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.”