Energy Policy: What "Green Jobs" Revolution in the U.S. Economy?

Too bad this editorial Green jobs fading from the 27 Oct 14, Oil And Gas Journal is hidden behind a subscription wall because more Americans need to be aware of the expensive sham of alleged "green energy" jobs that has cost them billions:

While campaigning for election to his first term, President Barack Obama promised to create 5 million green jobs in 10 years. Once in office, he maneuvered Congress into passing the American Recovery and Reinvestment Act (ARRA) of 2009, a $840-billion spending spree that included about $90 billion for energy and, of course, green jobs. Results have not been spectacular. In fact, they testify to core problems of governmental profligacy.
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So how many green jobs did the munificent government create with AARA energy money? An administration proudly dedicated to transparency must find that question disturbing.

In March 2013, the Bureau of Labor Statistics, part of the Department of Labor, reported employment associated with production of green goods and services in 2011 amounted to 3.4 million jobs. That was an increase of 158,000 jobs from the prior year, corrected in both cases to account for adjustments in estimation methods. But what jobs were being counted? The BLS explained its definitions and methods elaborately. By the time it issued its report for 2011, however, the validity of those methods had been shredded.

In a June 6, 2012, hearing of the House Committee on Oversight and Government Reform, Chairman Darrell E. Issa (R-Calif.) elicited an illuminating sequence of confessions from acting BLS Commissioner John Galvin, now deputy commissioner. A person could be counted by BLS as holding a green job, Galvin had to admit, if he or she swept floors in a solar-paneled facility, drove a hybrid bus in public transportation or even a school bus, pumped fuel into a school bus, worked in a bicycle shop, sold recycled goods in an antique store or Salvation Army outlet, or collected garbage. These revelations discredited official numbers, formerly flaunted, about green jobs. Responding to spending cuts mandated under sequestration provisions of the Balanced Budget and Emergency Deficit Control Act, BLS made its green-job report for 2011 the last.

Program troubles didn't end there. In June last year, the Government Accountability Office raised questions about the $501 million of targeted ARRA funds Labor spent on training for green employment. Required by the statute to act quickly, GAO said, Labor implemented several programs simultaneously. "As a result," it said, "in some cases Recovery Act training programs were initiated prior to a full assessment of the demand for green jobs." And in this program, too, definitions were flexible. According to GAO, "Labor created its green jobs definitional framework to provide local flexibility, and grantees we interviewed broadly interpreted Labor's framework to include any job that could be linked, directly or indirectly, to a beneficial environmental outcome."

At the time of the GAO report, incomplete data made results of the training effort uncertain. Information from grant recipients reporting final outcomes indicated slightly more individuals than projected had received training, GAO said. But job placements were only 55% of the target level.

Let me direct you to this series of articles (full disclosure they written by my brother, a long-time reporter for the L.A. Times) on one example of "stimulus money" gone awry:

. . . the federal Department of Energy in 2009 and 2010 pitched in with $9.9 million in stimulus grants — part of the Obama administration effort to create jobs and revive the American economy.

To date, however, not one of the proposed North American Power Group plants has been built. The stimulus grants — ostensibly to study carbon sequestration potential on the Two Elk site — were suspended by the DOE in January 2012 because of numerous accounting irregularities.

But that was not until $7.3 million of the stimulus money had already been spent, much of it on inflated salaries . . .

A couple of million here, a couple of million there. Pretty soon it adds up. Not necessarily in job creation, though.

In the meantime, job growth largely fueled by the private energy industry due to fracking and the development of shale gas sites has been significant:

The U.S. Energy Information Administration (EIA) projects that U.S. annual natural gas production will increase from 23.0 trillion cubic feet in 2011 to 33.1 trillion cubic feet in 2040, a gain of 10.1 trillion cubic feet (44.0 percent).2 More than 87 percent of this increase is due to growth in shale gas production, whose share of total natural gas production is projected to reach 50.4 percent by 2040.3 Because of this rapid growth, the oil and natural gas industry has experienced large employment and wage increases over the past few years. Many of these increases have occurred in areas outside the “oil patch” region, which produces a substantial amount of U.S. oil and natural gas and comprises the states of Oklahoma, Texas, and Louisiana.

