Both Broad and Targeted Federal Alternative-Fuels Initiatives Support the Development and Use of Alternative Jet Fuels

		Broad Federal Strategies and Initiatives Have Supported Alternative Jet- Fuel Development and Use

The White House has developed broad national strategies that promote  the development of alternative fuels to help secure energy independence,  foster economic development, and reduce greenhouse gas emissions. The expanded RFS generally required that covered transportation fuels  contain 9-billion gallons of renewable fuels in 2008, with renewable fuels’  volumes increasing annually to 36-billion gallons in 2022. In this way, the renewable fuel program has created a  market for RIN credits. Four Federal Agencies Support Alternative Jet Fuels Development and Use through Targeted Goals, Initiatives, and Coordination Efforts

Four of the selected agencies—FAA, DOD, USDA, and DOE—support  initiatives that target alternative jet-fuel development or use specifically. In fiscal year 2012, FAA set a goal for the U.S. aviation industry  (including commercial and military aircraft) to use 1-billion gallons of  alternative jet fuels annually by 2018 with the intent of encouraging  commercial production. The stated objective is to construct or retrofit multiple domestic  commercial- or pre-commercial-scale advanced drop-in biofuel production  facilities. In May and June 2013, four private  companies were selected to receive awards totaling $20.5 million, with  private industry paying at least 50 percent of the cost. In addition, DOE provides direct financial support for future alternative jet  fuels production through its integrated biorefineries program, which was  initiated in 2005. Price- Competitiveness Is the Main Challenge; Federal Activities Help Address Challenge, but Market Factors Affect the Long-term Commercial Viability of Alternative Jet Fuels

		While Some Progress Has Been Made, No Alternative Jet Fuels Are Currently Commercially Available at a Price That Is Competitive with Conventional Jet Fuels

The dates FAA and DOD have established for meeting their alternative  jet-fuel usage goals are several years or more away, and, to date, all  alternative jet fuels purchased in the United States have been for fuel  testing, approval, or demonstration activities, not for day-to-day  operations. Ten stakeholders we interviewed highlighted fuel producers’ difficulty  in obtaining the private investment needed to help construct  commercial-scale alternative fuel production plants. According to  stakeholders and literature we reviewed, private financiers are  hesitant to invest, in part, because of risks associated with the  uncertainty about access to a steady supply of feedstock, high  feedstock and capital costs, and an unwillingness on the part of fuel  end users to pay a premium price for alternative jet fuels. Uncertainty of Federal Policies and Regulations

As discussed above, federal policies and regulations can support the  development and use of alternative jet fuels, but uncertainty regarding the  future of this federal support may limit the support that these policies  provide to the alternative jet-fuels industry. Stakeholders Generally Believe Federal Actions Are Needed to Advance the Development of Alternative Jet Fuels, While Market Factors Also Affect Long-term Commercial Viability

			Federal Actions

Stakeholders and studies we reviewed identified a variety of actions that  could assist in the development of alternative jet fuels, ranging from  continuing the current federal efforts to providing greater regulatory and  policy certainty to providing greater financial support. Stakeholders  identified a variety of federal actions as being the most critical for the  federal government to take. Agency Comments

We provided DOT, USDA, DOE, DOD, and EPA with a draft of this report  for their review and comment. USDA,  DOE, DOD, and EPA also provided technical comments that we  incorporated as appropriate. Appendix I: Objectives, Scope, and Methodology

This report examines (1) the role of the federal government in the  development and use of alternative jet fuels and (2) key challenges to  developing and using alternative jet fuels and actions that the federal  government plans to or could take to help address those challenges. We selected five federal agencies: the Department of  Transportation’s (DOT) Federal Aviation Administration (FAA), the  Department of Agriculture (USDA), the Department of Energy (DOE), the  Department of Defense (DOD) and its military departments (Army, Navy,  and Air Force), and the Environmental Protection Agency (EPA). To examine key challenges to developing and using alternative jet fuels  and actions that the federal government plans to or could take to help  address those challenges, we (1) identified the extent to which alternative  jet fuel has been purchased for commercial and military use in the United  States; (2) selected and interviewed 23 stakeholders representing  government, academia, and the private sector to obtain their views on key  challenges and planned or possible federal actions; (3) reviewed relevant  literature on challenges to developing and using alternative jet fuels to  help corroborate the views obtained from the 23 stakeholders; and (4)  interviewed officials from the five selected federal agencies, as well as  representatives from other non-federal entities involved in the alternative  jet-fuels industry.
Why GAO Did This Study

