry in these 
        endeavors.

        b. Through CLEEN, the FAA is sponsoring efforts--in 
        collaboration with industry--to test fuels and evaluate fuels. 
        Last year, FAA received additional resources for alternative 
        fuels, and is pursuing efforts to conduct engine durability 
        tests with alternative fuels, and to perform key testing to 
        support qualification and certification of novel jet biofuels 
        from alcohols, pyrolysis, and other processes.

        c. FAA is engaged in environmental evaluations--from direct 
        engine measurements to analyses to establish life cycle 
        emissions and sustainability criteria. That work is primarily 
        performed through the Partnership for AiR Transportation Noise 
        and Emissions Reduction (PARTNER) Center of Excellence as well 
        as the John A. Volpe National Transportation Systems Center.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                          Dr. Lourdes Maurice

    Question 1. Dr. Maurice, the Future of Aviation Advisory Committee 
Report to Secretary LaHood considers success if ``approximately 5 
percent of aviation jet fuel could come from sustainable low-carbon 
lifecycle sources by 2020. These new fuels could reach majority status 
by 2050.'' Do you believe the 5-percent goal is achievable?
    Answer. The goal of having 5 percent of aviation fuel comes from 
alternative fuels by 2020 translates to roughly a bit over a billion 
gallons. The FAA has set a target for use of 1 billion gallons of 
alternative aviation fuel by 2018, which is consistent with the 5 
percent and which the FAA believes is achievable.

    Question 1a. Do you believe it is ambitious enough target?
    Answer. The goal is aspirational and very ambitious. It requires 
that the industry grow from making thousands of gallons to a billion 
gallons in 7 years. The good news is that the fuels are qualified for 
use and we know how to make them. Moreover, we are working hard to 
qualify additional classes of fuels.

    Question 1b. What do you see as the major challenges for 
alternative fuels to reach majority status prior to 2050?
    Answer. The challenges are building the infrastructure to produce 
the fuels, including feedstock availability. Also, we must make a 
careful examination of sustainability; that is, we have to make sure 
there are no unintended consequences. However, the FAA is confident 
that with the will, which includes resources, our Nation and our 
industry are up to the task.

    Question 2. Dr. Maurice, if the overall federal strategy is to have 
as many different feedstock and process pathways for creating 
alternative fuels as possible, having ASTM certifying fuel 
specification using different processes are critical. Which processes 
do you see as being next in the queue for ASTM to approve?
    Answer. Jet fuels from other advanced processes such as pyrolysis, 
alcohol oligomerization, and advanced fermentation are being 
investigated. Fuel samples are being evaluated and the testing to 
support ASTM approval in underway.

    Question 2a. In the Senate-passed FAA bill, Senator Warner and I 
created a grant program for conducting research in the use of 
alternative fuels as well as a Center of Excellence for Alternative 
Jet-Fuel Research in Civil Aircraft. Assuming the section remains in 
conference report, do you believe that grant program and the Center can 
be utilized to collect the data necessary to speed up the standards 
process for certifying fuels specification made with new processes?
    Answer. Such a Center of Excellence could serve this purpose, along 
with efforts by industry and government labs. We note, however, that 
Centers of Excellence are generally university-led and the potential 
university participants do not generally have the expertise and 
infrastructure for collecting data to support fuel specification 
approvals. The Center of Excellence might be more valuable in exploring 
sustainability criteria and to identifying new classes of fuels. We 
will, of course, structure the Center to best advance national 
alternative aviation fuels goals and in accordance with any 
legislation.

    Question 3. Dr. Maurice, what is the status of using biofuels for 
general aviation aircraft?
    Answer. Separate from our work with jet fuel, the FAA is partnering 
with industry to investigate unleaded alternative fuels to replace the 
current avgas. However, avgas presents a more difficult technical 
hurdle to identify a ``drop-in'' replacement fuel, and the limited 
resources of the GA community make this an even more challenging 
initiative.
    General aviation faces mounting environmental pressure to curtail 
its use of lead-containing aviation gasoline (avgas) in piston engine 
aircraft. Lead is a known toxic substance, but it provides performance 
benefits that aircraft piston engines rely on. The FAA is committed to 
ensuring that the approximately 190,000 small aircraft powered by 
piston engines have a safe fuel to perform their wide variety of 
important roles.
    FAA continues to support research on unleaded avgas, including bio 
derived avgas alternatives, at the FAA's William J. Hughes Technical 
Center in Atlantic City, New Jersey. FAA recently expanded its role by 
establishing an Aviation Rulemaking Committee (ARC) to develop a go-
forward strategy and plan to help industry develop and deploy an 
unleaded avgas. The ARC is comprised of key stakeholders from the 
General Aviation and fuel industry. It is currently in progress and 
expects to issue a recommendation by early calendar year 2012.
    Earlier this year, the FAA and industry stakeholders led the effort 
at ASTM International to approve a grade of avgas with 15 percent less 
lead. This new avgas, called 100VLL (for ``very low lead''), can be 
used on all current aircraft and is intended as an interim solution to 
a completely lead-free fuel.

    Question 4. Is there any storage issues associated with aviation 
biofuels? Do you expect aviation biofuels to degrade if they are stored 
for appreciable periods of time?
    Answer. Unlike biodiesel, aviation biofuels are essentially the 
same chemical composition as petroleum-derived jet fuel, so they are 
considered ``drop-in'' fuels. These drop-in fuels do not have any 
special storage or handling requirements and they can be freely co-
mingled with the jet fuel currently in use today. However, we are being 
cautious and conducting studies to make sure there are no issues with 
long term, prolonged use of aviation jet biofuels.
                                 ______
                                 
 Response to Written Question Submitted by Hon. John D. Rockefeller IV 
                                  to 
                            Billy M. Glover

    Question. Can you discuss broadly how the development of 
alternative fuels creates job growth across the supply chain?
    Answer. Focusing the power of U.S. agriculture on the production of 
alternative fuels creates jobs in rural America (building and operating 
processing facilities) and increases farm income. Additional markets 
are created for growers, bolstering farm income; jobs are created to 
transport pre-processed raw biomass; construction jobs are added to add 
fuel processing and storage facilities; fuel processing and 
distribution jobs are added as new processing capability comes on-line; 
and finally, the new fuel strengthens the sustainability of both 
commercial and military aviation. Commercial aviation drives $1.2 
trillion in annual economic activity and 11 million well-paying 
American jobs (source: Air Transport Association of America.)
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                            Billy M. Glover

    Question 1. Mr. Glover, you view Boeing's role as facilitating 
multiple feedstocks, multiple processing methods, and multiple supply 
chains globally. My understanding is that the company continues to be 
active in the ASTM standards development process. According the Dr. 
Maurice's testimony, the next few candidate aviation fuels will be far 
enough along for consideration by the standards organization in 2013 
timeframe. Are there things the Federal Government do to accelerate the 
standards process?
    Answer. Due to the increased attention over the last few years, we 
now have a much improved jet fuels approval process. However, scaling 
up new fuel processing methods to produce sufficient quantities for 
testing, and actually producing fuel and running the engine-related 
tests remain challenges. Lack of funding for these activities is the 
pacing item in completion of jet fuels approvals. Federal funding for 
processing methods development and fuels testing would greatly assist 
the standards approval process. Use of the unique facilities of the 
Department of Defense and National Aeronautics and Space Administration 
would also speed approvals.

    Question 2. Mr. Glover, as you mentioned in your testimony, 
Sustainable Aviation Fuels Northwest made a number of recommendations 
* regarding the creation of commercially viable aviation 
biofuel supply chain in the four state region that includes Washington, 
Oregon, Idaho, and Montana. One idea is for legislation to extend the 
tax credit under Section 40A for producers of biodiesel, renewable 
diesel, and certain aviation fuels derived from biomass. Why would 
extending the tax credit make such a difference?
---------------------------------------------------------------------------
    \*\ This report is available at http://www.safnw.com/wp-content/
uploads/2011/06/SAFN_
2011Report.pdf.
---------------------------------------------------------------------------
    Answer. Extending the tax credit helps to make the business case 
for a nascent industry where every advantage is needed to get through 
the initial stages of a new start by fostering attractive market 
conditions for investment. Adding certainty to such a tax credit also 
is critical. Providing a tax credit for a definitive period of time 
provides certainty for businesses and financiers to make long-term 
investment decisions thereby speeding up the market entry for these 
fuels, which in turn, will bring greater economic development.
                                 ______
                                 
 Response to Written Question Submitted by Hon. John D. Rockefeller IV 
                                  to 
                               Tom Todaro

    Question. Can you discuss broadly how the development of 
alternative fuels creates job growth across the supply chain?
    Answer. The development of alternative fuels, particularly biomass-
based fuels, creates jobs in numerous sectors, at various skill levels, 
in geographic regions throughout the United States.

   Feedstock Supply creates jobs in both rural and non-rural 
        areas, including high tech research and development for higher 
        yield, more sustainable varietals of energy crops; jobs in 
        farming and related agriculture industries (e.g., seed, water 
        and fertilizer services); and jobs related to the collection, 
        harvest, storage, transportation and delivery of biomass to 
        biorefineries.

   Fuel Production creates jobs in the planning, design, 
        engineering, construction, operation and maintenance of 
        biorefineries.

   Fuel Distribution creates jobs in not only the 
        transportation sectors (e.g., truck drivers) but also in the 
        planning, design, engineering, construction, operation and 
        maintenance of alternative fuel pipelines and associated 
        infrastructure. Alternative fuel distribution also creates jobs 
        in retail fuel distribution.
                                 ______
                                 
   Response to Written Question Submitted by Hon. Maria Cantwell to 
                               Tom Todaro

    Question. Mr. Todaro, one of the ways you recommend that Congress 
can help reduce or remove some of these obstacles to widespread 
commercialization is to ensure that EPA makes a clear determination 
that camelina-based jet and renewable diesel fuels qualify under the 
existing Renewable Fuel Standard. Can you explain to this committee why 
qualifying for a Renewable Identification Number and receiving market-
based credits is important?
    Answer. Without a Renewable Identification Number, a domestic 
renewable fuel producer may not sell renewable fuel in the United 
States. Moreover, petroleum refiners and importers are not obligated to 
procure ``RIN-less'' fuel, as these entities may only comply with their 
annual volumetric obligations under the Renewable Fuel Standard (RFS2) 
by submitting valid RINs associated with volumes of renewable fuel. 
Camelina meets all necessary criteria to qualify as a form of renewable 
biomass under RFS2, but EPA has yet to certify a fuel pathway for fuel 
derived from this feedstock. The failure to certify camelina's 
eligibility as a form of renewable biomass under RFS2 in the near 
future could impose significant legal and commercial barriers to the 
production of camelina-based renewable fuel.
                                 ______
                                 
 Response to Written Question Submitted by Hon. John D. Rockefeller IV 
                                  to 
                            Sharon Pinkerton

    Question. How do you see the development of biofuels fitting in 
with the airlines' goals of reducing emissions and limiting the impact 
of aviation on the environment?
    Answer. Although the U.S. airlines contribute only about 2 percent 
of the Nation's carbon dioxide (CO2) inventory, our airlines 
are committed to continuing their strong record of fuel efficiency and 
CO2 emissions savings and are relentlessly pursuing an array 
of initiatives in this regard. At the core of these measures is the ATA 
carriers' commitment to technology, operational and infrastructure 
measures to continue our drive toward ever-greater fuel and 
CO2-efficiency improvements. This includes tremendous 
airline investment in new aircraft, new aircraft engines, navigation 
aids and enhanced operational procedures. In addition, ATA and its 
airlines are dedicated to developing commercially viable, 
environmentally friendly alternative jet fuel, which could be a game-
changer in terms of aviation's output of CO2. To this end, 
as noted in my testimony, ATA is a founder and co-leader of the 
Commercial Aviation Alternative Fuels Initiative (CAAFI) , a 
consortium of airlines, government, manufacturers, fuel suppliers, 
universities, airports and other stakeholders working to hasten the 
development and deployment of such fuels.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                            Sharon Pinkerton

    Question 1. Ms. Pinkerton, you heard Mr. Yonkers speak about the 
Air Force's ambitious plans for purchasing alternative jet fuels. I 
know the Navy has similar plans. Over the next few years, how important 
are the Department of Defense's purchasing decisions in shaping the 
market for alternative fuels for commercial aviation and building 
capacity for the different feedstock producers and processors?
    Answer. As noted in my testimony, the aviation industry and would-
be alternative jet-fuel suppliers are on the cusp of creating a viable 
alternative jet-fuel industry. But government support is needed in the 
near team to provide financial bridging and other tools necessary to 
help us get over the cusp. One area of support is having the military 
join the commercial airlines in sending the market signals necessary to 
give investors the confidence to invest in the aviation alternative 
fuels industry and to stimulate would-be producers to go forward. In 
this regard, the military's plan to purchase alternative aviation fuels 
is critical. However, as recognized in the Strategic Alliance between 
ATA and the Defense Logistics Agency, the procurement arm for the 
military, military demand alone is not enough of a market signal. As 
commercial aviation represents a much greater portion of demand, it is 
important that we continue to work together, as contemplated in our 
Strategic Alliance. (More detail on this alliance is available at 
http://www.airlines.org/News/Releases/Pages/news_3-19-10.aspx). 
Further, market signals are only one part of the equation. As I noted 
in my testimony, it is critical that existing federal programs that 
have been effective in supporting development and deployment of 
alternative aviation fuels be maintained and, if possible, expanded.

