The departments of Energy and Agriculture and the Navy announced a partnership today with industry aimed at accelerating the production of advanced marine and aviation biofuels.

The Obama administration will spend up to $510 million over the next three years to help construct or retrofit drop-in biofuel plants and refineries. On a conference call with reporters, administration officials said they expect industry to at least match government funding, pushing the total investment to more than $1 billion.

Agriculture Secretary Tom Vilsack said the partnership reflects an effort to address feedstock risks, technological research and the need for a marketplace for biofuels. USDA, he said, will provide guidance for the feedstock and ensure there is no competition with food supply, and DOE will provide the technology backing, while the Navy will purchase the drop-in fuels and provide a ready market.

Navy Secretary Ray Mabus said the Navy, which wants to get half of its energy from non-fossil fuel sources no later than 2020, has already tested drop-in fuels for some aircraft, but is looking to purchasing the fuel from a domestic source. The Navy purchase, he said, would provide certainty to the private partners that they would get a quick return on their investment.

The initiative came in response to a directive issued by President Obama in March to encourage domestic investment into alternative fuels to cut imports of foreign petroleum by a third by 2025.

The three agencies will split the cost of the program equally and will pay for the investments through existing funds. The three signed a memorandum of understanding and will work to attract private-sector partners that can produce drop-in fuels at competitive prices.

Mabus said the Navy will invoke the Defense Production Act to help spur investment in the initiative. The 1950 law allows the military to invest in an industry that is vital to national security (Greenwire, July 25).

"From a strategic standpoint, we buy too much fuel from potentially volatile places," said Mabus, adding that energy independence was "one of the most important things we can do from a military standpoint."

The partnership marks the administration's most significant investment in biofuel production, although DOE and USDA have made coordinated investments before. However, Vilsack said the partnership represented not only a "wise investment" for biofuels, but a "new model for the government doing business."

The announcement comes as Obama takes a bus tour through the Midwest. At a stop yesterday in Minnesota, Obama answered a town hall question about biofuels, noting the "incredible progress on that front" and emphasizing the important of the "incredible purchasing power of the federal government to encourage it."

Reporter John McArdle contributed.