The U.S. Bureau of Labor Statistics kindly produced the following chart on such job growth:

You might note those are just jobs in the "oil and natural gas industry" and does not, apparently count jobs of people in industries who provide services to those oil and gas workers. Heck, if you count floor sweepers, motel clerks, school bus drivers, etc, those numbers might even be higher.

And, before you go off on the hazards of "non-green" energy (which I would assert you need to be careful in doing when natural gas is involved), you might be interested in the huge pollution bomb that is China:

China's emissions already exceed the US and EU combined, it emits more per capita than Europe and could overtake America by 2017.

Well, of course, there is a big capita difference involved.

Can you say "misguided" and ""unsupervised?" That seems to be the theory behind throwing "green job" stimulus money around. If you need to review it, there's a pretty good look at the $535 million Solyndra Scandal from the Washington Post:

Meant to create jobs and cut reliance on foreign oil, Obama’s green-technology program was infused with politics at every level, The Washington Post found in an analysis of thousands of memos, company records and internal ­e-mails. Political considerations were raised repeatedly by company investors, Energy Department bureaucrats and White House officials.

Sure, old news. But we are still paying for it - especially, I would argue, in the reduced funding for national security matters, including readiness.

UPDATE: Changed link to Rone Tempest Wyofile articles to give you the best possible access.

Slicing the Baloney: Congress Stalls Expensive Navy Bio-Fuels Project

Money pit of algae

Remember the hoopla about the "Green Fleet" and the alleged need to ween the Navy from a dependence on foreign oil (see Baloney at the Navy Top: "We use too much fossil fuel", An Unimportant Navy News Release, Background: "Biofuels of No Benefit to Military" says Rand. Navy rejects report., More Defense Money Baloney: "New Biofuels "Market" to Reduce Foreign Oil Dependence", Algae Fuel "Investment" Baloney).

Well, it seems various members of Congress are not as enamored with this sort of expensive "forward" "change" enough to believe in it and have, so far cut off its funding, as set out in Noah Schactman's Danger Room piece,
Senate Panel Cuts Off Navy's Biofuel Buys:

The Navy’s ambitious renewable-energy plans aren’t sunk quite yet. But they took a major hit Thursday, when the Senate Armed Services Committee voted to all-but-ban the military from buying alternative fuels.

The House Armed Services Committee passed a similar measure earlier this month. But the House is controlled by Republicans, who are generally skeptical of alternative energy efforts. Democrats are in charge of the Senate Armed Services Committee. And if anything, the Senate’s alt-fuel prohibition goes even further than the House’s. If it becomes law, if would not only sink the Navy’s attempt to sail a “Great Green Fleet,” powered largely by biofuels. It would also sabotage a half-billion-dollar program to shore up a tottering biofuels industry.

Tottering? You bet, because it makes no rational economic sense and they can't find any "greater fools" to toss money to the wind - except for, you know, the well-meaning U.S. Government spending your tax dollars to try to create a market where one does not exist at the prices this algae fuel demands.

Hey, the screwed up nature of this mess is evident to nearly everyone. See Congress torpedoes Navy, Pentagon agrofuel plans:

Both houses have approved legislation that blocks the Navy from buying agrofuels — petroleum substitutes derived from plants, typically grown on industrial Third World plantations — unless they cost no more than conventional fuels.

Their action also bars the Pentagon from funding agrofuel refineries, a major blow to the Obama administration embrace of plant-based fuels, driven largely by Energy Secretary Steve Chu.
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Just how important is the Pentagon’s agrofuel agenda? Swell, consider one simple fact: The world’s largest single consumer of oil is the U.S. military.
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What might the impact of the Congressional action be?