    Question 2. For example, in this early stage of market development, 
would a DOD decision to enter into a long term contract to purchase 
biofuel or synthetic fuel, exclusively, give one fuel such a first 
mover advantage that the other, or yet to be approved fuel 
specification such as alcohol-to-jet, will never be able to get a 
toehold?
    Answer. We do not see a determination by the military to enter into 
a long-term contract with any particular supplier as providing an 
obstacle to other suppliers or to promising alternatives. As noted, the 
military is only a small portion of U.S. demand for jet fuel--needing 
about as much per year as a mid-size commercial airline. Thus, it is 
difficult to envision it swinging the market. What is a greater worry 
is what will happen if the U.S. military were to not be able to pursue 
alternative fuels with vigor. Without the military joining commercial 
aviation in the pursuit of alternatives, the opportunity for a strong 
market signal would be reduced and the military would not be in line 
for much-needed supply. That is why ATA is on record as supporting 
legislation that would give the military the authority to enter into 
long-term contracts, which it does not now have.
                                 ______
                                 
   Response to Written Question Submitted by Hon. Maria Cantwell to 
                             Judith Canales

    Question. Ms. Canales, in order to have a sustainable aviation 
biofuel system, it is imperative that sources of biomass be identified 
that will be reliably available. The non-food crops, such as camelina, 
are relatively primitive, requiring robust and ongoing genetics, 
breeding, agronomic studies so these crops can be optimized for various 
production locales. Such research and develop is historically conducted 
by America's land grant universities. What steps will USDA take to 
ensure that the necessary agricultural research and grower education is 
funded for the development of non-food crop as feedstocks for aviation 
biofuels?
    Answer. USDA understands that support to our farmers and 
researchers is necessary to provide adequate non-food feedstocks for 
the domestic production of biofuels. To ensure that research, 
education, and extension efforts are coordinated, the USDA has followed 
the guidance of the President's Biofuels Interagency Working Group's 
Growing America's Fuels report, and developed a coordinated effort 
directed to help supply the agricultural and forest-based feedstocks 
that are needed to support commercial production of aviation and other 
advanced biofuels.
    One particular effort has been the USDA establishment of five 
regional USDA Biomass Research Centers which were established between 
the Agricultural Research Service (ARS) and the U.S. Forest Service 
Research and Development (FS) utilizing the two agencies' nation-wide 
networks of scientists and facilities. The National Institute of Food 
and Agriculture (NIFA) Agricultural and Food Research Initiative (AFRI) 
is also offering large competitive grants for coordinated agricultural 
projects or CAPs that look to support regionally directed research and 
grower education through extension to deploy improved feedstocks and 
production systems that will produce aviation biofuels. NIFA currently 
plans to offer this competitive program again in Fiscal Year 2012. The 
Regional Centers and AFRI CAP projects have been designed to focus, 
coordinate, and accelerate the science and technology needed to 
incorporate feed stock production into existing agricultural and forest 
based systems.
    Specific to the development of feedstocks for aviation fuel 
production, a network of ARS research facilities in the western U.S. in 
cooperation with NIFA supported land grant universities and industry 
partners are determining how to incorporate camelina and other oil seed 
crops that can be produced in rotation with cereal and other crops. 
Research is also being done with support from the Navy Office of Naval 
Research to determine where oil seeds can be produced on marginally 
productive and abandoned lands and least adversely impact food crop 
yields and existing commodity markets. Both extramural and intramural 
USDA research supports the genetic development of other high-
performance dedicated biomass feedstocks and sustainable systems for 
their production. NIFA supports work on biofuels through several 
programs. For example, NIFA formula funds are made available to land 
grant universities, genetic and breeding research supports improvements 
to non-food crops for bioenergy and biofuels production, and the 
extension of this information to growers. These funds also support work 
on the production and management of these crops. Fundamental research 
for crop improvement, diseases, pests and the economics of feedstock 
crops is supported by the AFRI foundational competitive grants program.
    The Biomass Research and Development Initiative competitive grants 
program supports research, development and demonstration projects that 
address three legislatively identified technical areas at the same time 
in each supported project. These areas include: (A) Feedstocks 
development, (B) Biofuels and biobased products development, and (C) 
Biofuels development analysis. The intent of requiring integration of 
the three areas is to encourage a collaborative problem-solving 
approach to all studies funded under BRDI, to facilitate formation of 
consortia, identify and address knowledge gaps, and accelerate the 
application of science and engineering for the production of 
sustainable biofuels, bioenergy and biobased products.
    All of these USDA programs, including research, strategically help 
to address the immediate and short-term needs for the production of the 
feedstocks necessary to meet the next 21 billion gallons of biofuels 
under the Renewable Fuel Standard (RFS2), including the needs for drop-
in aviation and military fuels.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                             Richard Altman

    Question 1. Mr. Altman, do you believe that the largest remaining 
obstacle for the creation of a functioning market in aviation biofuels 
is the ability of key participants in the supply chain to secure the 
financing necessary to develop commercially useful volumes of 
alternative fuel? A number of witnesses spoke about their expectation 
that ATSM will certify alcohol-to-jet fuel specification in the next 
few years. Do expectations regarding the future alcohol-to-jet fuel 
pathway impact the ability for key participants in HRJ fuel pathway 
supply chains to secure financing today?
    Answer. Yes, securing financing is the key to success going 
forward. Key financing agencies backed by the U.S. governments (such as 
SBA, and trade groups) must view qualified aviation fuels technologies 
as ``proven.'' Right now funding is constrained because the government 
agencies backing loans will not fund biofuel facilities.
    No HRJ facilities are not jeopardized by the expectations of ATJ 
pathways being developed nor has it been an issue with IPO's for HRJ 
companies to my knowledge. Assuring affordable feedstocks by increasing 
yields for HRJ (HEFA) feedstocks is the key to meeting HRJ potential. 
ATJ qualification is needed to improve supplies to allow us to 
eliminate imported oil dependence.

    Question 2. Mr. Altman, one of CAAFI's most significant 
accomplishments was developing the Fuel Readiness Level for different 
pathways and a Feedstock Readiness Tool. Sustainable Aviation Fuels 
Northwest Identified four potential feedstocks for the region--oilseed 
crops such as camelina, forest residue, municipal and industrial solid 
wastes, and algae production. Where do they rank relative to each other 
in terms of readiness?
    Answer. Oilseed crops such as camelina are ready now. Forest 
residue waste for processing via fischer tropsh processes are ready now 
for commercial use.
    Municipal waste to the degree it requires pre treatment of the 
waste to separate out unusable parts or to make them useable is more 
risky from a production readiness perspective. I trust that projects 
such as the Solena, British Airways project will handle that those 
issues at FRL levels beyond certification.
    Algae is actually an oil seed crop so FRL is not an issue. What is 
an issue is the economics and energy intensity of open and closed pond 
systems to produce both economic and environmentally acceptable results 
associated with such issues as water extraction. This too is a 
production readiness challenge. I personally have not seen the evidence 
that we are there in these areas. Sufficient research funding is in 
place in my view through DARPA and DOE to address this challenge but it 
is not clear when or if the challenge will be met. I do not think that 
we should depend on algae economics coming home to address the biofuels 
challenge with any certainty. Some technologies (e.g., hydrogen fusion) 
simply do not come home in a timely manner to address concerns. I am 
hopeful that this is not the case with Algae . . . on a scaled 
producible basis. But there is a risk that this is the case according 
to the experts that I have spoken to.

    Question 3. Mr. Altman, AltAir Fuels was able to get over a dozen 
airlines to agree to accept up to 750 million gallons of alternative 
fuel over 10 years. In 2009, airlines operating at SeaTac consumed 411 
million gallons of jet fuel.
    Answer. Not sure what the question is here but the statement is 
accurate to the degree that the intent was established via MOU. 
Definitive terms have yet been signed but we are helpful and supportive 
of the Altair project as a ``first of its kind'' production facility in 
the U.S.

    Question 4. There are different business models how fuel is stored 
and distributed at airports. At some airports, the tenant airlines form 
a fueling consortium and then hire a contractor to manage it. At other 
airports, individual airlines are responsible for managing their own 
fuel needs. Then there are those airports where the airport runs 
everything. Do you believe the prevailing business model at an airport 
for storing and distributing aviation fuel will impact the adoption of 
aviation biofuels by commercial airlines operating at the airport?
    Answer. I believe that this business model is helpful in that 
allows all the airlines at the airports to share the risk of new 
product introduction. It also assures the broadest acceptance across 
the industry.

    Question 5. Mr. Altman, the military tries to simplify some of its 
logistics by having some of its ground support vehicles at its bases 
operate on jet fuel. The EPA won't let Jet A be used for ground service 
equipment at commercial airports because of the amount of sulfur in the 
fuel. Aviation biofuel does not contain sulfur. If the EPA would allow 
green jet fuel to be used to run ground service equipment, would that 
help increase demand by airports?
    Answer. This is more a question for ATA fuel buyers than for me. I 
encourage you to ask Ms. Pinkerton.
    There are more factors than EPA however.
    For example we need to look at the taxation rules for GSE fuel and 
jet fuel I understand that they are different and may limit the use of 
Jet fuel.
    I also think it important to the economics of airport use of fuel 
that the airports or airlines be permitted to distribute fuel diesel 
fuel use at the airport off-airport without consequence for projects 
funded by airport programs. My understand that this is a concern if we 
are to maximize the ability to use the airports as a concentrated 
distribution hub. I hope that we will investigate and expose this issue 
more in case studies that we will be performing in the ACRP 02-36 
project under the Airport Cooperative Research program.

