* Single largest US gov't purchase of biofuels
* The fuels cost $26 a gal, but price has dropped
WASHINGTON, Dec 5 (Reuters) - The U.S. military, in the largest ever government purchase of biofuel, bought a batch of fuel made from chicken fat and algae that will be burned by the Navy in war games next year, officials said on Monday.
The Defense Logistics Agency purchased 450,000 gallons of fuel from Dynamic Fuels LLC, a Louisiana-based venture owned by Tyson Foods Inc and Syntroleum Corp, which makes biofuel from used cooking oil, and from California-based Solazyme Inc , which makes fuel from algae.
"We are doing this for one simple reason, it makes us better war fighters," Navy Secretary Ray Maybus told reporters in a teleconference. "Our use of fossil fuels is a very real threat to our national security and to the U.S. Navy's ability to protect America and to project power overseas."
The U.S. government has looked for ways to boost domestic energy production to wean the country off foreign oil, but the effort has been costly.
The military paid $12 million, or about $26 a gallon for the biofuel, far higher than the price of diesel fuel, which is currently under $4 a gallon.
Maybus said the sky-high price was about half the amount the military paid for the fuels last year, and that costs should go down as the market develops.
Navy ships will use the animal fat oil while Navy aircraft will burn the algae fuel during a demonstration at a Rim of the Pacific Exercise, the world's largest war games, next summer off the coast of Hawaii.
The fuel will be mixed in blends that are half biofuel and half traditional petroleum fuels that will cost about $15 a gallon. The biofuel is chemically identical to petroleum based fuels Maybus said.
The amount of the biofuel purchased is a drop in the bucket compared to the military's annual thirst for fuel. The Navy alone burns some 1.26 billion gallons of fuel a year.
Several biofuel companies have collapsed in recent years including Range Fuels, which received tens of millions of dollars in U.S. loan guarantees and grants.
"Obviously there are going to be circumstances with new technologies that may not work," said Vilsack.
But he said that is part of helping to get an industry started. "I don't think we want to get to the point where we are totally risk adverse here. This country was built on risk takers."
The Navy demonstration could teach both the commercial aviation industry and the military about how to incorporate domestically made biofuels, and their potential to add jobs and cut carbon emissions, Vilsack said.