Energy Concerns Could Make Panetta First Green DOD Chief

When Leon Panetta was sworn in this morning as the 23rd secretary of
Defense, he inherited a force that is more fuel-dependent than ever -- a
fact that those inside the Pentagon increasingly say underlies the
budgetary and battlefield issues that will consume his attention.

More than 3,000 service members and civilian contractors have been
killed or injured protecting the long supply convoys that carry fuel and
water through Afghanistan's winding roads, according to Deputy Defense
Secretary William Lynn. Recognizing that even as the military is
becoming more technologically capable, it is becoming ever more
energy-intensive, the Pentagon last month came out with its first
battlefield energy strategy (Greenwire,
June 15).

At the same time, fuel costs are hitting the department's budget hard --
in 2008, when oil prices reached record highs, the Pentagon spent about
$20 billion on fuel alone. Every $10 increase in the price of a barrel
of crude costs the department an extra $1.3 billion.

"The way we build energy into our operations is a core part of fighting
and winning the nation's wars," Lynn said at the unveiling of the
Pentagon's new battlefield energy report last month. "The less [energy]
we need, the more operationally resilient we will be."

But while insiders say outgoing Defense Secretary Robert Gates
understood the serious security challenge the military's energy reliance
poses, he stopped short of getting publicly involved with the issue.
And although President Obama has spoken frequently of the geopolitical
threats of fossil fuel dependence, the military's energy requirements
have not made their way onto his national energy agenda.

Now, as Panetta comes to the Pentagon with strong, bipartisan backing,
some defense energy insiders are hoping he will bring the kind of
top-level support to the issue that could break through the department's
grinding bureaucracy and bring transformational change.

His friends and colleagues say they have little doubt that Panetta
understands the importance of energy issues to the Defense Department
and the trade-offs at play.

"He gets the energy equation beautifully," said Adm. James Watkins, a
Republican who was the Navy's top officer in the 1980s before becoming
Energy secretary for President George H.W. Bush and served as
co-chairman of the Joint Ocean Commission Initiative with Panetta. "He's
got the long outlook, he's got the short-term reality that he knows he
has to face, and he knows how to deal with the two."

Retired Sen. John Warner (R-Va.), a former Navy secretary and chairman
of the Senate Armed Services Committee, said Panetta sees the security
implications of the military's fuel reliance.

"He realizes that fuel is like ammunition -- you can't do one without
the other," Warner said.

But getting anything onto the defense chief's agenda other than the
budget and the current wars stands to be a heavy lift. At Panetta's
confirmation hearing last month there was just one question on energy
buried among the deluge of queries about spending cuts, terrorism and
the troop drawdown.

"This is an area that I want to learn a lot more about" Panetta told
Sen. Mark Udall (D-Colo.), who recently introduced a defense energy bill
(E&E
Daily, June 9). Udall thanked him, then turned the conversation
to terrorist havens in Pakistan.

Energy costs at issue

Panetta was chosen in large part for his budgetary prowess. As a
California congressman, he chaired the House Budget Committee from 1989
to 1993. During the Clinton administration, he was director of the
Office of Management and Budget and later served as White House chief of
staff. Obama has called for $400 billion in defense cuts over the next
12 years, and some in Congress want them to go even deeper. If energy
captures Panetta's attention in his new job, it is likely that it will
be for its cost.

"When you look at the cuts he's going to have to make, it would be
nearly impossible not to address energy," said retired Air Force Gen.
Charles Wald, who now works on military energy issues as Deloitte's DOD
business lead. "Different types of energy can have the potential to
reduce cost, and they can certainly assure more stability [than oil] as
far as budgets are concerned."

Money saved on energy can be reinvested elsewhere in the military, as
Gates proposed with other savings earlier this year, Wald said.

But while savings from energy efficiency measures can come back quickly,
the alternative fuel and clean technology measures currently being
pushed by Navy Secretary Ray Mabus and others usually require
significant upfront investments and take years to pay for themselves.

The formulas that the Pentagon uses to calculate return on investment
are beginning to account for these long-term paybacks and are starting
to incorporate intangible benefits, like the security that comes from a
base not relying on the civilian grid for its power. But in the current
fiscal environment, Panetta will be under pressure to cut near-term
costs, and the department currently is not taking full advantage of the
financial tools that can spread investment costs out over years (Greenwire,
June 30).

One area that might catch Panetta's eye is the system by which the
military purchases and uses fuel, according to retired Brig. Gen. Steven
Anderson, who served as the military's chief logistician in Iraq during
the 2006-2007 troop surge.