    Question 6. Mr. Altman, one of the reasons the approved HRJ fuel 
specification is a 50-50 blend rather than 100 percent biofuel is that 
the chemical composition doesn't react with the rubber seals in a way 
to ensure there is no fuel leakage. One alternative discussed is using 
seals made out of a different material. How complicated and expensive 
would it be to identify, locate, and replace seals throughout the 
fueling infrastructure and on aircraft? What is the potential of 
developing a pathway that would allow for a 100 percent biofuel rather 
than a blend?
    Answer. To date the need to qualify 100 percent biofuels has been 
academic in nature in that there has not been adequate supply to 
support facilities at the 100 percent level. Hence that portion of the 
agenda has been put on hold.
    Presently if fuel with less than 8 percent aromatic content (risk 
occurs with >50% HRJ or FT is used) is an environmental hazard 
associated with fuel leaks. The issue of whether it is more economic to 
change out seals or to require additives rich in aromatics (e.g., 
pyrolysis oil derive additives) has not been evaluated to my knowledge.
    In my view the Committee could offer to fund such an evaluation in 
conjunction with the increased support for advanced biofuels research 
similar to what was put in place in FY 10 for the advance biofuels 
supplemental funds which you approved. It would not be very expensive 
to do that evaluation in my view.
                                 ______
                                 
 Response to Written Question Submitted by Hon. John D. Rockefeller IV 
                                  to 
                               John Plaza

    Question. Can you discuss broadly how the development of 
alternative fuels creates job growth across the supply chain?
    Answer. Imperium Renewables was founded in 2004 and operates a 
100,000,000 gallon per year biofuel facility.

        i. Since 2004 our company has contributed the following to the 
        economy:

                1. We have employed over 150 people

                2. Provided over $12,000,000 in payroll benefits to our 
                employees in Washington State

                3. Provide jobs and opportunity for veterans returning 
                home from Iraq and Afghanistan at our biofuel facility

                4. Invested over $135,000,000 into Washington state 
                companies for construction and operation of our biofuel 
                facility

                5. Purchased over $350,000,000 of agricultural products 
                from the U.S. and Canada

                6. Sold over 85,000,000 gallons of biodiesel for more 
                than $340,000,000

                7. Offset over 1.35 billion lbs of CO2 (per 
                National Biodiesel Board)

                8. In total, our company has contributed over 
                $940,000,000 to the North American economy since 2004

        ii. With the enactment of EISA 2007 RFS2 and the creation of a 
        36 billion gallon per year market by 2023, our company is just 
        1/360th of the potential economic benefit to the U.S.

        iii. By adding the Department of Defense as a market for 
        biofuel producers, this economic engine can be accelerated and 
        enhanced to bring significantly more jobs than already are in 
        place with this burgeoning industry

        iv. Imperium's supply chain includes oilseed growers in rural 
        parts of the country, crushing facilities that extract the oils 
        from the feedstock, as well as transportation of raw materials 
        to the facility and of finished products from the facility. As 
        we expand our production, our demand for goods and services 
        throughout the supply chain will naturally increase. According 
        to a 2009 industry report by Bio Economic Research Associates, 
        ``direct job creation from U.S. advanced biofuels production 
        could reach 29,000 jobs by 2012, rising to 94,000 by 2016, and 
        190,000 by 2022.'' In addition, the report found that ``total 
        job creation, accounting for economic multiplier effects, could 
        reach 123,000 jobs in 2012, 383,000 in 2016, and 807,000 by 
        2022.''
                                 ______
                                 

           Center for a New American Security--September 2010

                        Fueling the Future Force

      Preparing the Department of Defense for a Post-Petroleum Era

                 By Christine Parthemore and John Nagl

Acknowledgments
    We would like to thank our colleagues at the Center for a New 
American Security (CNAS) for their valuable insights and comments 
throughout the research and writing process. Will Rogers, Dr. Kristin 
Lord, and more than a dozen colleagues all provided invaluable feedback 
and critiques. Joseph S. Nye, Jr. National Security Intern Alexandra 
Stark contributed her sharp, investigative research skills and 
excellent writing. We are grateful for external reviews of drafts from, 
among others, CDR Herb Carmen, USN, Frank Hoffman of the Navy Staff and 
Jim Morin of Hogan Lovells. As always, Liz Fontaine, Ashley Hoffman and 
Shannon O'Reilly provided guidance and advice through the production 
process. Many experts from the U.S. Navy, Air Force, Army, Marine 
Corps, and the Office of the Secretary of Defense, and other U.S. 
Government agencies and NGO's, contributed to the discussions from 
which we derived this analysis; however we alone are responsible for 
any errors or omissions.

I. Introduction
    The U.S. Department of Defense (DOD) must prepare now to transition 
smoothly to a future in which it does not depend on petroleum. This is 
no small task: up to 77 percent of DOD's massive energy needs--and most 
of the aircraft, ground vehicles, ships and weapons systems that DOD is 
purchasing today--depend on petroleum for fuel.\1\ Yet, while many of 
today's weapons and transportation systems are unlikely to change 
dramatically or be replaced for decades, the petroleum needed to 
operate DOD assets may not remain affordable, or even reliably 
available, for the lifespans of these systems.
---------------------------------------------------------------------------
    \1\ U.S. Energy Information Administration, Annual Energy Review 
2009, ``Table 1.13: U.S. Government Energy Consumption by Agency and 
Source, Fiscal Years 2003, 2008 and 2009.'' (19 August 2010); and BP, 
Statistical Review of World Energy (2010).
---------------------------------------------------------------------------
    To ready America's armed forces for tomorrow's challenges, DOD 
should ensure that it can operate all of its systems on non-petroleum 
fuels by 2040. This 30-year time-frame reflects market indicators 
pointing toward both higher demand for petroleum and increasing 
international competition to acquire it. Moreover, the geology and 
economics of producing petroleum will ensure that the market grows 
tight long before petroleum reserves are depleted. Some estimates 
indicate that the current global reserve-to-production (R/P) ratio--how 
fast the world will produce all currently known recoverable petroleum 
reserves at the current rate of production--is less than 50 years.\2\ 
Thus, given projected supply and demand, we cannot assume that oil will 
remain affordable or that supplies will be available to the United 
States reliably three decades hence. Ensuring that DOD can operate on 
non-petroleum fuels 30 years from today is a conservative hedge against 
prevailing economic, political and environmental trends, conditions and 
constraints.
---------------------------------------------------------------------------
    \2\ Energy Information Administration, ``Crude Oil and Total 
Petroleum Imports Top 15 Countries'' (May 2010 Import Highlights); and 
BP, Statistical Review of World Energy (June 2010).
---------------------------------------------------------------------------
    It will take decades to complete this transition away from 
petroleum. However, DOD has already laid important groundwork. The 
development, testing and evaluation of renewable fuel conducted by the 
armed services to date mark the first steps in guaranteeing DOD's long-
term ability to meet its energy needs. DOD should build on this work 
and develop a strategy that guarantees its ability to operate worldwide 
in the event of petroleum scarcity or unavailability.
    The Center for a New American Security (CNAS) launched a project in 
September 2009 to examine DOD's energy challenges and recommend a path 
forward. We convened DOD leaders and nongovernmental experts; 
researched current laws, requirements and projects; and visited 
military bases around the country to discuss DOD's energy challenges 
and opportunities. From this research, we concluded that DOD needs a 
long-term strategy to adopt alternative fuels based on our reading of 
current trends in petroleum availability and use, as well as our 
identification of petroleum dependence as a long-term vulnerability for 
DOD.
    DOD officials increasingly understand this vulnerability. During 
the course of our project, the Navy appointed two-star officers to lead 
two task forces on energy and climate change. Their activities, which 
began quietly within the bureaucracy, are now well-known examples of 
leadership by the U.S. armed forces. The Air Force and Navy flight-
tested camelina-based biofuel blends in the past year.\3\ The Air 
Force's Air Mobility Command and the Office of the Secretary of Defense 
(OSD) are working to increase energy efficiency and maximize fuel 
savings in existing platforms and new acquisitions. The Quadrennial 
Defense Review (QDR) presented instructions for integrating energy 
considerations into how DOD does business. Bases around the country are 
investing in solar, wind and geothermal projects. DOD is working to 
comply with federal energy mandates, and in particular those found in 
the Energy Independence and Security Act (EISA) of 2007, President 
Barack Obama's October 2009 Executive Order on resource conservation by 
federal agencies and defense authorization acts.
---------------------------------------------------------------------------
    \3\ Jason Paur, ``Air Force Debuts Biofuel-Guzzling Warthog,'' 
Danger Room (30 March 2010); and Liz Wright, ``Navy Tests Biofuel-
Powered `Green Hornet','' Official Website of the United States Navy 
(22 April 2010).
---------------------------------------------------------------------------
    Though each of the services has admirably developed its own energy 
strategy to improve its near-term energy management, DOD must also 
develop a comprehensive long-term energy strategy. The strategies 
developed by individual services focus heavily on electricity usage at 
domestic installations, which accounts for a relatively small fraction 
of DOD's energy needs, and most goals within these strategies do not 
look beyond 2015 or 2020--a timeline that is too short to ensure DOD's 
long-term energy security. Moreover, there is no single official who 
oversees DOD's entire energy portfolio; authority within DOD is 
currently divided, which is likely to complicate implementation of the 
strategy. This report lays out the strategic necessity for DOD to find 
alternatives to petroleum over the next 30 years and then presents 
important steps in achieving that long-term goal.
    Transitioning away from petroleum dependence by 2040 will be 
enormously difficult, but fortunately the U.S. defense sector has made 
several energy transitions successfully in its history. In particular, 
it moved from coal to petroleum to nuclear power in its ships. In a 
similarly seismic shift, DOD rapidly increased its reliance on 
electronics, space assets and computer systems in modern warfare in 
ways that enhanced mission effectiveness. These experiences may offer 
lessons for DOD as it leverages an energy transition to maximize its 
strategic flexibility and freedom of maneuver.
    Now is an opportune time to make this transition. As the services 
redeploy from current wars, the Army (and to a lesser extent the other 
services) have years of reset ahead of them. Acquisition reforms and 
personnel restructuring initiatives launched by Secretary Robert Gates 
in 2009 and 2010 will continue through the Obama administration and 
likely beyond. Together, these developments will present opportunities 
to procure new, more energy-efficient systems.
    A successful transition away from petroleum will produce financial, 
operational and strategic gains. Reducing dependence on petroleum will 
help ensure the long-term ability of the military to carry out its 
assigned missions--and help ensure the security of the Nation. Though 
adopting nonpetroleum fuels will require an initial investment, it will 
likely be recouped in budget savings over the long term. Finally, 
moving beyond petroleum will allow DOD to lead in the development of 
innovative technologies that can benefit the nation more broadly, while 
signaling to the world that the United States has as innovative and 
adaptable force.
    This transition should not compromise readiness and, indeed, DOD 
must always put mission first. However, DOD need not choose between 
accomplishing its mission and minimizing the strategic risks, price 
fluctuations and negative environmental effects of petroleum 
consumption. By providing the private sector with stable market signals 
and incentives to invest in scaling up the fuels that meet its unique 
energy needs, DOD will never need to sacrifice performance or national 
security for energy security. Rather, reducing reliance on petroleum 
will only help the armed services to accomplish their missions in the 
years and decades to come.

              Table 1: DOD Energy Consumption by Fuel, 2009
------------------------------------------------------------------------
 2009 DOD Energy Consumption by Fuel Source, in Trillion British Thermal
                               Units (BTU)
-------------------------------------------------------------------------
                                                        Percentage  of
           Fuel Source                Energy Use             total
------------------------------------------------------------------------
Petroleum                                     679.7                77.2
------------------------------------------------------------------------
Natural Gas                                    74.2                 8.4
------------------------------------------------------------------------
Coal                                           16.2                 1.8
------------------------------------------------------------------------
Chilled water, renewable energy,                9.1                 1.0
 and other fuels reported as
 used in facilities
------------------------------------------------------------------------
Other electric                                101.1                11.4
------------------------------------------------------------------------
Total                                         880.3                99.8
------------------------------------------------------------------------
Source: Department of Energy, ``U.S. Government Energy Consumption by
  Agency and Source, Fiscal Years 2003, 2008 and 2009.'' Totals may not
  equal 100 percent due to rounding.

II. Why DOD Should Adopt Alternative Fuels
    Several factors challenge DOD's continued reliance on its existing 
petroleum-dominant energy strategy over the long term: direct risks to 
U.S. security; troubling supply and demand trends; the often-hidden 
external costs of fuel consumption; and a changing domestic political 
and regulatory environment.

