Navy to Buy $12 Million of Advanced Biofuels in Record Purchase

The U.S. Navy will spend $12 million to buy 450,000 gallons of alternative fuel for aircraft, ships and unmanned vehicles, the biggest government purchase of advanced biofuels, Navy Secretary Ray Mabus said.

The fuel will come from Dynamic Fuels LLC, a joint partnership of Tyson Foods Inc. and Syntroleum Corp., and Solazyme Inc., Mabus said today on a conference call. The cost will be about $26 a gallon, he said.

“This is still R&D,” Mabus said. “As the market develops, you will see the cost come down.”

Dynamic Fuels will process algal oil supplied by Solazyme and used cooking oil into 100,000 gallons of jet fuel and 350,000 gallons of marine distillate fuel at its plant in Geismar, Louisiana. The facility opened in November 2010 and has a 75 million gallon a year capacity. The Navy will receive the fuel in May 2012, the companies said today in a joint statement distributed by Globe Newswire. Both companies previously supplied fuel to the military for testing.

The contract is part of the Navy’s effort meet half of its fuel needs from alternative sources by 2020. The deal also follows an August announcement by the Navy and the U.S. energy and agriculture departments to invest $510 million to retrofit or build new biofuel processing plants.

To contact the reporter on this story: Andrew Herndon in San Francisco at aherndon2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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