Consider the case of Amyris, the local company started by Chu protégé and former employee Jay Keasling with the help of some Bill Gates money.

Amyris hopes to make synfuel with the help of genetically engineered microbes, but the diesel fuel they’ve churned out costs a whopping $29 a gallon, no sale under the pending legislation.

If the measure makes it into law, we can expect a major shakeup in the already rickety agrofuel industry.

Amyris stock in the tank, as Mr. Brenneman notes in his post.

Rickety industry? Like stepping into quicksand.

Because its number don't add up.

Might as well just throw dollars into a pond full of scum.

Timely action by Congress on this one.

Energy Thursday

One reason gas prices go up - refiners are tired of losing money so they are shutting down refineries. See Valero again suspending refinery in Aruba from the Oil and Gas Journal:

Citing “unfavorable refinery economics and the outlook for continued unfavorable refinery economics,” Valero Energy Corp. said it will halt crude runs at month’s end of its 235,000 b/d facility in Aruba.

Valero’s move follows by 2 months the announcement by Hovensa LLC, a joint venture of Hess Corp. and Petroleos de Venezuela SA, of closure of the 350,000 b/d refinery at St. Croix, VI (OGJ Online, Jan. 18, 2012). Hovensa will operate the facility, capacity of which had been reduced from 500,000 b/d, as a terminal.
***
Valero said it has been operating the refinery at reduced rates and at a financial loss. While holding open the possibility of a restart, it said it is considering converting the refinery to a terminal.

Hmm. Refiners losing money? How could that be?


Investors Business Daily hammers President Obama for his fake "I bring you more oil" nonsense in its editorial "Obama's Keystone XL Visit A Potemkin Village Photo-Op":

The president stages a photo-op in Oklahoma to take credit for the portion of the Keystone XL pipeline that doesn't need his approval and for oil production on private and state lands beyond his jurisdiction.

Of the things within his power, on the other hand, he seems to not quite grasp some concepts - like the cost structure of the oil and gas industry. Here's the president speaking to employees of a federally subsidized solar energy company, complaining about the "subsidies" "given" to those nasty "old" oil companies:

And, yes, that means we make investments in stuff that is new, and we stop subsidizing stuff that’s old. The current members of the Flat Earth Society in Congress -- (laughter) -- they would rather see us continue to provide $4 billion -- $4 billion -- in tax subsidies, tax giveaways, to the oil companies -- $4 billion to an industry that is making record profits. Every time you fill up the pump, they're making money. They are doing just fine. They're not having any problems.

And yet, on top of what we're paying at the pump, we're also going to give them $4 billion in subsidies that could be going into making sure there were investments in clean energy for the future? That doesn’t make any sense. Does that make any sense?

AUDIENCE: No!

THE PRESIDENT: All right, I just wanted to make sure. Because I didn’t think it was a wise use of your tax dollars. (Laughter.)

We have subsidized oil companies for a century. We want to encourage production of oil and gas, and make sure that wherever we've got American resources, we are tapping into them. But they don’t need an additional incentive when gas is $3.75 a gallon, when oil is $1.20 a barrel, $1.25 a barrel. They don’t need additional incentives. They are doing fine.

AUDIENCE MEMBER: It is our retirement!

THE PRESIDENT: Yes. A century of subsidies to oil companies is long enough. It's time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double down on investments in an energy industry that has never been more promising. (Applause.) That’s what we need to do.

So Congress needs to pass more tax credits for projects like this one; needs to provide certainty when it comes to these tax credits. We need to go out there and do what a lot of states are doing right now, which is saying, let's get a certain percentage of our energy from clean energy sources. Because when we do that, that gives a company like this one certainty that they're going to have customers, and they can invest more and build more. (Applause.)

First, as has been pointed out elsewhere, oil does not cost oil companies "$1.20 a barrel, $1.25 a barrel" or even that per gallon. Maybe he meant $120 a barrel?

