Yesterday, President Obama announced that the U.S. Departments of Agriculture (“USDA”), Energy (“DOE”), and Navy (“USN”, and together with the USDA and DOE, the “Agencies”) will invest up to $510 million over the course of the next three years to support advanced drop-in aviation and marine biofuels to power military and commercial transportation. This is a follow up to President Obama’s Blueprint for a Secure Energy Future (the “Blueprint”).  In the Blueprint, the President expressed a desire to begin construction on at least four commercial-scale cellulosic or advanced bio-refineries over the next two years and challenged the Agencies to work together to spur the development of competitively priced substitutes for diesel and jet fuel.

The USDA, DOE and USN responded to the Blueprint by signing a Memorandum of Understanding  (the “MOU”). The MOU outlines a plan for the Agencies to partner with the private sector to construct or retrofit several drop-in biofuel plants and refineries. The agencies have stated goals of limiting our nation’s dependence on foreign oil for national, providing tactical and strategic advantages for our military and creating economic opportunities in rural communities. We expect that the USDA will take the lead on addressing feedstocks, the DOE will take the lead on technology, and the USN will be the initial primary consumer of the advanced biofuels.

Each of the Agencies have committed to spending $170 million over the next three years and an Executive Steering Group (the “ESG”) will be established to coordinate the programs. It is expected that the ESG will work with the Agencies to develop and release solicitations to industry beginning in December 2011. The solicitations will be issued in accordance with the Defense Production Act (50 U.S.C. App. 2061 et seq), the Commodity Credit Corporation Charter Act (15 U.S.C. 714 et seq), the Economy Act (31 U.S.C. 1535) and other appropriate authorities. Consequently, rights in inventions made as a consequence of, or in direct relation, of these solicitations will be administered in accordance with the applicable Agency’s governing laws and policies.