US energy boom undermines logic of Pentagon’s alternative fuel subsidies

Lachlan Markay Investigative Reporter, Heritage Foundation
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The Defense Department plays a key role in the Obama administration’s “green energy” agenda. But the coming energy boom in the United States may undercut its efforts and could provide avenues for reducing spending at the Pentagon while avoiding ham-fisted sequestration cuts.

A new report from the International Energy Agency predicts that the United States will be a net energy exporter by 2030, even overtaking OPEC giant Saudi Arabia in oil production within the next five years.

Much of that boom is attributable to the rise of hydraulic fracturing and horizontal drilling, oil and gas extraction techniques that have vastly expanded the nation’s energy potential. The impending windfalls for energy-producing states are knocking down political barriers to increased production there, USA Today reports.

All of that points to a continuing trend toward greater — and cheaper — fossil-fuel production. That has significant policy implications going forward. But it could also signal a shift in a fight currently being played out on Capitol Hill.

A group of 38 senators — all Democrats, save Maine Republican Susan Collins — sent a letter to Senate leaders last week asking them to purge the pending National Defense Authorization Act of language prohibiting the Pentagon from buying alternative fuels that cost more than the prevailing price of their conventional competitors.

The language in section 313 of the bill, passed by the Senate Armed Services Committee in a 13-12 vote, addresses recent controversies over extremely expensive military energy expenses. It prohibits the use of Defense Department funds “for the production or sole purchase of alternative fuel if the cost of producing or purchasing the alternative fuel exceeds the cost of producing or purchasing a traditional fossil fuel that would be used for the same purpose as the alternative fuel.”

In one instance, the Navy bought algae-based biofuels for about $15 per gallon, drawing the ire of, among others, Armed Services ranking member John McCain (R-AZ).

The provision, along with one prohibiting the Pentagon from building biofuel refineries, “could cause harm to our national security and military readiness,” the senators state, “while hindering national efforts to develop viable domestic alternative fuels.”

The concerns over military readiness involve the cost of fossil fuels, the senators explain. Price spikes, they claim, leave the military vulnerable to sudden cost increases.

But the bill’s language makes clear that the Pentagon is free to purchase alternatives that cost less than conventional fuels. In other words, unless and until oil prices spike to the level of alternatives, even price shocks cannot cost the military as much as biofuel alternatives. If those shocks make oil the more expensive option, the Pentagon can look elsewhere.

If the goal, then, is to power the military as inexpensively as possible, there is nothing objectionable about the provision. But if the goal is simply to subsidize renewable energy, the coming U.S. energy boom is a troubling trend. The resulting decline in prices will mean that the military likely will not have cause to buy biofuels or other renewables.

And that brings us to the 38 senators’ second objection — that the provision in question will hinder “national efforts to develop domestic alternative fuels.” That much is likely true, but it leads to the question: Is it, and should it be, the Pentagon’s job to develop alternative fuels?

According to a report released last week by Sen. Tom Coburn (R-OK) on waste and inefficiency in the Defense Department, the Pentagon is actually more active than any other federal agency, including the Energy Department and the Environmental Protection Agency, in the renewable energy sphere.

The coming U.S. energy boom’s downward pressure on fossil fuel prices will make alternative fuels unnecessary from a cost perspective. To the extent, then, that legislators are concerned with the legislation’s stance toward renewables, it is less a concern over the military’s effectiveness than a hope that the Pentagon will maintain a steady stream of subsidies for politically fashionable energy projects.

That has implications not just for immediate energy policy and the bill itself, but for the short- and medium-term efforts to trim the Pentagon’s budget. Impending defense sequestration cuts take an across-the-board approach to reducing the nation’s defense budget, meaning cuts will be implemented without regard for strategic priorities.

A reduction in the Pentagon’s renewable energy adventurism provides an avenue to reduce the nation’s military budget by trimming activities that may be better undertaken by agencies whose missions actually include the development of alternative energy technologies.

Lachlan Markay is an investigative reporter for The Heritage Foundation. Follow him on Twitter.