Oil costs, according to the Crude Oil Price gauge over there on the right - $104 a barrel. A barrel is 42 gallons of crude, unrefined oil. So, a gallon of unrefined crude, before the costs of transport, refining, drilling, storage, administrative overhead costs $104/42= $2.28/gal. Thus, a barrel of oil costs about 86 times what the president says it does and even if he meant gallons, he got it wrong by nearly 1/2.Now, if he meant $120 a barrel, what does that mean? It means that oil companies are paying a higher price for the product that they use to produce gasoline. Yes, those higher costs get passed on to consumers. That price of crude makes up about 76% of the price of gasoline at the pump (see below) - it is not profit to the "oil companies."

Not all of a barrel of oil can be converted to gasoline. Of any given barrel, according to the Texas Oil and Gas Association, only about 19.5 gallons of gasoline are derived from an average barrel of crude. That's less than 1/2 of the barrel, but let's say we could actually by that 1/2 barrel for 1/2 the price of a whole barrel - it would cost $52 for 19.5 gallons or $2.67 per gallon (at $120 barrel it would be $3 per gallon). According to the U.S. Energy information agency, 76% of the price of gas at the pump is attributable to the cost of crude (see here), 11% to distribution, marketing and refining and - 12% to taxes. Your local taxes may vary. Here in North Carolina, it's about $.35 gallon. According to this site, Exxon (for example) makes about $.02 per gallon profit, or about 1/15 of what the state takes in. Total taxes - well, the American Petroleum Institute has a nice map:

I guess it really sucks to be in California, New York and Connecticut where the combined federal/state taxes are over $.60 per gallon or over 30 times  the oil company profit per gallon.

Now, what sort of subsidies does the solar company - the employees of which the president was addressing - get? According to the Las Vegas Sun, the plant got $12 million from the State of Nevada in incentives and (the side comments are the Sun's, not mine):

The federal government gave Sempra Generation about $42 million in tax credits, 30 percent of the price tag for Copper Mountain. The Economic Development Commission said the 48-megawatt project cost $141 million.

State officials provided sales tax abatements for equipment purchases and a 55 percent property tax reduction for 20 years. Those incentives amounted to $12 million. The state gave Sempra an additional $2 million in concessions for El Dorado, an adjacent 10-megawatt solar array.

“Even with the abatements, the state is still netting $27 million over the life of the project,” Sempra spokesman Scott Crider said. “This money would not be available to the state if not for the solar project.”

The cash comes from property and sales taxes Sempra pays at a reduced rate.

Similar incentives are offered to any renewable energy company that commits to a project that generates more than 10 megawatts of energy, enough to power several thousand homes. Firms also must abide by certain hiring and spending requirements to receive tax breaks.

“If they didn’t have the federal or state incentives, they probably couldn’t make these projects work,” Boulder City Mayor Roger Tobler said. (emphasis added)

Copper Canyon provides electricity to 14,000 homes. With $54 million in incentives, tax credits, etc, that works out to over $3800 per house.

The benefits to Nevada? Las Vegas Sun:

Temporary construction jobs created: 350. Not bad.

Nevadans employed: 262. That’s a good share.

Solar power coming to Nevada: 0. Zip.

Parts manufactured in Nevada: 0. Zilch.

Permanent jobs created: 5.

So, Nevada offers up $12,000,000 for 5 permanent jobs and 262 temp jobs (now ended)? Wow, talk about a lousy return on investment. Especially since the 14,000 homes being "electrified" are in California. It's really nice that Nevada decided to subsidize California's energy needs.

Oh, and as to Sempra, the owner/operator of Copper Canyon:

Sempra Generation is a subsidiary of Sempra Energy, which owns two Southern California utilities, natural gas pipelines and storage facilities in North and South America and wind farms in Indiana and Mexico. In 2010, it reported $9 billion in revenue.