The Risks of Petroleum Dependence
    The growing world demand for petroleum presents major geostrategic 
risks. High prices and rising demand are a boon to major suppliers and 
reserve holders such as Iran and Venezuela, which are unfriendly to the 
United States. It also affects the international behavior of rising 
powers such as China, which is on a quest to secure access to natural 
resources that is in turn expanding its influence around the globe. In 
Mexico, one of the top suppliers of petroleum to the United States, 
pipelines serve as an increasingly attractive target for dangerous 
cartels to fund activities that could undermine the Mexican government, 
destabilize the region and decrease U.S. homeland security.\4\ American 
foreign policy itself has been colored by its growing petroleum demands 
since the 1970s oil crises and subsequent declaration of the Carter 
doctrine, which stipulated that the United States would consider 
threats to the Persian Gulf region threats to its ``vital interests'' 
due to the strategic importance of its petroleum reserves.\5\
---------------------------------------------------------------------------
    \4\ Steve Fainaru and William Booth, ``Mexico's Drug Cartels Siphon 
Liquid Gold: Bold Theft of $1 billion in Oil, Resold in U.S., Has Dealt 
a Major Blow to the Treasury,'' The Washington Post (13 December 2009).
    \5\ President Jimmy Carter, ``State of the Union Address'' (23 
January 1980).
---------------------------------------------------------------------------
    Dependence on petroleum for 94 percent of transportation fuel is 
also a dangerous strategic risk for the United States given the 
leverage oil can provide to supplier countries. Many European allies 
have experienced such leverage in action with Russia periodically 
threatening to reduce or cutoff natural gas exports to countries highly 
reliant on their supplies (and in some cases carrying through with 
these threats). Similarly, national oil companies and OPEC can choose 
to increase or decrease their production rates to drive changes in the 
market.
    The more the United States reduces its dependence on petroleum, the 
better it can hedge against petroleum suppliers exerting political 
leverage over U.S. interests, including in times of crisis.
    At the operational level, heavy reliance on liquid fuels also 
constitutes a force protection challenge for DOD. Fuel supply convoys 
have been vulnerable to attack in both Iraq and Afghanistan, where the 
services have struggled to adapt to the challenges of terrorism, 
insurgency and violent extremism. In addition to minimizing these risks 
in the current wars, DOD must also conceptualize and plan for what the 
future will likely hold for America's security. The Navy's battle 
against pirates off the coast of the Horn of Africa foreshadows the 
littoral and unconventional challenges that await the United States in 
the coming decades, as populations continue to migrate toward the 
world's coastal area. These types of problems often manifest at major 
shipping chokepoints (including petroleum transit chokepoints), and 
addressing them will include distinctive fueling requirements. The Air 
Force, likewise, confronts dramatic changes in manned and unmanned 
flight, in addition to the proliferation of space technologies, all of 
which could dramatically alter fuel needs. In another example, one 
recently published AirSea battle concept focused on China notes that 
the type of conflict it outlines could require hardening fueling 
infrastructure, improving aerial refueling, ``stockpiling petrol, oil, 
and lubricants'' and potentially ``running undersea fuel pipelines 
between Guam, Tinian and Saipan.'' \6\ As the character of warfare 
changes, DOD will have to continue to consider the attraction of fuel 
supply lines to opponents.
---------------------------------------------------------------------------
    \6\ Jan van Tol, ``AirSea Battle: A Point-of-Departure Operational 
Concept'' (Washington: Center for Strategic and Budgetary Assessments, 
2010): 81-82.
---------------------------------------------------------------------------
Changing Supply and Demand
    DOD cannot be assured of continued access to the energy it needs at 
costs it can afford to pay over the long term. Today DOD meets its 
energy needs primarily through petroleum, which accounts for more than 
77 percent of DOD's total energy use.\7\ However, both demand and 
supply trends are likely to raise the price and perhaps even limit the 
availability of petroleum.
---------------------------------------------------------------------------
    \7\ U.S. Energy Information Administration, Annual Energy Review 
2008.
---------------------------------------------------------------------------
    The U.S. Energy Information Administration projects that world 
energy demand will grow from its 2007 level of 495.2 quadrillion 
British thermal units (Btu) to 738.7 quadrillion Btu by 2035--a steep 
increase. If current trends continue, energy demand in non-OECD 
countries will grow more than four times faster than in OECD 
countries.\8\ Global petroleum demand has increased steadily from about 
63 million barrels of oil per day in 1980 to more than 85 million 
barrels today, and will grow to 110.6 million barrels per day by 2035 
if current trends hold.\9\
---------------------------------------------------------------------------
    \8\ U.S. Energy Information Administration, Annual Energy Outlook 
2010, Table A1: ``World total primary energy consumption by region, 
Reference case, 2005-2035'' (11 May 2010).
    \9\ U.S. Energy Information Administration Website, ``Petroleum 
Statistics'' (26 January 2010); Annual Energy Outlook 2010, Appendix A.
---------------------------------------------------------------------------
    While global oil demand increases, the supply side of the equation 
is equally worrisome. At current production rates, the global R/P ratio 
is about 46 years (see Appendix I). Proved reserves (those recoverable 
under current conditions \10\) increasingly lie in the hands of 
national oil companies that are often hostile to U.S. interests. 
Venezuela, for example, holds over 100 years' equivalent of reserves at 
its current production rates. Thus, the U.S. reliance on countries such 
as Venezuela as a supplier could increase beyond the roughly 1 million 
barrels of petroleum it already imports from there every day.\11\ The 
reserve part of this ratio may increase, but we can also be certain 
that the demand half of the ratio will increase, and likely at a faster 
pace.
---------------------------------------------------------------------------
    \10\ The U.S. Department of Energy defines ``proved reserves'' as 
follows: ``Proved reserves are estimated quantities that analysis of 
geologic and engineering data demonstrates with reasonable certainty 
are recoverable under existing economic and operating conditions.'' 
U.S. Energy Information Administration, ``World Proved Reserves of Oil 
and Natural Gas, Most Recent Estimates'' (March 2009).
    \11\ Energy Information Administration, ``Crude Oil and Total 
Petroleum Imports Top 15 Countries'' (May 2010 Import Highlights); BP, 
Statistical Review of World Energy (June 2010).
---------------------------------------------------------------------------
Costs of Petroleum Dependence

   Heavy dependence on large fuel supplies can increase 
        operational vulnerabilities and make fuel supply infrastructure 
        a more valuable target.

   Every dollar increase in the price of petroleum costs DOD up 
        to 130 million additional dollars.

   Rising global demand, for instance in China, is increasing 
        the strategic importance of petroleum in ways that could be 
        detrimental to U.S. interests.

   Countries such as Iran and Venezuela could have the largest 
        remaining reserves in a few decades if current production rates 
        hold--and will gain leverage as a result.

   High levels of petroleum consumption are contributing to the 
        changing climate, which can bring destabilizing effects and 
        trigger new security challenges.

    The United States is already moving past the era of nearly complete 
reliance on petroleum for transportation fuel. Though it will take 
several decades to make this transition, the country should take every 
opportunity to hasten progress given projections of tight markets and a 
heightened potential for competition. This transition will require 
careful investments that account for the potential economic, 
environmental and geopolitical tradeoffs involved with all energy 
sources.
    There is an array of reliable, renewable fuels that should be 
considered as alternative supplies to petroleum, including multiple 
generations of biofuels. Biotechnicians have long proven the technical 
ability to produce hydrocarbon equivalents to fossil fuels, including 
the jet fuel blends that DOD requires. Efforts by the National 
Laboratories, academia and the private sector are focusing on basic 
science that will enable more efficient use of second- generation 
biological fuel sources (made from non-food crops) by increasing 
efficiency in processing plant materials while retaining net energy 
gains, and by overcoming other technical hurdles. Others are leap-
frogging beyond second-generation biofuels to fuels derived from algae. 
Still other options include displacing petroleum by using electricity 
or natural gas to power transportation, and using distributed renewable 
energy at overseas and forward operating bases to displace petroleum in 
powering generators. It is encouraging that growth in renewable energy 
supply availability frequently outpaces expectations. Ethanol 
production grew 164 percent between 2002 and 2006, and biodiesel 
production expanded from 1 trillion Btu to 32 trillion Btu over the 
same period. Wind, solar and geothermal supplies also have expanded 
faster than most analysts predicted over the past decade.\12\ These 
supply-side changes show how technical, economic and policy decisions, 
such as tax regimes that Congress has enacted to even the playing field 
with fossil fuels, can affect energy trends.
---------------------------------------------------------------------------
    \12\ U.S. Energy Information Administration Website, ``Biomass'' 
(April 2008).
---------------------------------------------------------------------------
    Any effective DOD energy strategy must also be flexible enough to 
account for the fact that its leaders will have to make energy 
decisions based on imperfect information. Specific projections 
regarding how rapidly fuel alternatives could achieve large-scale 
production and consumption are often treated as proprietary. This 
uncertainty is particularly problematic for DOD, which has limited 
manpower and funds to invest in fuel research and development.
The Indirect Costs of Petroleum Dependence
    The Department of Defense accounts for about 80 percent of the 
Federal Government's energy consumption, and its high dependence on 
petroleum-based fuels--the Defense Energy Support Center reported 132.5 
million barrels in petroleum sales in Fiscal Year 2008, totaling nearly 
$18 billion \13\--means that its budget is subject to major oil price 
fluctuations.\14\ Petroleum price spikes negatively affect DOD's budget 
and divert funds that could be used for more important purposes. As 
Secretary Gates said in 2008, ``Every time the price of oil goes up by 
one dollar per barrel, it costs us about $130 million.'' \15\ In an era 
of constrained budgets, American security is best served by trying to 
hedge against future price fluctuations of this scale.
---------------------------------------------------------------------------
    \13\ Defense Energy Support Center, Fact Book FY 08 (2009): 19-20.
    \14\ U.S. Energy Information Administration, Annual Energy Review 
2009, ``Table 1.13: U.S. Government Energy Consumption by Agency and 
Source, Fiscal Years 2003, 2008 and 2009.'' (19 August 2010).
    \15\ Donna Miles, ``Military Looks to Synthetics, Conservation to 
Cut Fuel Bills,'' American Forces Press Service (6 June 2008).
---------------------------------------------------------------------------
    In addition to the security and financial costs, petroleum 
dependence creates environmental costs that are causing increasing 
concern among security analysts. Emissions from fossil fuel use 
contribute to changes in the global climate, which risk altering 
geopolitical relations, destabilizing regions of high strategic 
importance to the United States, increasing erosion and storm surges at 
coastal installations, and altering disease patterns.\16\ Melting 
summer ice in the Arctic is an early example; its geopolitical 
importance has risen sharply in the past 5 years as Arctic countries 
(and their potential shipping and natural resource customers) prepare 
to exploit newly navigable waterways and seabed resource deposits. 
federal leaders from both major political parties, DOD's civilian and 
military leaders, and security analysts of all stripes regularly 
reiterate concerns over the national security implications of the 
changing climate caused by high-carbon fuel consumption.\17\ Other 
environmental costs of fuel production can include heavy water use and 
diverting arable land to fuel production, both of which can trigger 
negative side effects if not managed properly. Factors such as 
greenhouse gas emissions (including from burning high-carbon fuels and 
from land use change) and the effects of fuel production on food prices 
should therefore constrain DOD's energy investments in high-carbon 
fossil fuels or first-generation biofuels derived from food crops.
---------------------------------------------------------------------------
    \16\ See, for example, Commander Herbert Carmen, USN, Christine 
Parthemore and Will Rogers, Broadening Horizons: Climate Change and the 
U.S. Armed Forces (Washington: Center for a New American Security, 
2010).
    \17\ Many U.S. policymakers, agencies and documents have recognized 
the connection between climate change and security: the 2010 QDR says 
``Climate change and energy will play significant roles in the future 
security environment'': p. xv; the National Intelligence Council has 
done extensive climate change research including reports on ``The 
Impact of Climate Change to 2030''; President Obama stated in his 
December 2009 Nobel Peace Prize acceptance speech that ``. . . the 
world must come together to confront climate change. There is little 
scientific dispute that if we do nothing, we will face more drought, 
famine and mass displacement that will fuel more conflict for decades. 
For this reason, it is not merely scientists and activists who call for 
swift and forceful action--it is military leaders in my country and 
others who understand that our common security hangs in the balance''; 
in remarks in November 2009 Secretary of Defense Robert Gates said that 
``the melting of the polar ice cap in the Arctic plus the frequency and 
intensity of weather events in this hemisphere, with the corresponding 
need for military humanitarian assistance missions, calls for a greater 
attention to the security implications of climate change.''
---------------------------------------------------------------------------
The Changing Political, Legal and Regulatory Environment
    Signs indicate that federal and state governments will continue to 
push for greater adoption of domestic and/or lower-carbon energy 
technologies. As a result, DOD will face a changing legal, regulatory 
and political environment in the coming decades. Congress has 
consistently passed legislation since 2005 to support investments and 
set federal requirements supporting energy efficiency and renewable 
energy production. The Obama administration strongly supports this 
approach as well. Obama issued an October 2009 Executive Order 
committing federal agencies to calculate and reduce their greenhouse 
gas emissions, which spurred energy-focused DOD officials to begin 
complying with this requirement. Likewise, 27 states have instituted 
renewable energy portfolio standards, and nine others have renewable or 
alternative energy goals or requirements.\18\ Legal and regulatory 
changes can also constrain energy choices. For instance, the U.S. 
Supreme Court ruled in 2007 that greenhouse gas emissions constitute a 
pollutant and therefore can be regulated at the federal level, and the 
Obama administration has signaled its intent to move forward with such 
regulation unless the Congress mandates emissions reductions through 
legislation.
---------------------------------------------------------------------------
    \18\ Pew Center on Global Climate Change, ``Renewable & Alternative 
Energy Portfolio Standards'' (14 December 2009).
---------------------------------------------------------------------------
    While the U.S. Government sets domestic regulations and laws, and 
can exempt combat-related activities, it does not exercise the same 
control internationally. Indeed, there is growing concern that foreign 
countries may not always exempt military activities within their 
territory from environmental standards. For example, the Canadian 
government recently decided to upgrade one of its vessels that was not 
equipped to meet the environmental standards of several European 
countries, for fear that the vessel could be denied port access.\19\ 
The Department of Defense must consider emerging international trends 
in regulating emissions and adopting less carbon-intensive energy 
sources as it considers how to guarantee its freedom of access to 
foreign ports and territories.
---------------------------------------------------------------------------
    \19\ Bill Curry, ``Canadian Navy's Ships Risk Being Banned from 
Foreign Ports,'' The Globe and Mail (Toronto) (5 August 2010).
---------------------------------------------------------------------------
III. Elements of a DOD Energy Strategy
    In response to these factors, DOD should map a path forward that 
relies on technological innovation and efficiency to hedge against 
price spikes and scarcities and to accommodate America's economic, 
political and environmental needs. By planning now around these likely 
future conditions, DOD can weather change, protect its own interests, 
reduce its vulnerability to extreme price spikes and--most 
importantly--ensure that it can meet its mandate to protect the 
Nation's security. The logical next step is to develop a strategy that 
adheres to 12 specific guiding principles.

