The advanced biofuels public and private partnership, recently spearheaded by the USDA, the U.S. DOE and the U.S. Department of the Navy, took a huge step forward today. One week after each government entity signed an MOU agreeing to participate in a three-year, $510 million pledge to invest or financially match funding for the construction or retrofitting of future advanced biofuels facilities, Secretary of the Navy Ray Maybus held a press conference to inform the private sector that the secretaries have issued a request for information (RFI) on how to leverage private capital markets to establish a commercially viable drop-in biofuels national market. “We are asking for ideas from the agricultural sector, the energy sector and from the financial sector.”

“We think this is a big day, and exciting step,” Maybus said, “We are fully engaging now with industry.” The RFI request will remain open for one month, allowing participants to provide suggestions ranging from geographical possibilities for future facilities to the number of facilities the industry could support.

According to the RFI document, the areas of particular interest “are the technical, manufacturing and market barriers to establishing a viable business for advanced drop-in hydrocarbon biofuels,” but the RFI is not a competitive request for proposals. The RFI also points out the three main characteristics the secretaries are looking for in a project, including the capability of the biorefinieries to produce drop-in fuel competitively priced to petroleum; meeting the geographic diversity aims set out in the MOU; and that the fuels produced have no significant impact on the supply of agricultural commodities or the production of food.

The RFI indicates that the secretaries are estimating that the facilities funded through the private-public partnership will be in the 20 MMgy range and will produce JP-5, JP-8 or F-76 equivalents. Maybus said that they are unsure how many facilities will receive financial assistance, but he did mention they have no preference for the technologies used except that those used must be “pretty cutting edge technology.”

Maybus also said that the whole point of the efforts by the government to seek out information is to make the advanced biofuels industry competitive. “This,” he said, “will help America move towards a different energy economy.”

The following are the considerations the government feels responders to the RFI should consider, as outlined in the RFI:

- The Defense Production Act is concerned with only domestic sources. Foreign capabilities will not be considered. Title III cannot be used to create or expand a foreign source, regardless of the essentiality of the technology to U.S. defense requirements. Additionally, as critical components, feedstocks would also be restricted to domestic sources under any DPA Title III program investment to expand production capacity for biomass-derived fuels.

- A drop-in replacement fuel requires no change in systems configuration, engine architecture, fuel infrastructure, or fuel handling.

- The maturity of specific technologies and biorefinery operations that could be deployed to achieve commercial-scale production.

- The feasibility and economic viability of the proposed major biomass feedstocks that could be employed to meet commercial-scale production volumes.

- Description of all value-added coproducts resulting from the processing and conversion processes that have the potential to provide economic benefits to the Responder and the Responder’s team members, thereby reducing business risk. Risks associated with producing, marketing and delivering value-added co-products and methods for mitigation.

- Locations where commercial-scale IBRs could be best sited and most economically operated.

- Recognition that Hawaii is a critical command location for all U.S. military services. Because of its dependence on imported oil and the very real opportunity for agriculture to enhance energy security for the State and the Department of Defense, creation of a sustainable biofuel supply chain in Hawaii, independent of long transoceanic supply lines, would be of particular interest.

- The ability of interested parties to form effective teaming/business arrangements that encompass all aspects of a fully integrated value chain required to produce drop-in liquid transportation fuels that meet both military and commercial specifications.

- The importance of mitigating price fluctuations and enhancing price stability in the biofuel market. The government anticipates the potential to index the price of biofuels to nonpetroleum commodities.

- The total risk associated with undertaking an investment in a commercial-scale biofuel operation. The government estimates a nominally 10 million gallon capacity of neat fuel per year operation is needed; however, the government is seeking input on what constitutes a realistic commercial-scale operation that could foster future financing and investment.

- The importance and duration of government offtake purchase agreements that would be required for fuel produced in a prospective commercial-scale facility,

- The inclusion of food-based crops only as transitional feedstocks for a pathway to sustainability, while assuring no significant intermediate or long-term impact on the supply of agricultural commodities for the production of food.

- The total public-private investment required to develop and construct a commercial-scale integrated biorefinery that meets the nominally 20 million gallon blended fuel capacity objective.

- Recognition that 50 percent (1:1) is the minimum level of industry cost sharing that the government would entertain.

- The types and  amounts of potential funding from additional sources (including private capital markets, as well as local, county, state or other federal sources) that might be made available to supplement or partially fund the activity.

- Documentation a prospective Responder would be willing to share in response to a possible solicitation that would be sufficient to assure the government that an applicant would have adequate resources and sustained access to capital to pursue such a program. Letters of intent by financial institutions, available cash-on-hand, company capital investment commitments, and/or other such assurances might suffice as evidence of such a capability.

- Government documentation and/or assurances a prospective Responder would require to permit review by independent consultants of proprietary construction and operational information, should the government elect to use independent engineering, procurement, and construction consultants to more efficiently evaluate technical risks and plans.

In addition to the press conference announcing the RFI, Maybus also indicated there would be an industry day in the following days to allow industry feedback and questions relating to the RFI.

For more information on the RFI and how to submit information, visit the Final Title III Biofuels RFI-11-27-PKM.doc.