Of course, the $9 billion number is misleading because revenue is not profit - but rather income before accounting for expenses. In its 2010 report, Sempra reports earnings of $739 million. For 2011, Sempra reports earnings of $1.4 billion and raised its dividend by 25%.

There is nothing wrong with this. It is the way we do business in this country.

Sempra provides gas and electric service to much of southern California through natural gas powered and one nuclear powered plant. In contrast to the output of its two solar facilities in Nevada, providing power to a total of 17,000 people, its nearby by gas powered electrical generating plant provides power to 350,000 homes.

According to its 2010 annual report, Sempra reports the following "subsidies (according to the Obama adminstration these are exactly the same sort of  "subsidies" complained of that the "oil companies" took). From Sempra's 2010 Annual Report:

As a mostly regulated company (gas pipelines and electricity have their rates approved by various agencies), that has a certain level of profit guaranteed (you can look it up), Sempra has done quite well for its investors over the past few years compared to both the S and P 500 and the S and P 500 Utilities:

So, it what sort of world would the president be making sense? Well,I guess in a world in which the price of every gallon of gasoline sold was over 2/3 profit to the oil companies and in which there were no costs except for the price of crude oil and there were not federal or state taxes in the price of gasoline at the pump.

In this world, though, the president is "talking through his hat."

Too bad so many people will fall for it.

Look, here's a look at Exxon's 2010 consolidated statement of operations to compare with Sempra's:

Yes, it's bigger in numbers, but those "costs and deductions look pretty similar, don't they?

Trend Lines

Chinese Shipping company Freezing Payments.

Baltic Dry Index:

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View the full BDIY chart at Wikinvest

Baltic Dry Index is a daily average of prices to ship raw materials. It represents the cost paid by an end customer to have a shipping company transport raw materials across seas on the Baltic Exchange, the global marketplace for brokering shipping contracts. The index is quoted every working day at 1300 London time. This index can be used as an overall economic indicator as it shows where end prices are heading for items that use the raw materials that are shipped in dry bulk.

Generally, a decrease in the BDI means demand is down for raw materials and that portends a decline in future planned production because of weak consumer demand. In the chart above, you will note a slight increase trend in the BDI in the past few days. In the last 12 months, the BDI has ranged from a low of 1043 (Feb 2011) to a high of 2261 (Dec 2010). Here's the last two years:

What's it all mean? Chinese shipping company not paying ship owners?

Is it because their demand is down and they don't need to be especially nice to the ship owners to ensure they can get ships in a tight market? Because they know there's too many ships chasing too few charters?

Glenn Reynolds gets an interesting question from one of his readers:

“Did the Administration punt on Keystone because there are more Solyndras out there dependent on high oil prices and Alberta oil threatens to lower the price enough to put more of them out of business?

"You don’t need a weatherman To know which way the wind blows," Dylan once wrote. How else do you create a market for overpriced fuels and products? Jack up the prices and costs of your competition. In private business it would be a violation of the law. Apparently, in government when the goal is "saving the planet" there are no rules. So we see the Department of the Navy getting into the "market creation business" for an unproven business (or, as the insiders put it, "investing in").

Of course, "investments" are always better when the fix is in. But, as Solyndra proves, sometimes the "fix" doesn't take. Which means, with private investors the investors take a bath. With taxpayer money? It was just "unexpected" that competition could drop the price model of Solyndra into the garbage pit.

Despite strong growth in the first half of 2011 and traction in North America with a number of orders for very large commercial rooftops, Solyndra could not achieve full-scale operations rapidly enough to compete in the near term with the resources of larger foreign manufacturers. This competitive challenge was exacerbated by a global oversupply of solar panels and a severe compression of prices that in part resulted from uncertainty in governmental incentive programs in Europe and the decline in credit markets that finance solar systems.

 A "global oversupply of solar panels?" Surely, someone should have been monitoring the market before a ton of money was "invested?"

Half a billion here, half a billion there, pretty soon you're talking real money.