1. Set a Common Energy Goal
    In order to address security risks, costs, domestic constraints and 
changing energy supply and demand trends, DOD should set an overarching 
energy goal of managing a smooth transition beyond petroleum over the 
next 30 years. This goal is significantly broader than the array of 
goals and objectives that the services have set to guide their own 
energy decisions to date. Those more near-term goals move in the right 
direction, but remain insufficient given the broad scope and extended 
timeline of DOD's energy challenges.
    The 2010 QDR stated, ``Energy security for the Department means 
having assured access to reliable supplies of energy and the ability to 
protect and deliver sufficient energy to meet operational needs.'' \20\ 
This leaves much room for interpretation and is not precise enough to 
ensure that everyone within DOD is moving in the same direction. To 
many domestic installations, energy security means reliable sources of 
power that are not vulnerable to disruption by natural or man-made 
disruptions affecting the electric grid. To the Army, operational needs 
and installation energy concerns overlap greatly given that operations 
abroad center most often on forward operating bases. The Air Force is 
yet a different case; as aviation fuel accounts for the majority of its 
energy demand, liquid fuel supplies are of paramount importance. Thus, 
for each of the services, the broad requirements of ``assured access,'' 
``reliable'' and ``sufficient'' supplies could mean any number of 
energy choices, and will vary depending on whether this definition 
applies to short-term or long-term needs.
---------------------------------------------------------------------------
    \20\ QDR: 87.
---------------------------------------------------------------------------
    To accommodate all of these needs, yet still provide real guidance, 
DOD should settle on a single overall goal and ensure that the 
objectives set by the services align with that goal. It is important 
that this goal is long-term in nature and general enough to incorporate 
the work already set by the military services and to allow flexibility, 
but specific enough to guide real changes in behavior and investment.

A Thirty-Year Challenge
    We recommend that DOD establish a goal that by 2040, DOD must be 
able to operate all of its assets on non-petroleum fuels. The thirty-
year timeline is sufficient time for the private sector scaling up 
adequate supplies, and for DOD aligning its bureaucratic and 
infrastructure systems to accommodate this change. Knowing that 
petroleum prices will rise and renewable fuels will become cost-
competitive years before the world produces all reserves, it is not 
prudent to assume that petroleum will remain affordable or that 
supplies will be reliably available to the United States three decades 
hence; nor is it wise to perpetuate the geopolitical, operational and 
environmental costs indefinitely. Ensuring that DOD can operate on non-
petroleum fuels 30 years from today is therefore a conservative hedge 
against the economic, political and environmental conditions and 
constraints outlined in this report.
    Despite the 30-year timeline, DOD does not have several decades to 
begin this transition. The renewable fuel development, testing and 
evaluation that the services have conducted to date mark the first 
steps in guaranteeing their long-term ability to meet their energy 
needs, but even if DOD adopts a hastened timeline, it will take decades 
to complete this transition. Implementing this strategy must therefore 
begin immediately.
    Though it is important to start the critical process of 
transitioning to non-petroleum energy sources, mission accomplishment 
will always remain DOD's top consideration. It is therefore essential 
that DOD's energy choices do not interrupt or detriment operational 
capabilities. Rear Admiral Philip Hart Cullom, director of fleet 
readiness for the Navy staff and head of the Navy's Task Force Energy, 
calls this creating ``off-ramps'' from petroleum.\21\ In the near term, 
this indicates the importance of drop-in fuels, or liquid fuels that 
are chemically equivalent to petroleum-based fuels and can therefore 
fuel existing platforms. DOD's energy transition should be nearly 
seamless to the soldiers, sailors, airmen and Marines using these 
fuels.
---------------------------------------------------------------------------
    \21\ Rita Boland, ``Great Green Fleet Prepares to Set Sail,'' 
SIGNAL Magazine (July 2010).
---------------------------------------------------------------------------
    Other goals debated in recent years, including a goal of simply 
increasing the efficiency of petroleum use or a static reduction in 
overall fuel consumption, will be insufficient. Improving energy 
efficiency--in other words, getting more power per unit of energy 
consumed--must be part of a strategy to meet DOD's energy needs without 
petroleum, but it is important that this not serve as the goal itself. 
Efficiency is one of the most important short-term operational energy 
objectives for DOD; for instance, any energy efficiency gains in Iraq 
and Afghanistan can immediately reduce vulnerable supply lines, save 
lives and free up manpower for other operations. However, efficiency 
does not mark a concrete end state over a multidecade time scale, and 
therefore cannot serve as an overarching goal. America's energy 
efficiency has grown since the 1970s, yet its overall petroleum demand 
and corresponding vulnerabilities have also grown. For DOD, this means 
that its operational vulnerabilities and costs remain despite its 
efficiency gains. In other words, gains in efficiency are necessary and 
important, but there is a danger that too heavy a focus on efficiency 
over a long-term time scale will mask an increasing reliance on fuel 
that poses further risks to the Department of Defense. Efficiency 
should therefore be treated as a means and an operational enabler.

Service Priorities
    The services have set many of the necessary short- and near-term 
goals and objectives to hit our suggested long-term target for DOD as a 
whole. The Army, Air Force, Navy and Marine Corps all established 
energy strategies, and they have since refined them to accommodate new 
requirements from Congress and executive orders. These include, among 
others:

        Air Force

                ``By 2016, be prepared to cost competitively acquire 50 
                percent of the Air Force's domestic aviation fuel 
                requirements via an alternative fuel blend in which the 
                alternative component is derived from domestic sources 
                produced in a manner that is greener than fuels 
                produced from conventional petroleum.'' \22\
---------------------------------------------------------------------------
    \22\ Air Force Energy Plan (2010): 8.

                ``Test and certify all aircraft and systems against 50/
                50 alternative fuel blend by 2011.'' \23\
---------------------------------------------------------------------------
    \23\ Ibid.

                ``Reduce overall fossil fuel consumption in vehicles by 
                2 percent annually (2005 baseline) until 2015, and 
                steadily increase the overall fleet average miles per 
                gallon (MPG).'' \24\
---------------------------------------------------------------------------
    \24\ Air Force Infrastructure Energy Plan (2010): 12.

                ``Install at least 1 renewable fuel pump at each 
                federal fleet refueling center at each installation 
                that issues more than 100 thousand gallons of ground 
                fuel annually.'' \25\
---------------------------------------------------------------------------
    \25\ Ibid.: 14.

---------------------------------------------------------------------------
        Army

                ``Reduce the amounts of power and fuel consumed by the 
                Army at home and in theatre. This goal will assist in 
                minimizing the logistical fuel tail in tactical 
                situations by improving fuel inventory management and 
                focusing installations consumption on critical 
                functions.'' \26\
---------------------------------------------------------------------------
    \26\ Army Senior Energy Council and the Office of the Deputy 
Assistant Secretary of the Army for Energy and Partnerships, ``Army 
Energy Security Strategy'' (13 January 2009): 4.

                ``Raise the share of renewable/alternative resources 
                for power and fuel use, which can provide a decreased 
                dependence upon conventional fuel sources.'' \27\
---------------------------------------------------------------------------
    \27\ Ibid.

---------------------------------------------------------------------------
        Navy

                ``The Navy will demonstrate in local operations by 2012 
                a Green Strike Group composed of nuclear vessels and 
                ships powered by biofuel. And by 2016, we will sail 
                that Strike Group as a Great Green Fleet composed of 
                nuclear ships, surface combatants equipped with hybrid 
                electric alternative power systems running biofuel, and 
                aircraft flying only biofuels--and we will deploy it.'' 
                \28\
---------------------------------------------------------------------------
    \28\ Secretary of the Navy Ray Mabus, ``Remarks at the Naval Energy 
Forum'' (14 October 2009): 8-9.

                ``The Department of the Navy will by 2015 reduce 
                petroleum use in our 50,000 strong commercial fleet in 
                half.'' \29\
---------------------------------------------------------------------------
    \29\ Ibid.

---------------------------------------------------------------------------
        Marine Corps

                ``Reduce energy intensity 30 percent by 2015 relative 
                to a 2003 baseline.'' \30\
---------------------------------------------------------------------------
    \30\ United States Marine Corps, ``Ten by '10: Top 10 Things To Do 
by 2010 to Reduce USMC Energy Risks'' (2009): 3.

                ``Increase the percentage of renewable electrical 
                energy consumed to 25 percent by FY 2025.'' \31\
---------------------------------------------------------------------------
    \31\ Ibid.

