U.S. oil and natural gas production has increased substantially thanks in part to new drilling technologies like hydraulic fracturing. Imports of foreign oil have declined as a result.
The Energy Department said it was looking to capitalize on that momentum by working to develop domestic biofuels that meet military specifications for jet fuels and diesel for marine vessels.
The department said it was funding four pilot-scale biorefineries in California, Iowa and Washington with nearly $18 million.
"The innovative biorefinery projects announced today mark an important step toward producing fuels for our American military and the civil aviation industry from renewable resources found right here in the United States," Energy Secretary Steven Chu said in a statement.
The department said the pilot projects would work to convert biomass to fuel in a cost-effective manner. Funding recipients need to match the government's contribution.
The U.S. departments of Agriculture, Energy and Navy last year announced $30 million in funding would be put forward to match private investments for commercial-scale biofuels.
Biofuels may be more expensive to manufacture than conventional fuel.