Playing Politics with Energy: State Department delays Keystone XL decision until 2013

If, years from now, we look back and need to blame an administration for further screwing up our energy business and economy, we can look back at decisions like this: State Department delays Keystone XL decision until 2013 - Oil & Gas Journal. You know, after the election.

US oil industry and general business trade associations lashed out at the decision.

American Petroleum Institute Pres. and Chief Executive Officer Jack Gerard complained about a political dimension of the decision.

“Whether it will help the president retain his job is unclear, but it will cost thousands of shovel-ready opportunities for American workers” he said. “There is no real issue about the environment that requires further investigation, as the president's own State Department has recently concluded after extensive project reviews that go back more than 3 years.

“This is about politics and keeping a radical constituency opposed to any and all oil and gas development in the president's camp in November 2012.”

National Petrochemical & Refiners Association Pres. Charles T. Drevna said the decision “will strike a blow against American workers who need jobs, against American consumers who need energy, and against American economic and national security.”

Drevna said, “Turning our back on our good friend and ally Canada will exponentially increase the odds that Canadian oil is shipped to China and other countries overseas and will harm American fuel manufacturers and their employees.”

US Chamber of Commerce Pres. and Chief Executive Officer Thomas J. Donohue said, “Politics has trumped jobs in this decision, and we can only wonder if the administration’s delay will cause Canada to turn their pipeline west and ship their energy and American jobs elsewhere.”

National Association of Manufacturers Pres. and Chief Executive Officer Jay Timmons, citing what he estimated to be 118,000 jobs at stake, called on the administration to reverse a decision he described as “outrageous.”

Somewhere, some idiot "environmentalist" is happy, since the last thing he understands is where energy comes from. I doubt that idiot knows that pipelines already run across our country and Canada.

Meanwhile the President will waste more fuel and pollute more to attend the "carrier game." I guess he figures that he needs the environmental votes more than the U.S. needs jobs and this energy project. Way to put the country first, Mr. President.

I think this is a bad idea: "Promotion boards to look at energy efficiency"

While it pains me to say it, the Secretary of the Navy continues to assert a mythical "energy vulnerability" while inserting what can only be construed as a "green" component into Navy officer promotions, as reported at Promotion boards to look at energy efficiency - Navy Times:

Navy Secretary Ray Mabus, who has spent the past two years trying to wean the service off of fossil fuels, said promotion boards will consider an officer’s energy management when deciding whether to move him up. Furthermore, Battle E commendations will be based, in small part, on a command’s ability to sip fuel instead of guzzle.

Look, if the SecNav wants to cut fuel costs that's arguably a good idea, though I would assert it is not necessary to take drastic measures that will hurt combat preparedness. What fries my bacon is his persistent assertion that there is an U.S. strategic fuel shortage and that it requires drastic steps, including pumping millions of DON money into creating a "biofuels" market. Why isn't he screaming for more nuclear powered ships? That's the ultimate effective "energy management" to beat the SecNav's concerns of reducing

. . . the sea services’ dependence on oil from adversaries while reducing the need to refuel, which takes ships out of combat while making them vulnerable to attacks.

As I have said before here, and here, the U.S. has plenty of fossil fuels to operate our Navy for hundreds of years. In the latter post I wrote, "When we claim we're "hostages" to foreign energy, we're just being stupid. Politically correct, but stupid." Develop the energy we have, and stop this nonsense.

This program of the SecNav is a another misstep in already overly "politically correct" environment.

Chart from here

On the other hand, sail makers should be out in force, selling "new" wind energy tools for optimum fuel savings for promotion hungry officers.

Or, hey, just tie the ships up and send the crews home to practice being at sea by playing video games and following other silly guidelines.