    Once DOD establishes its long-term energy goal, it will need to 
audit these energy plans to ensure that all service-level energy goals 
align. Most, if not all, of them will already align with the long-term 
goal of managing a smooth transition beyond petroleum by 2040. It will 
be critical to build on these successes by expanding targets past the 
dates specified above.
    It is also important that DOD's energy goal does not amount solely 
to absolute reductions in energy consumption, devoid of consideration 
of how DOD uses energy in its efforts to protect and defend U.S. 
interests. DOD must always retain the flexibility to successfully 
conduct its missions. Demand reduction can be an important means of 
reducing vulnerabilities to supply lines abroad and reliance on a 
fragile grid at home. However, overall energy consumption should remain 
a function of DOD's activities and global engagements. Total fuel 
demand must therefore remain flexible and should not serve as a fixed, 
long-term goal.

2. Establish Clear Energy Guidelines for DOD
    DOD should establish, publish and enforce a clear set of 
overarching rules or guidelines to help the services navigate their 
energy transitions, and to signal to the private sector what sorts of 
fuels, infrastructure and efficiency technologies it will need to 
supply over the long term.
    In setting these guidelines, first and foremost, DOD's energy 
investments must meet military needs. Those that cannot be designed or 
adapted by their producers to meet military needs should not be 
considered worth DOD's limited energy investment dollars. Otherwise, as 
the track record to date indicates, new fueling infrastructure, energy 
production technologies and vehicles will simply not be used. For 
example, a hydrogen vehicle and fueling station demonstration at Hickam 
Air Force Base in Hawaii marked a great sign that DOD bases can be used 
for testing new technologies, but the small scope of the 
demonstration--a single fueling station and limited range of the 
vehicles--significantly limited the utility of this investment to the 
airmen and civilians working at Hickam. DOD's purchases should treat 
military utility as a mandatory constraint on any energy-related 
purchases.
    Second, the fuels on which DOD relies must be consistently 
available long into the future. This stipulation leads to a preference 
for renewable fuel technologies versus supplies that will eventually 
deplete. We do not currently know with much fidelity what energy 
supplies will be reliably available where and when--even for petroleum 
beyond the 30-year timeframe, with the likelihood of demand spiking, 
possible recalcitrance on behalf of suppliers, diminishment of easily 
recoverable supplies and fragile transit routes and delivery 
infrastructure. DOD requires consistently available supplies and supply 
systems that will not evaporate for economic or political reasons.
    Third, new fuel sources must hold the potential to be available 
globally. DOD relies on international companies and other countries to 
provide fuel supplies for its use outside of the United States. 
Reliance on a single fuel that is commonly used in all countries and 
produced globally (petroleum) benefits DOD logistically, but this 
system will not survive indefinitely at a bearable cost. Many countries 
are already producing fuel alternatives to petroleum and increasing 
their capacity to do so, though there is a lack of information about 
where these supplies are, whether they can be formulated to fit DOD's 
technical specifications, and to what scale they are likely to grow in 
supply availability. DOD must insist that its platforms can operate on 
fuels that it can procure abroad in order to ensure its ability to 
operate globally and to take advantage of the benefits that fuel source 
diversification can offer.
    Fourth, performance is paramount. DOD cannot waver on its demand 
for fuels that perform properly. Its assets, particularly aircraft, 
require chemical consistency in the fuels used. This indicates special 
concern for reliability in formulating, refining and properly blending 
drop-in aviation biofuels that are mixed with petroleum.
    Fifth, plans to smoothly navigate DOD's long-term energy transition 
beyond petroleum must account for the changing political and regulatory 
environment. Congress mandated that federal agencies should not invest 
in fuel sources that carry lifecycle greenhouse gas emissions higher 
than their current fuel sources \32\ (such as coal-derived fuels, and 
by some calculations, potentially corn-based ethanol), and private 
companies are pushing Congress more aggressively than ever to enact 
legislation to curb emissions. No federal agencies should invest their 
finite funds in fuel sources with higher lifecycle emissions, or that 
contribute to extensive damage to food commodity markets or ecosystems. 
The private sector should not sell DOD fuels that will contribute to 
extensive rainforest destruction, water supply contamination or 
climate-changing emissions increases. DOD needs to set and stick to 
guidelines that clearly indicate to the private sector where it should 
be investing in order to develop supplies appropriate for DOD needs and 
national environmental policy standards.
---------------------------------------------------------------------------
    \32\ See GovTrack.us, Text of H.R. 6 [110th]: Energy Independence 
and Security Act of 2007.
---------------------------------------------------------------------------
    Finally, over the long-term, DOD should also consider fuel 
affordability: whether its supply systems will be able to operate for 
sustained periods of time without crippling negative direct costs and 
externalities. In this sense, affordability applies to the actual cost 
of DOD's energy supplies and the risks that those supplies carry. This 
standard also indicates a need to consider the effects of potential 
price spikes on the defense budget--both within DOD if its fuel costs 
rise, and for the nation as a whole (if high prices negatively affect 
the economy in ways that lead to a constrained federal budget). Costs 
associated with the increasing difficulty in tapping the world's oil 
resources show that dependence on finite, nonrenewable resources is 
inherently risky. Indeed, the blanket assumption that petroleum would 
remain affordable indefinitely is what caused the dangerous dependence 
with which DOD now wrestles. It is critical, however, that 
affordability be considered with reference to the costs of fuels 
produced at scale. Any newly developed fuels that are not yet mass 
produced will cost more in their development stage and less once 
economies of scale are achieved. It will be incumbent on potential 
alternative fuel suppliers that their fuels will be affordable over the 
long term.

3. Plan for an Uncertain Future
    DOD should forecast what its fuel vulnerabilities and needs are 
likely to be decades into the future as a means of guiding energy 
choices today. The future of DOD aviation and aviation fuel in 
particular will influence the pace and composition of DOD's energy 
strategy over the long term, considering that aviation fuel accounted 
for 56 percent of DOD's energy consumption as of 2008, and about 80 
percent of the Air Force's energy needs.\33\ The future of manned and 
unmanned flight will directly impact the balance of DOD's energy 
investments in jet fuel, energy storage devices and other energy 
technologies.
---------------------------------------------------------------------------
    \33\ U.S. Energy Information Administration, Annual Energy Review 
2009, ``Table 1.13: U.S. Government Energy Consumption by Agency and 
Source, Fiscal Years 2003, 2008 and 2009.'' (19 August 2010).
---------------------------------------------------------------------------
    DOD should develop a series of planning scenarios to game out fuel 
needs against different potential future combat concepts. Warfare 20, 
30 and 40 years from now will not look like today's wars. Likewise, the 
way the United States secures its interests will likely not mirror 
today's efforts. Preparing for this uncertainty requires thinking today 
about how DOD will operate years down the line--and this by necessity 
includes envisioning DOD's future energy needs.
    The key to successful energy planning will be to ensure diversity 
within the scenarios: incorporating diverse needs and diverse sources 
of energy and the supply systems that they will require. Planning 
scenarios may blend together and overlap, but must involve planning for 
a very broad range of energy technologies and requirements. This will 
ensure that DOD is preparing for a wide range of energy contingencies. 
From these, it can derive estimates of what types of fuels, 
infrastructure and storage technologies it may need to invest in today.

4. Demand New Fuels for Old Equipment
    The majority of the vehicles, aircraft and weapons systems that DOD 
purchases in the near term will be designed to be fueled by petroleum, 
as are most of DOD's current assets. Most of these systems will remain 
in commission for decades before replacements are seriously considered. 
Notably, the Office of the Secretary of Defense (OSD) is working to 
fulfill a mandate from Congress that defense suppliers work to increase 
fuel efficiency as a consistent part of acquisition processes. In the 
near term, DOD should also sustain its focus on dropin fuels--that is, 
liquid fuels designed as chemical equivalents to petroleum-based fuels, 
and that are therefore ready for immediate use in existing aircraft, 
vehicles and equipment once they are tested and certified. The Navy and 
Air Force have already begun moving down this path, and both have now 
flight-tested drop-in biofuels blended with petroleum-based jet fuel. 
The key will be to maintain and strengthen the demand signal these 
tests have begun to create in order to push the private sector to 
continue producing military-appropriate fuel supplies. It will also be 
important for DOD to continue to consider the long-term environmental 
ramifications of these drop-in fuels so as not to violate Congressional 
requirements that its alternative fuels have lower greenhouse gas 
emissions than petroleum equivalents.
    Diversification of energy supplies stands to be an important 
benefit to DOD of this focus on drop-in fuels. Even if DOD positions 
itself to meet all of its energy needs using non-petroleum sources by 
2040, there may still be circumstances in which certain fuels are 
simply not available when and where DOD needs them. If DOD can procure 
fuels from a portfolio of sources, such as fuels made from locally 
grown switchgrass, algae, camelina or other crops, that diversity can 
help to keep prices competitive (especially as a hedge against weather 
or economic conditions reducing crop output in any given region) and 
deny suppliers leverage over the United States. Diversification can 
also ensure that DOD will be able to procure the fuel it needs around 
the world. Enjoying the full operational and budgetary benefits of fuel 
diversification will also require DOD to work with foreign governments 
on international standards for military-grade fuels.

5. Continue to Increase Alternative Fuel Use at Domestic Installations
    The best way to begin DOD's energy transition will be to begin with 
fast-tracked efforts at bases in the continental United States. The 
services are already increasing renewable power generation at their 
installations, and leaders at several bases have even set goals of 
becoming net-zero energy consumers (in other words, producing as much 
energy as they consume) and developing resilient microgrids. In several 
conversations with energy managers at U.S. bases during the course of 
our research, there was a tangible sense that increasing efficiency and 
use of renewable energy domestically contributed to the broader goal of 
DOD improving its long-term energy security.
    To date, DOD has focused heavily on generating renewable 
electricity at domestic installations, but it should expand this focus 
to include reducing petroleum use in vehicle fleets. Moving to 
alternative fuels in ground vehicles will be easier than displacing 
aviation fuels, which require an array of additional specifications. At 
its installations, DOD also has more alternative fueling options that 
those designed for use in aviation (e.g., DOD cannot fly its aircraft 
with electricity today, but it can adopt electric ground vehicles if 
they meet the guiding principles outlined above). This added 
flexibility allows individual bases to invest in energy sources that 
make sense given regional renewable energy production capabilities and 
infrastructure.

The Long Lives of DOD Assets
    Given DOD's long acquisitions process, a majority of the vehicles, 
aircraft and weapons systems that DOD purchases in the near term will 
be designed to use petroleum-based fuels, as are most of DOD's current 
assets. Consider the following: for DOD's 2008 acquisitions programs, 
27 of the 80 active programs had been in development for a decade or 
more. What is more, most of these systems will remain in commission for 
decades, and any DOD energy strategy will have to account for the 
fueling needs of these systems. Below are several programs, retired and 
active, that reflect DOD's long development and deployment timeline.


    * Tactical Fighter Experimental program
    Source: Defense Acquisitions: Assessments of Selected Weapon 
Programs (Government Accountability Office: Washington, D.C., March 
2009):10.

