The U.S. Transportation Dept. (DOT) has chosen the X PRIZE Foundation to create a competition for alternatives to jet fuel, DOT Secretary Mary Peters announced this morning.

The aim of the award is to stimulate market competition for the development of alternative fuels. The X PRIZE competition in 2004, which was worth $10 million, resulted in advances in suborbital flight. Since then, three more competitions have started regarding genomics (for $10 million), lunar exploration (for $30 million) and automotive transportation (for $10 million).

The alternative fuel competition will span the next 14 months; the monetary award and ground rules will be developed over the next several months. The foundation will work with the aviation industry and scientists to develop new fuels.

It is crucial that the U.S. government work not just to increase domestic oil production, but to stimulate the development of alternative fuels, Peters said. "The race to refuel American aviation is on, and our hope is that the X PRIZE will jump-start investment and spur innovation," said Peters in the announcement made at the American Association of Airport Executives fuel summit in Washington, D.C.

The project was established by the FAA, working with the DOT's John A. Volpe National Transportation Systems Center. The X PRIZE Foundation has been tasked to identify a method to provide incentives to industry participants to develop fuels and technologies, and then come up with a prize incentive model that could be coordinated with FAA's next Generation air traffic modernization program.

Secretary Peters also revealed that the U.S. government will continue to provide airlines with war risk insurance through the end of this year. Because the airlines are already struggling with higher fuel bills, the insurance should help to alleviate higher insurance costs, at least for the time being. Peters said the administration's long-term goal is to permit the gradual re-entry of commercial insurance companies into the war risk market.