The federal government has encouraged the development and use of alternative fuels to reduce greenhouse gas emissions associated with aviation and to enhance economic development and energy security for the United States. To help achieve these goals of reducing greenhouse gas emissions, the aviation industry is actively supporting alternative jet fuels.
GAO was asked to provide information on the progress and challenges to developing and using alternative jet fuels in the United States. This report examines (1) the role of the federal government in the development and use of alternative jet fuels and (2) key challenges to developing and using alternative jet fuels and actions that the federal government plans to or could take to help address those challenges.
GAO interviewed officials from five federal agencies—FAA, USDA, DOE, DOD, and EPA. GAO selected these agencies for review because GAO identified them as the federal agencies most involved in the development and use of alternative jet fuels. GAO also reviewed relevant literature and federal and industry documents and discussed challenges and potential federal actions with 23 stakeholders from government, academia, and the private sector, selected to represent a range of perspectives and expertise in areas related to each step in the development and use of alternative jet fuels. GAO is not making recommendations in this report. DOT, USDA, DOE, DOD, and EPA reviewed a draft of this report and provided technical comments that were incorporated as appropriate.

What GAO Found

The federal government supports the development and use of alternative jet fuels through both broad and targeted initiatives. Broad national strategies promote the development of a variety of alternative fuels—including alternative jet fuel—to help achieve national goals, such as securing energy independence, fostering economic development, and reducing greenhouse gas emissions. In addition, the renewable fuel program—established by law in 2005 to encourage greater use of renewable fuels and administered by the Environmental Protection Agency (EPA)—requires that U.S. transportation fuels contain certain amounts of renewable fuels annually, increasing from 9-billion gallons in 2008 to 36-billion gallons in 2022. The other four federal agencies that GAO reviewed—Department of Transportation's (DOT) Federal Aviation Administration (FAA), Department of Agriculture (USDA), Department of Energy (DOE), and Department of Defense (DOD)—directly support alternative jet fuels through targeted goals, initiatives, and interagency and industry coordination efforts. For example, FAA set a goal for the U.S. aviation industry to use 1-billion gallons of alternative jet fuels annually by 2018. The four agencies also sponsor research that specifically targets alternative jet-fuel development or provide direct support for its future commercial production, or both. For example, FAA and DOD support research to determine the technical feasibility of using new alternative jet fuels on aircraft and in existing infrastructure. Also, USDA, DOE, and DOD have coordinated their activities to support the future construction or retrofit of multiple domestic commercial- or pre-commercial-scale production facilities to produce alternative fuels, including alternative jet fuels. Specifically, in May and June 2013, four private fuel producers received awards totaling $20.5 million in federal funds, with private industry paying at least 50 percent of the cost.
Achieving price competitiveness for alternative jet fuels is the overarching challenge to developing a viable market. No alternative jet fuels are currently commercially available at prices competitive with conventional jet fuels. The 23 stakeholders that GAO interviewed most frequently cited high development costs and the uncertainty of federal regulations and policies as primary reasons why alternative jet fuels are not priced competitively and believe that federal activities are needed to help advance the alternative jet-fuels industry. For example, according to 10 stakeholders, fuel producers face difficulties in obtaining private investment to help construct commercial-scale fuel production facilities, in part because of concerns about the supply and high cost of feedstock (the source used to produce the fuel, such as crops) and high capital costs. Also, 13 stakeholders stated that continued uncertainty about the future of current federal policies—particularly the renewable fuel program—generally causes potential investors to discount the value of federal subsidies, discounting that, in turn, limits the support these policies may provide the industry. Stakeholders identified a variety of federal actions to advance alternative jet-fuels development, including continuing current federal research efforts, providing greater regulatory and policy certainty, and giving more direct financial support. However, even if the cost to produce alternative jet fuels is reduced, market factors may still determine the long-term success of the industry. The main market factors identified by stakeholders were (1) comparative value of competing end products, (2) feedstock prices, and (3) the costs of conventional jet fuels.