Algae Fuel "Investment" Baloney

Algae farm (claytonbodiecornell.greenoptions.com)

OK, in light of the "occupiers of Wall Street" complaining of - well, almost everything except labor unions and fire ant bites, here's a little addition to what they should be be concerned about - a government program to provide "venture capital" to a program that apparently has failed to find any real venture capitalists dumb enough to risk their own money in it. An example of "corporate welfare" if ever there was one.

Here,with a little highlighting from me, the "Algal Biomass Organization" offers up praise for an "investment" of $510 million from the USDA, DOE, and Navy (what does it matter whose budget the money comes from? It is all taxpayer money, extracted from the pockets of people who work for a living) into "biofuels" at "ABO Responds to USDA/DOE/Navy Biofuels Investment Promise" from Algae Industry Magazine:

The Algal Biomass Organization has voiced its opinion of the US government’s recently announced $510 million biofuels investment commitment over the next three years. Following is their statement: Late last month, three federal departments came together to launch an ambitious effort to commercialize next generation biofuels. The USDA, DOE and Navy announced an historic commitment to directly invest up to $510 million to retrofit and/or build facilities capable of producing drop-in replacement fuels. Funds from the private sector will be matched one-to-one, bringing the total potential available capital to more than $1 billion.

This announcement is a significant boon to our industry and comes at a time where several of our member companies are moving from lab to pilot, and from pilot to commercial production of algae-based drop-in fuels.

We’ve always praised the US military for its leadership in procuring and testing biofuels—their support has shown that domestic, sustainable fuels can perform at the highest levels of use. But until now, direct investment in companies or projects was not an option.

These three departments have rightly determined that it’s not going to be enough to just be a customer. They understand that the capital costs of facility construction are too high, and not the right model for venture capital, and the technologies still so new as to preclude traditional bank financing.

Let’s be clear – this is not a feel-good publicity stunt. This is an investment in the long-term national security and economic health of our country. As Navy Secretary Ray Mabus said: “America’s long-term national security depends on a commercially viable domestic biofuels market that will benefit taxpayers while simultaneously giving Sailors and Marines tactical and strategic advantages.”

What was most inspiring to me, however, was one aspect of the partnership that went under reported—where the funds were sourced. It turns out that no new authorizations are required (no surprise, given the current climate surrounding our national debt) because the funds have been pulled from elsewhere in the budget.

That means, for the first time in what seems like a long time, that advanced biofuels took precedence for limited funds. From the Obama administration to the departments of the Navy, Agriculture and Energy, the importance of accelerating commercialization of advanced biofuels is now a national priority.

It’s now up to our industry to take advantage of this opportunity and show what we can do.

Sincerely,
Mary Rosenthal

Let's take a look at the highlighted portions.

First, "three federal departments came together to launch an ambitious effort to commercialize next generation biofuels . . ." Uh, pumping federal taxpayer money into a project so iffy that its ". . . capital costs of facility construction are too high, and not the right model for venture capital, and the technologies still so new as to preclude traditional bank financing" means that taxpayers are at risk $510 million on something no rational commercial enterprise would fund (but for, apparently, the government decision to pony up money).

How does the government justify this? The Wall Street Journal editorial of 10 October 2011 has it just right, in describing the "Solyndra economy" mindset of this administration:

And there you have America's Solyndra economy, as the White House understands it: Washington allocates capital, and taxpayers pick up the tab if those choices go bust. Through this political lens, the August bankruptcy of the Fremont, Calif. company was a necessary casualty in the greater campaign to steer the U.S. economy toward Mr. Obama's noble goals. Private competition that winnows out losers is so yesterday.

Politics and a disdain of free markets triumphs economic sense. After all, throwing a big lump of government money at this project hardly seems capable of being described as an effort to "commercialize" anything. We might as well say we provide federal funding to "commercialize the next generation of grade schools." Ms. Rosenthal, I don't think that word means what you think it means.

Secondly, take a look at

What was most inspiring to me, however, was one aspect of the partnership that went under reported—where the funds were sourced. It turns out that no new authorizations are required (no surprise, given the current climate surrounding our national debt) because the funds have been pulled from elsewhere in the budget.

