Power hungry: market for synthetic aviation fuels off to a shaky start.

Algae, wood chips or garbage could in the future help fuel airplanes.

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So say U.S. manufacturers of alternative aviation fuel, who are beginning to develop novel ways to power aircraft.

Makers of synthetic fuel are eager to offer their wares to the military as a lower cost and nationally produced alternative to petroleum-based products.

Chief among the potential buyers of synthetic fuel is the Air Force, which has trumpeted an ambitious plan to power its aircraft with alternative propellants.

The service plans to certify its aircraft fleet with synthetics by 2011 and aims to meet half of its fuel needs with such products by 2016.

But Air Force officials face roadblocks that are hampering efforts to stimulate the growth of a fledging synthetic jet fuel market. While the development of alternative energy technology in the United States has exploded in recent years, for synthetic aviation fuels, progress has been much slower.

"The industry is just beginning to grow in the United States," says William Anderson, assistant secretary of the Air Force for installations, environment and logistics.

Rentech and Baard Energy were two of the first companies to announce plans to build synthetic aviation fuel plants. But their sites won't be ready until 2011 and 2012, respectively.

Other countries are far ahead in this area, including South Africa, Malaysia and Qatar. "There are at least a dozen [plants] operating around the world today and another couple of dozen under construction or in the final planning stages," Anderson says at an Air Force energy forum in Arlington, Va.

Anderson estimates that every $10 increase in the price of a barrel of oil costs the Air Force $600 million annually.

Additionally, the development of alternative fuel is considered a national security priority. At the energy forum, Mississippi Gov. Haley Barbour, a staunch alternative energy advocate, claims that the United States is hurting its anti-terrorism campaign by importing foreign oil.

"The United States is financing both sides of the war on terror. We're financing our own military and our own economy, and then a lot of our petrol dollars find their way into the hands of radical Islamic terrorists," says Barbour.

The Air Force hopes to spur the growth of a U.S. synthetic fuels market. But a string of policy headaches may prevent the service from buying the very products it promotes.

A provision included in the 2007 Energy Independence and Security Act that was signed into law by President Bush in December contains language that would prevent the Air Force--or any government agency--from buying synthetic jet fuel unless it is proven to emit less carbon over the life of the substance than currently used petroleum.

The problem is that no one knows how to measure that.

"No one has the ability to capture life cycle costs," Anderson says.

Without life cycle data, manufacturers of alternative fuel have no benchmark to go by, says Paul Bollinger, Anderson's former special assistant.

He says the Air Force was taken off guard by the new requirement, contained in section 526 of the energy act.

"The Air Force always said it wanted a greener fuel than petroleum, but we were focused on the production, which is where most of the carbon dioxide comes from. We weren't talking about the life cycle," Bollinger says.

Chief executive officers of Rentech and Baard assert that their fuels are cleaner than petroleum.

The companies have decided to mix traditional hydrocarbon-based products with biomass--plant matter that can be burned for fuel--in an attempt to reduce harmful emissions.

Rentech plans to build the first U.S. synthetic aviation fuel plant in Natchez, Miss., which will produce a blend derived from petroleum residue called petroleum coke and water sludge, says CEO Hunt Ramsbottom. Rentech will employ a variation of the Fischer-Tropsch method to gasify the substances and convert them to synthetic fuel. Fischer-Tropsch is named after two German scientists who created the process to convert natural gas or coal to liquid fuel. Rentech may also experiment with natural gas as the primary feedstock and blend it with sugarcane, garbage, or wood chips, Ramsbottom tells National Defense.

The company will avoid using coal as a feedstock, he says. Industry experts have said fuel derived from coal has enormous potential because of its abundance, but production of the fuel could release twice as much greenhouse gas as petroleum, the Environmental Protection Agency says.

Facilities that use hydrocarbon substances as a feedstock--including coal-to-liquid plants will require an expensive process known as carbon capture and sequestration, which catches the carbon during production before it can be released into the environment.

Ramsbottom asserts that his company will capture enough carbon to "produce fuels with carbon footprints that are better than what it replaces." Rentech's petcoke/biomass fuel could be up to 25 percent cleaner than petroleum, depending on the feedstock mix, he says.

John Baardson, CEO of Baard Energy, says that his company's fuel would be 40 to 50 percent cleaner than petroleum, based on a life cycle analysis.

Baard plans to open its plant one year after Rentech, in 2012. The company chose to use a combination of coal and wood waste to make its synthetic fuel, Baardson says. The mixture of coal and biomass is expected to significantly reduce the carbon footprint and reduce costs. The company will produce either Jet-A, used in commercial aircraft, or JP-8, used in military airplanes.

Rentech built a testing facility in Commerce City, Colo., which was scheduled for completion in the spring. The plant is expected to produce 10 barrels a day of diesel, aviation fuel and naphtha (petroleum ether) using a variety of feedstocks, including natural gas, coal and biomass.

Baard is building an 800-acre coal-to-liquid test site in Wellsville, Ohio, which is expected to produce 35,000 barrels per day of jet fuel, diesel and other chemicals. The facility will capture and sequester at least 85 percent of all carbon dioxide produced, the company says.

The Defense Advanced Research Projects Agency and utility provider Arizona Public Service are also studying how to produce cleaner jet propellants by adding plant oils. Both are looking at triglyceride oils, such as algae oil, as potential feedstocks because they do not emit any carbon during production. DARPA program manager Doug Kirkpatrick says that there are at least 68 different oil crops that could be used and says the technology is already available to convert them to fuel. However, critics say that biofuels production is expensive and results in carbon emissions when the crops are harvested.

Despite industry claims of cleaner fuel, the Air Force is uncertain if companies can satisfy the new energy act requirement. Bollinger points to a lack of standards as the main impediment.

"You heard industry representatives who are producing this fuel say that they can meet this standard," Bollinger says. "But there is no standard."

Industry estimates are based on an antiquated EPA standard that doesn't measure the life cycle, he explains.

Until those life cycle standards are developed, the Air Force simply can't buy the fuel, Bollinger says. He believes the requirement is hampering market development because it deters companies from building facilities.

The uncertainty associated with the new rule is viewed as a risk in the market, Bollinger says. Companies need financing to build plants, but they can't get money until the standard is defined.

The EPA estimated that it would take at least a year to write new standards.

Tom Sayles, Rentech vice president of government affairs and communications, says that besides the life cycle requirement, the industry has bigger financial concerns. "Long-term contracts are needed to get this [industry] off the ground."

Today, the military purchases fuel on an annual basis, Sayles says, while electricity is bought in 10-year contracts.

Additionally, Ramsbottom believes the industry won't move forward in a timely manner without strong government support. The Air Force wants to develop synthetic jet fuel as soon as possible, but is restricted by Congress. Lawmakers are showing greater interest in alternative energy, but many caution against moving too quickly.

Sen. Jeff Bingaman, D-N.M., who chairs the Energy and Natural Resources Committee, wants to ensure the Air Force weighs all the options before purchasing new aviation fuel.

"We need to make sure we're undertaking careful analysis before making an investment," he says.

Of particular interest is biofuels development, Bingaman says.

"There are a lot of studies in dispute with each other on the topic of whether biofuels help or hinder our ability to reduce greenhouse gas emissions in the transportation sector."

To help clear up the confusion, the committee has asked the National Academy of Sciences and the National Academy of Engineering to study the cost and environmental impact of all the options, Bingaman says.