"The people who are expending the fuel aren't the people who are
actually paying for the fuel," said Anderson, who has become a vocal
advocate for military energy efficiency since leaving the Army. "Really,
if you wanted to sit down and design a system that was more convoluted,
that was worse at aligning the user and the payer, you'd have a hard
time coming up with one worse than the one we've got now."

In a 2006 editorial
in his hometown paper, the Monterey County Herald, Panetta
emphasized the importance of a cost incentive to changing the country's
energy scenario.

"In the end, it may very well be the price itself, rather than any
mandate from Washington, that may have the greatest impact on changing
human behavior when it comes to energy," he wrote. "It is only when the
public begins to demand more gas efficient vehicles, and uses more mass
transit, car pools and fuel alternatives that the market will respond."

If Panetta decides to implement a similar strategy at the Pentagon by
making commanders feel the cost of the energy they use, it could have a
dramatic effect. The current system provides commanders little incentive
to reduce energy use. Moreover, battlefield commanders have strong pull
when it comes to purchasing new equipment, but right now they rarely
place energy as a priority.

Climate issues

Although Panetta has made few public comments on defense energy issues,
climate change has hit his radar. During his tenure as director of the
CIA, the agency stood up a small unit to study the national security
effects of climate change, such as how water scarcity, extreme weather
events and access to natural resources can affect state stability and
create conflict.

"Decision makers need information and analysis on the effects climate
change can have on security. The CIA is well positioned to deliver that
intelligence," Panetta said in a CIA statement announcing the launch of
the Center on Climate Change and National Security in September 2009.

The center has come under attack from conservative members of Congress (E&ENews
PM, Feb. 16), and analysts see traces of Panetta's personal
support in the fact that the unit has survived.

"The fact that the center has been able to sustain its charter against
this political chafe I would attribute in large part due to the
high-level leadership with Panetta," said Will Rogers, a research
associate at the Center for New American Security's natural security
program. "To me, it shows that he is taking the long view, that there is
a realization from his standpoint that the CIA needs to be involved on
these untraditional issues that are increasingly defining our security
environment."

Similar work is under way at the Pentagon's policy shop, which
identified climate change as a "an accelerant of instability or
conflict" in last year's Quadrennial Defense Review, and elsewhere in
the military and could get more attention under Panetta.

A passion for oceans

By far, Panetta's clearest environmental interest is the oceans.

The grandson of a sardine fisherman, Panetta was a strong advocate for
marine health in Congress, where he played a critical role in
establishing the Monterey Bay National Marine Sanctuary, and through his
work on nonprofit boards and as co-chairman of the Joint Oceans
Commission Initiative, a blue-ribbon initiative aimed a reforming oceans
policy.

"We're all a sum total of our experiences, and his experience has always
been conservation, the protection of the environment, especially when
it comes to the oceans" said Ted Balestreri, a close friend of Panetta's
for more than two decades.

The military, particularly the Navy, plays a significant role in marine
issues. The Navy is responsible for protecting sea lanes, it collects
extensive environmental data, and its equipment, most notoriously sonar,
can have an impact on ocean life.

Such issues are not apt to land on the secretary's desk unbidden, but
those who know Panetta from his oceans advocacy work hope his interest
could help set the tone at DOD.

"The services have a lot more to offer this country than just
war-fighting," said Daniel Basta, who directs the National Oceanic and
Atmospheric Administration's Office of National Marine Sanctuaries. "I'm
hopeful that we might see some of the joint projects we worked on with
the Navy [during the Clinton administration] restarted."

It is more likely that Panetta might get involved with international
governance issues. As heads of the Joint Oceans Commission, Panetta and
Adm. Watkins penned a New York Times editorial
calling for the United States to ratify the United Nations treaty that
sets a framework for claims on energy resources and for protection of
the marine environment. The United States is the only industrialized
nation not to have signed off on it, despite the wide support of
industry and defense leaders, largely because of opposition from
conservative Republicans who worry it could limit U.S. sovereignty.

Now, as rising temperatures open new Arctic sea routes and make
underwater oil, gas and mineral resources available, Watkins said
Panetta may use his leverage to again push for ratification.

While a call from the secretary of Defense could bring new attention to
the issue, Watkins said Panetta's relationships with important figures
on both sides of the aisle could be the critical element.

"He will have a very powerful voice with key members, heads of various
committees, the ranking members, and so forth," Watkins said.