6. Invest for Maximum Impact
    DOD should maximize the impact of its investments by factoring 
distribution and infrastructure into its decisions on where to invest. 
Because energy production, purchasing, transport and transmission all 
involve systems of infrastructure and sunk costs, new fuels will not 
likely displace the old everywhere simultaneously. Prioritizing energy 
projects is today a bottom-up and organic process: Interested 
individuals navigate mazes of funding streams, laws, regulations, 
contract types and public utility relationships in order to gain 
approval and funding to move forward with renewable energy or 
efficiency projects. DOD should streamline this process and target it 
to maximize results.
    For DOD to prioritize where to focus its energy transition efforts 
better, it should identify the locations where transition to non-
petroleum fuels would have the greatest, most immediate impact. For 
example, DOD often uses jet fuel in vehicles and equipment due to the 
logistical benefits gained in using a single fuel type. Therefore, 
aviation fuel must be a central focus of this analysis. DOD should 
identify points at which drop-in biofuel blends or other energy systems 
will cover the greatest volume of fueling. As it considers this step, 
it will find the private sector aviation industry, which has considered 
prioritizing aviation biofuel supplies for the nation's busiest 
airports, instructive. For example, if biofuels are available at the 
seven busiest U.S. airports in passenger volume, they could power 
nearly 28 percent of the country's air traffic.\34\ These airports 
could be used as hubs around which to build energy infrastructure and 
production capacity in order to hasten the adoption of renewable fuels 
there. Cities around the United States and institutions such as the 
U.S. Postal Service have utilized their hub-and-spoke fueling systems 
to quickly integrate new fuels and vehicles into their fleets--cases 
which should be studied for best practices and important lessons in 
adopting new fuels.
---------------------------------------------------------------------------
    \34\ According to the FAA, the top seven airports by passenger 
volume are:

    Hartsfield--Jackson Atlanta International: 6.10 percent

    Chicago O'Hare International: 4.45 percent

    Los Angeles International: 3.94 percent

    Dallas/Fort Worth International: 3.83 percent

    Denver International: 3.45 percent

    John F Kennedy International: 3.26 percent

    McCarran International: 2.79 percent

    Total: 27.82 percent
---------------------------------------------------------------------------
    Finding the locations with the greatest fuel demand, however, is 
only the first step since not all locations are currently conducive to 
the production, transport or use of non-petroleum fuels. DOD should 
therefore analyze the list of top fuel demand locations against key 
enablers that could hasten the availability of alternative fuels at a 
large scale. These enablers should include: permissive state and local 
laws and incentives; infrastructure to handle transport, storage and 
fueling; and supply availability (including states or regions with 
current biofuels development in progress or high production potential).

7. Save Energy, Keep the Change
    Several disincentives hinder DOD's transition to more efficient 
energy use and the use of alternative fuels. The problems here run 
deep; over the course of research for this report we have heard from 
energy managers at U.S. military bases, installation policymakers in 
Washington and officers representing each of the services. Perhaps most 
importantly, individual bases, the military services and even the DOD 
writ large cannot always pocket and repurpose the money they save if 
their energy costs drop. This is a result of the type of funding used 
for renewable energy or efficiency investments or arrangements with 
local public utilities for renewable energy installations. 
Additionally, depending on how DOD pays for renewable energy 
investments on its bases, it does not always receive the commensurate 
clean energy credits for the energy generated on its land. These 
disincentives to save energy also extend to many contractors. 
Implementing a long-term energy strategy will therefore require DOD to 
address incentives and disincentives built into budgeting rules and 
norms, including for contractors. Energy Savings Performance Contracts, 
which allow contractors to recoup their energy investments in federal 
projects, are one example of how designing incentives for contractors 
to reduce energy use can dramatically lower consumption.\35\
---------------------------------------------------------------------------
    \35\ See Department of Energy, ``Energy Savings Performance 
Contracts,'' (2010) for further information on ESPCs.
---------------------------------------------------------------------------
    Correlated to the current misalignment of incentives, DOD lacks 
appropriate metrics regarding its energy security activities. This 
stems in part from the lack of a long-term energy strategy or a 
specific, unified goal. OSD and the services do have long lists of 
metrics for meeting objectives that may or may not measure progress 
toward the endpoint DOD needs to reach. Past metrics have also tended 
to measure static energy use and do not account for military 
activities. New metrics to indicate DOD's success (or lack thereof) in 
progress toward its long-term energy goals should be both streamlined 
and meaningful.

8. Understand that Energy is Not Free
    Changing how DOD meets its energy needs will involve a shift in its 
culture. It is important to note that this challenge is not distinct to 
DOD: Due to relatively (and often artificially) cheap energy and the 
normalization of consistent and abundant supplies, the country broadly 
undervalues the true cost of energy and therefore faces few incentives 
to change its behavior. Change will take time, and it will involve 
consistent leadership and public education. A culture that recognizes 
the cost of failing to change the energy status quo will help 
facilitate DOD's smooth transition to more sustainable long-term energy 
use. It will also have ripple effects for the country. Whether through 
disseminating new technologies such as GPS or leading by example to 
change cultural norms such as with racial integration, changes to DOD's 
culture often set the stage for significant national change.
    Among those who consider DOD's energy challenges on a regular 
basis, a consensus has formed that cultural change is a necessary 
component of meeting long-term energy needs. One Marine Corps 
representative recently described DOD as a victim of its own success in 
that it manages logistics and engineering so well that energy is taken 
for granted: it is simply available when and where it is needed.\36\ 
The wars in Iraq and Afghanistan launched the process of reversing this 
trend, as supply lines have proven extremely vulnerable to attack.
---------------------------------------------------------------------------
    \36\ Off-the-record CNAS event (July 2010).
---------------------------------------------------------------------------
    Committed leaders are in place, meeting the first precondition for 
integrating energy into the normal ways in which DOD does business. 
Civilian and military leaders of the Navy, Marine Corps, Army and Air 
Force have all spoken to the importance of improving energy efficiency 
and assuring long-term fuel availability and created energy offices.
    Next steps include raising awareness at every installation, and 
improving energy education at war colleges and through messaging by 
higher-ranking officers. The vast majority of representatives we spoke 
with at all civilian and military ranks during the course of this 
project understood the operational vulnerabilities involved with the 
high energy consumption required by the current wars. Subsequent areas 
of focus must include long-term energy supply and demand trends, the 
negative economic and environmental effects of fossil fuel dependence 
and trends in science and innovation.

9. Promote a Shared Vision of DOD's Energy Future
    Even with all of DOD's efforts, it cannot meet its long-term energy 
goals without Congress, the rest of the Executive Branch and a critical 
mass of private companies sharing a similar vision. Businesses and 
academic researchers will have to do the heavy lifting in energy 
innovation, and DOD relies on Congress and the White House to provide 
funding. Yet while DOD has worked busily to define and confront its 
energy challenges over the past few years, its track record in relating 
its activities to the outside world is mixed at best. Many current 
successes are driven by individual initiative, making them ad hoc and 
easily terminated. Some aspects of external relations need major 
adjustment, while other areas of improvement will require relatively 
minor refinements.
    Most critical is for DOD and Capitol Hill to improve communication 
on energy issues. Legislators and their staffs often are left to 
interpret for themselves what energy policies it would be helpful to 
require for DOD. Many at DOD also express frustration that energy 
requirements mandated by Congress are not always backed by funding to 
invest in steps like fuel switching, new infrastructure and efficiency 
upgrades. DOD should develop a robust plan for Capitol Hill relations 
and external relations to communicate its long-term energy strategy. It 
should ensure that its strategic thinking is framed clearly and points 
toward real policy actions that Congress (or other government agencies) 
can adopt. There is also a strong need for Congressional staffers to 
expand their knowledge on DOD energy issues, and to ensure due 
diligence in examining how DOD may react to their ideas before they are 
enacted in law.
    A simple way for DOD to improve its relations with other government 
agencies is to provide an online organization chart of major DOD 
offices focused on energy and a description of the general roles and 
responsibilities of those offices. This may seem simplistic, but to 
those not familiar with the DOD bureaucracy (especially policymakers on 
the Hill and clean energy entrepreneurs) it can be extremely 
challenging to find the proper points of contact to discuss energy 
policies in DOD. There is little hope of improving interagency 
coordination or Congressional relations if outsiders cannot even figure 
out whom to engage with questions or ideas.

10. Engage Allies in the Energy Transition
    Through foreign military sales, joint exercises and international 
basing, DOD can promote adoption of shared technical standards and 
directly influence the energy systems used by its allies. This will 
improve its own ability to operate by ensuring that the United States 
has access to needed energy supplies globally and improving 
interoperability. It will also encourage allies to make compatible 
choices with respect to energy, instead of working at cross purposes.
    DOD's long-term energy strategy must therefore include an 
international plan of action. At a minimum, this should include 
information sharing on alternative energy research and development. It 
should also include cooperation with international partners on fuel 
testing and evaluation, and setting fuel standards that guarantee 
interoperability. This should be a familiar concept for DOD, which 
already sets joint standards with allies by, for example, standardizing 
the use of 9mm NATO cartridges by all member countries. Where the 
interests and regulations of both countries permit, such efforts can 
include working with U.S. allies on energy technology sharing. This 
will also require better coordination with the State Department, the 
National Labs and U.S. energy industries. Additionally, it will have 
the positive effect of signaling to international suppliers (both 
countries and private companies) that DOD will favor procurement of 
non-petroleum fuels when possible.
    Energy is an increasingly important issue for U.S. diplomacy with 
traditional allies such as Japan, the Republic of Korea (ROK) and NATO 
countries. Where these overlap with important military considerations, 
DOD's active engagement will be critical for ensuring that its needs 
are considered. But while this step may seem straightforward and 
relatively easy to implement, in fact each country has its own 
interests, domestic politics, economic pressures and tradeoffs to 
consider. Often, logical areas of cooperation on energy are in fact 
areas of competition. Cooperation regarding installation energy use can 
be particularly difficult as it is often met with requirements that 
favor American products.
    It is important to remember that DOD already works internationally 
to secure its energy supplies for the current petroleum-heavy system--
and that the process is often neither smooth nor easy. Contracting and 
using supply systems for petroleum through countries such as Azerbaijan 
are already costly and require often-difficult relationship 
management.\37\ DOD should actively consider how it can better 
coordinate with U.S. allies to develop nonpetroleum energy systems to 
meet its requirements for reliable, affordable and sustainable fuels.
---------------------------------------------------------------------------
    \37\ Craig Whitlock, ``Gates brings reassurances to Azerbaijan 
leader,'' The Washington Post (7 June 2010).
---------------------------------------------------------------------------
11. Streamline Energy Management
    Managing a smooth transition from petroleum to meet DOD's long-term 
energy needs will require bureaucratic and personnel changes. DOD's 
current structure reflects past thinking about energy rather than 
current priorities, and the military services and OSD regularly change 
the structure of their offices and personnel requirements to address 
questions of energy. Energy planning and policy are also subject to 
changing mandates by Congress and the White House. It is important to 
underscore that many aspects of DOD's current energy personnel 
structure mark major improvements and indicate solid leadership on 
energy. As mentioned earlier, each branch of the armed services and OSD 
have new offices devoted specifically to energy, including experts on 
operational fuel use. Nonetheless, incorporating energy better into how 
DOD does business, as the 2010 QDR mandates, is far from 
institutionalized.

              Figure 1: Recommended Personnel Structure, 
                   Office of the Secretary of Defense



    Within OSD and the services, responsibility is generally split 
between those managing energy for military installations and those 
managing operational energy. This is in part a legacy divide: Positions 
governing operational energy in OSD and the services have only been 
stood up as dedicated offices over the past few years, while offices 
governing energy use at military bases have long been part of the DOD 
organizational structure. However, the separation of energy along these 
lines is a false distinction; the training and equipping carried out at 
domestic military installations is geared toward operational utility. 
The only truly static component of installations is the buildings 
themselves, whereas the people using energy and how they use it 
fluctuate regularly and depend on operational requirements. Indeed, the 
definitions of operational and non-operational energy are not well 
delineated in related laws or Congressional requirements.
    Once a long-term DOD energy strategy is in place, the DOD should 
assess its related organizational and personnel structures. This 
assessment should involve an evaluation of personnel needs, and in 
particular what positions are filled by political appointees versus 
civil service officers versus contractors, while being cognizant of the 
work that the military services themselves conduct.
    Since the separation of installation and operational energy 
reflects DOD's energy past more than its energy future, it should seek 
in the years ahead to merge energy management at the OSD level to a 
coherent body under the leadership of one individual. The Army, Air 
Force, Navy and Marine Corps could continue to manage their own unique 
energy bureaucracies as their leaders deem best. This combined office 
should include experts focused on the following important areas:

Strategy
    A major component of DOD's energy strategy will include setting 
priorities, planning against various scenarios and contingencies, and 
tracking progress against objectives.