Are you kidding me? The Defense and Navy "budget" process is designed to put money on things that need money. Ship repair, aircraft repair, fuel, ammunition replacement, personnel costs and so forth, Stripping money from such allocations means something suffers. Yep, because "advanced biofuels took precedence for limited funds", something else, planned for as priority, suffered. Was it Seaman Johnny's advancement in rate? Did ships not get under way because they needed repair? Oh, those things are lower precedence, I suppose.

Further, as I have tried to say before, the issue here is not a shortage of domestic fuel that would help with "energy independence" but rather with an extreme "green" agenda that is distorting our economy and wasting taxpayer dollars (see Baloney at the Navy Top: "We use too much fossil fuel"). I am not opposed to the development of a biofuel that is self-funded and self-sustaining. I am opposed to this forced "create a market" by expending tax dollars approach.

If you think this is the wave of future, I invite you to invest your own hard-earned money into companies that produce this product, like Sapphire Energy (no, I don't own any stock, nor do I guarantee any financial results, and all private investments are subject to risk, just like investments in any other company and all the other disclaimers you can imagine) (UPDATE: Oh, wait, it's privately held.)(UPDATE2: Oh, wait, Sapphire Energy got a $50 million loan guarantee from the USDA as set out here to "to build an algae-based diesel biofuels plant in Columbus, New Mexico." - Hmmm.)

My previous rants against this "investment" can be found here, here, here and here.

An Unimportant Navy News Release

Pilotless aircraft in a pilot program (U.S. Navy photo by Kelly Schindler)

Fire Scout Completes First Navy Unmanned Flight on Biofuel

To which my mind says, "So what?"

What did the testers think was going to happen? Hadn't they tested the fuel ahead of time?

If it's fuel that burns in a gas turbine, it's gas turbine fuel. I don't believe there will be much chemically different from a fuel based on petroleum. In fact, I bet it is almost like a petroleum product.

The question of whether or not Department of Navy funds should be diverted to support this "biofuel" industry is not answered by this sort of rigged test. As I've noted over and over, the U.S. has plenty of fossil fuels available to help us become energy independent - the announced goal of the Secretary of the Navy and his ultimate boss, the President. SecNav's pitch, which we heard repeatedly during a DoD Bloggers Roundtable with him earlier this year, is that he is seeking alternative fuels that, essentially, cost the "same" as fossil fuel products. Oddly enough, fossil fuels cost the same as fossil fuels and don't require a dime of Navy (taxpayer) money to develop a market or to build refineries, pipelines and the like.

The "Green" Navy and "Energy Independence" were the topics of DoDLive Bloggers Roundtable: Secretary of the Navy Ray Mabus. From the transcript:

SecNav: ***The most overarching or broadest goal was by no later than 2020, at least half of all Navy energy, both afloat and ashore, would come from non-fossil fuel sources. I did this to address a vulnerability. We simply buy too much petroleum from volatile places on earth, and we need to address that vulnerability to reduce our dependence on foreign sources of fuel.

My translation: "So, instead of focusing on buying fuel from non-volatile places (like say, the U.S. and Canada), we have decided create a whole new industry using your tax dollars."

The U.S. Navy's least polluting ship?

SecNav: The Navy will do two things. One is, we will make our contribution of about $170 million to help either build or retrofit biofuel plants for -- to produce biofuel. We will also be willing to sign offtake contracts so that we will provide the market for these biofuels. And finally, earlier this summer, the Defense Logistics Agency, on behalf of the Navy, issued a request for proposals for 450,000 gallons of biofuels for our test purposes, which we think is the largest biofuel purchase ever undertaken in the United States.

My translation: "Biofuel production is not 'shovel ready' so we are going to take taxpayer money and try to push production of this product into a market in which the only real demand will be the taxpayer funded military. Building plants and all that is needed to get the biofuels ready for real production has yet to be accomplished."