The Department of Defense can execute long term contracts for alternative synfuels, but only if the synfuel have lower GHG’s than conventional petroleum based fuel. The Department of Defense (DoD) has backers on Capitol Hill that support increasing the length of procurement contracts that the DoD can enter for supply of fuels. The current law was passed in September 2008 and permits the DoD to enter into contracts that are a maximum of 10 years in length. Senator John Thune (South Dakota) announced that the Senate approved the National Defense Authorization bill for Fiscal Year 2009. Recently the Senate Budget Committee voted unanimously to approve an amendment to the Fiscal Year 2010 Budget that will permit the Department of Defence to increase the contract length from 10 years to 20 years.
Senator Bunning (Kentucky) sponsored an amendment to the Fiscal Year 2010 Budget to increase the DoD contract term to 20 years and it was passed by the Senate Budget Committee.
The increased contract term length for fuel supply contracts is considered to be due to the US Air Force has been considering various coal-to-liquid proposals. The U.S. Air Force has a strategic objective to convert it’s fleet of aircraft to a domestic coal-to-liquids synfuel. Proponents of coal-to-liquid plants have noted that the U.S. Air Force must be able to enter long term contracts for developers to successfully negotiate lender funding to build the facilities. The Governor of Indiana recently signed legislation that allows the State to enter into 30 year contracts for this same reason.
A key requirement of any long term contract is that the alternative fuels are environmentally friendly. Section 526 of the Energy Independence and Security Act (EISA) was included in the 2007 energy bill to prohibit Federal agencies from procuring alternative synfuel unless its life cycle Green House Gas (GHG) emissions are less than those for conventional petroleum sources.
EISA Section 526 states: “No Federal agency shall enter into a contract for procurement of an alternative or synthetic fuel, including a fuel produced from nonconventional petroleum sources, for any mobility-related use, other than for research or testing, unless the contract specifies that the lifecycle greenhouse gas emissions associated with the production and combustion of the fuel supplied under the contract must, on an ongoing basis, be less than or equal to such emissions from the equivalent conventional fuel produced from conventional petroleum sources.”
May 28th, 2009 at 1:47 pm
Editor,
This is a confusing story if I have ever read one…Senator Bunning tried to amend the FY09 Defense Authorization bill with SA 5432, which was not adopted. Second, The FY10 Defense Authorization bill, S1003, was just introduced May 13, 2009 and has yet to move from the Armed Services Committee to the Senate Budget Committee, the Senate Budget Committee has yet to hold hearings on the FY10 Defense Authorization Bill.
So did Senator Bunning sponsor a amendment that has been included in the FY09 Defense Supplemental, S1054? If so could you reference it for your readers? This is a huge story that needs to be better researched as a 20 year contract term will allow several of the CTL projects to move forward especially given that a contract length of this term will make CO2 sequestration economically feasible.
May 28th, 2009 at 10:04 pm
Chris,
We re-read our story and decided it was a bit confusing so we modified it to make it more clear that Senator Bunning sponsored an amendment to the Fiscal Year 2010 Budget. There was a link to the press release on Senator Bunning’s website with this information, but our article should have been more clear.
We would like to point out that at the State level, Indiana recently passed legislation that enables the State through an agency to negotiate Substitute Natural Gas (SNG) contracts with a 30 year term for the purpose of facilitating financing for coal gasification projects. SEA 423 received overwhelming bipartisan support in the Indiana Senate (48-0) and House (90-8). It authorizes the Indiana Finance Authority (IFA), on behalf of the state, to enter into negotiations for 30-year contracts for the purchase and sale of SNG for delivery to Indiana customers. Governor Daniels was joined at the bill signing by Senator Brandt Hershman (R-Monticello), Senator Jim Merritt, (R-Indianapolis), Representative Russ Stilwell (D-Boonville), and Representative Win Moses (D-Fort Wayne).
Hopefully the U.S. Senate and Congress will support similar legislation. We agree with you that this is important for the coal-to-liquids industry. We appreciate you taking time to comment. Good catch!