Assets
    One person should oversee energy issues as related to specific DOD 
assets, with a team of individuals focused specifically on the very 
different categories of assets. This component would consider not just 
the stock of DOD equipment, vehicles, ships and aircraft, but also 
long-term trends in how DOD employs them.
    Aviation: As it comprises more than half of DOD's petroleum use and 
requires unique technical knowledge, aviation fuel is a category onto 
itself.
    Weapons Systems: Assets such as missile defenses and directed 
energy weapons also have unique energy signatures and, given their 
limited numbers and specific uses, are operated differently from other 
categories of assets. Parsing which weapons systems have unique enough 
energy requirements to necessitate consideration independent of the 
expeditionary and aviation categories will be difficult, and they will 
likely change over time.
    Expeditionary Energy: This component would include all mobile 
assets not represented in the aviation and weapons systems categories. 
It will be the heart of DOD energy activities during wartime, when fuel 
to deployed troops represents the most critical energy management.
    Buildings/Bases: This component of DOD's energy infrastructure 
should focus only on installations themselves. It will require 
coordination with public utility commissions and legal and regulatory 
bodies, and knowledge of often-complicated state and local dynamics.

External Relations
    Many of the conditions that will determine DOD's ability to meet 
its long-term energy needs will be set by Congress, the private sector 
and the international community. Meeting DOD's energy needs over the 
long term requires effective relations with all of these groups. This 
component will therefore include three important areas of external 
relations management: private sector partnerships; Congressional 
relations; and international relations.
    Officials focusing on all of these areas will be responsible for 
interagency coordination and coordination within OSD as it relates to 
their work. As much of the activity on meeting energy goals does and 
will continue to reside among the services, coordination among them and 
by OSD will be imperative. These positions will also represent a 
straightforward network of points of contact for other government and 
non-governmental representatives needing to coordinate with DOD on 
energy issues.
    Funding for DOD's investments in reliable long-term energy supplies 
will come in many forms, and it will be critical for DOD's energy 
personnel to develop a deep understanding of how to properly resource 
its energy strategy. New resources should go toward sunk costs--
efficiency upgrades, fuel testing and evaluation and energy 
infrastructure.
    However, meeting DOD's goal of making a smooth transition away from 
petroleum will require the private sector to provide cost-competitive, 
at-scale renewable fuels that the Defense Logistics Agency can purchase 
when and where it needs them. This will require DOD to commit to a 
general direction for its energy future in order to send an effective 
market signal, and it will require incentives and regulations beyond 
DOD's control.
    Contracting mechanisms and direct funding appropriated by Congress 
will constitute important means for making the necessary sunk 
investments for renewable energy adoption. The 2009 American Recovery 
and Reinvestment Act proved to be a successful and popular stream of 
funding for several projects at domestic installations, and lessons 
learned can be collected to indicate where funding may be most 
effective for future projects. The services also devote significant 
resources toward meeting this challenge. The Navy and Air Force have 
been testing and certifying alternative aviation fuels within their own 
budgets. They will need to remain consistent in these investments for 
some time, but the rewards in potential savings to their budgets should 
over the long-term pay off if DOD can properly align its incentive 
structures.
    Given the urgent need to address operational energy considerations 
in the current wars, this grand bureaucratic adjustment might best be 
timed for after significant redeployments from Iraq and Afghanistan are 
complete. Managing DOD's long-term energy transition may not need a 
vast personnel structure in its next iteration, though each component 
of the office can grow or shrink to match the changing nature of DOD's 
activities. The Army, Navy, Marine Corps and Air Force are also likely 
to continue to provide personnel who will address energy challenges, 
and much implementation will be conducted by base managers.

12. Plan for the Worst
    DOD should plan for contingencies in which its predictions and 
plans for moving beyond petroleum turn out to be wrong. In other words, 
its ``off-ramps from petroleum'' may turn out to be rough roads, or DOD 
could make the wrong turns or miss the ramps altogether. For instance, 
DOD should imagine scenarios involving absolute shortages of energy, 
major price spikes, alternative fuels that simply cannot scale up fast 
enough and major technological or environmental game-changers that 
fundamentally alter how DOD meets its energy needs.
    If worst-case scenarios transpire, they could cost DOD its ability 
to operate effectively. DOD, including the war colleges, combatant 
commands and OSD, has already conducted war games and scenario 
exercises that include fuel shortages, extended blackouts and other 
contingencies. DOD must continue to think through these kinds of 
scenarios, compile lessons learned from them and apply them to its 
energy calculations.

IV. Conclusion
    The steps outlined in this report will help DOD transition to non-
petroleum sources of energy, to the benefit of national security and 
operational effectiveness. Yet DOD's smooth transition to a future 
energy paradigm that does not rely on petroleum depends heavily on 
policies that lie beyond its own control. Many relevant policy choices 
and commitments are up to elected officials, state and local 
governments, the private sector and the international community (see 
Appendix II: How the Rest of the Government Can Contribute to DOD's 
Energy Strategy). Congress and the White House will continue to refine 
energy requirements for all federal agencies, and exert their 
leadership to improve the American public's understanding that these 
actions are taken to promote U.S. national security. DOD's long-term 
energy strategy should include coordination with all these groups, 
since their decisions will affect DOD's ability to operate.
    Meeting DOD's energy demands with new fuel sources in the next 30 
years will require patient and persistent leadership by DOD officials. 
But the benefits will prove to be far-reaching. These changes will help 
DOD to hedge against unbearable costs, maintain its flexibility and 
guarantee its ability to protect and defend the United States against 
all enemies--regardless of the availability of petroleum-based fuels.
                                 ______
                                 

        Appendix I : Why Examine Reserve-to -Production Ratios?

                           By Alexandra Stark

    The U.S. Energy Information Administration defines the R/P ratio as 
``the number of years that oil and gas reserves would last at the 
current production rate.'' The resulting figure indicates the length of 
time in years that known, recoverable reserves are expected to last if 
production continues at the same pace. This timeline, while constantly 
in flux, gives a more useful indicator than just supply, demand or 
reserve figures for the purpose of long-term policy planning.
    Global proved reserves (the quantities of oil that exist with 
reasonable certainty and can be recovered under current geological, 
economic and technological conditions) are often cited in considering 
the future of world energy trends. However, this is not always a 
helpful indicator. For example, Saudi Arabia has almost 20 percent of 
remaining global proved reserves, but at the current rate would produce 
its reserves in less time than Venezuela, which has about 13 percent of 
reserves but produces those reserves much less efficiently. Ominously, 
many major suppliers to the United States could produce their current 
proved reserves in fairly short time horizon if they continue at the 
present rate: For example, the R/P ratio for Canada (the top supplier 
to the United States in 2009, providing more than 20 percent of total 
oil imports) stands at about 28 years today. For the United States 
itself, it is 11 years. The only countries with current R/P ratios 
longer than 75 years are Venezuela, Iran, Iraq, Kuwait and the United 
Arab Emirates.

         Figure 2: World Petroleum Reserve-to-Production Ratios



    Source: BP Statistical Review of World Energy 2010
    Sources: BP Statistical Review of World Energy 2010 and U.S. Energy 
Administration, ``U.S. Imports by Country of Origin.'' Data are from 
2009.

    It is also important to note that both elements of this ratio 
change regularly, so even reserveto- production ratios are not perfect 
predictions of the future. As prices change and technology advances, as 
demand rises and falls, and as new reserves become accessible, R/P 
ratios are likewise affected. However, just as it is possible for 
countries to have a longer time horizon than projected, it is also 
possible for countries to exhaust their reserves sooner than expected, 
and for rising prices to make non-petroleum fuels more cost-competitive 
than investing in new petroleum production. While no economic and 
geologic estimates perfectly predict the future, R/P ratios can serve 
as important indicators for DOD officials and policymakers to plan 
against.

  Appendix II: How the Rest of the Government Can Contribute to DOD's 
                            Energy Strategy

    Many of the policies and measures that will help DOD achieve its 
long-term energy goal of making a smooth transition away from petroleum 
by 2040 lie beyond DOD's jurisdiction. The following actions by 
Congress, the White House and the private sector will contribute to 
DOD's continued ability to meet its energy demands within the 
constraints outlined in this report.
    Provide a clear long-term legal and regulatory environment. Market-
based regulatory adjustments and innovation coming holistically through 
the private sector will be more helpful than DOD pushing for different 
systems piece by piece. Unfortunately, today many businesses are biding 
time and waiting for a more certain business environment rather than 
producing the fuels they have developed and making the investments they 
have planned. Hundreds of businesses have encouraged the Federal 
Government to pass clean energy and climate change legislation to 
provide a significant long-term market signal. Doing so should be 
considered one of the primary ways that the Nation's leaders can help 
ensure that DOD can meet its long-term energy needs.
    Mind the grid. DOD's ability to address its electricity reliability 
concerns is in part beyond its own jurisdiction. Almost all of DOD's 
domestic installations are connected to the public power grid and must 
therefore rely on local or regional utilities to grant it permission 
for renewable energy production and to improve grid reliance. The 
utilities are working to bolster grid security, but concerns remain 
sufficient that many at DOD and in Congress are considering plans for 
``islanding'' bases, or detaching them from the public grid system 
altogether. Public utilities should continue to work closely with 
nearby installations to ensure that public and defense community needs 
are taken into account. A consistent legal and regulatory environment 
would also promote decisions by utilities to make investments in new 
infrastructure and rules to allow greater renewable energy production.
    Extend requirements from Congress. The 2007 Energy Independence and 
Security Act (EISA) requires federal buildings, including domestic DOD 
installations, to reduce energy consumption up to 30 percent through 
2015. This raised the bar from previous requirements set in 2005. 
Congress should direct additional requirements for efficiency and use 
of renewable energy in domestic installations beginning when previous 
requirements are set to end (often 2015). It should also continue to 
mandate that the fuels that federal agencies invest in have lower 
greenhouse gas emissions than the fuels they are meant to displace. 
However, two changes may be in order. The 2007 legislation requires 
that DOD reduce energy per square foot, yet this calculation does not 
account for the dramatic differences in the ways in which DOD uses 
different facilities. Congress should also be sensitive to the tight 
budget environment that DOD officials feel, and consider prizes for 
innovation and other mechanisms to provide funding to meet these 
requirements. The next round of legislative change to require DOD's 
continued progress on energy should be designed through extensive 
discussions and good coordination between DOD and the Hill.
    Address information challenges. Credible government estimates are 
available for fossil fuel resources, including specific estimates of 
energy reserves, production, consumption and historical prices. These 
include reserve-to-production projections and future outlooks that are 
generally reliable, if often conservative. Finding comparable 
information for non-fossil fuels is difficult to impossible, and often 
involves wading through dense reports. There is no single-source place 
where those reports lie, and analysts are left to compare and judge the 
efficacy of sources on their own. The private sector often provides 
more accessible information--but not information that can necessarily 
be relied upon as neutral and accurate. While we do not recommend that 
the Federal Government engage in guesswork or estimates that are less 
than diligent, DOD must recognize this information gap.
    Make reliable models available. DOD's incorporating greenhouse gas 
emissions, economic costs and other lifecycle effects of its energy 
options presents its own challenges. The computer models used to make 
these calculations reflect the sum of their parts: the data and 
mechanisms used by the modelers must be accurate (and reflect honest 
scientific facts, not political agendas or skewed information) to 
produce viable calculations. Information on the carbon, water and land 
use footprints of emerging fuel sources can also be more difficult to 
calculate than those of long-used sources, as they suffer from relevant 
information often being proprietary and in the hands of private 
companies. New fuels may also be adaptable to meet specific 
environmental footprint requirements once they are developed and 
produced at scale, which is a positive factor but again difficult to 
quantify. Meeting environmental constraints can be an inexact science, 
and calculations can change over time. DOD should therefore rely on 
energy and related climate models run by or compared to honest brokers, 
such as academics or the National Labs, in its decision-making.

                                  
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