Some thoughts...

If anyone can create a 60% or even 90% efficient conversion process, DARPA would be one agency I'd bet on. DARPA has deep pockets and a large, pre-existing research culture that doesn't have to be assembled from scratch either.

Further, while biofuels cannot scale to replace the "easy motoring utopia" (to quote Kunstler), biofuels definitely could fill most or even all of national defense liquid fuel needs. Those needs remain a small fraction of our total national consumption. The article notes that DoD used 128 million barrels total in 2005. For reference, the United States as a whole used about 7 billion barrels in 2005. Military usage is a small fraction of our total consumption, under 2% total nationally. In other words, we may be able to have our national defense but it doesn't look like we'll have our easy motoring lifestyle.

Historically, the US Department of Defense has been very aware of energy issues for a long time though these issues are coming to the forefront now. They already are using wind and solar power in camps in Iraq and are actually asking for more such generators instead of liquid fueled ones because the "green" generators reduce security issues compared to liquid fuel generators.

Finally, this is a positive sign, at least for the United States. For all its warts and foibles, when the Pentagon stirs on a topic, people listen and react. A DARPA project is a very positive development, in addition to the private commercial work that goes on now anyway.

biofuels definitely could fill most or even all of national defense liquid fuel needs.

How would the citizens feel about 'toiling in a field' for fuel to power the military part of the military-industrial-congressional complex?   Claims of 'give me the privilage of liquid fuel because my work is needed for keeping the military running' would be fast and furious.

Meanwhile, otheres would point to claims of fraud and greed (tax the war profiteers ring a bell?  How about 'we can't find 2.1 trillion in the Pentagon budget'?)  Not to mention funding and fuel for unpopular military actions.

I tend to think if the military is going to transition from oil it will most likely to another fossil fuel based source.

I'm thinking coal.

It's been done before (Nazi Germany), the technology is there, our supply is clearly there.  It's only a matter of time.  Somewhere I was reading (no link) that some researcher was working on making a coal-based liquid fuel capable of aircraft temperature tolerances and getting favorable results.  

Now what will make more sense in the plausibility department. The military trying to appropriate 16% of this country's arable lands to their fuel needs or buying existing coal supplies/opening new ones?  Door number 2 makes more sense.

Too bad for central appalachia and the intermountain west but oh well, got keep fighting them terrorists.

Seriously folks, coal is gonna be the military's go-to fuel of the future (if indeed there is a future for our high-energy military operations.)

Nuke power over wind (for moving about ships)   And citizens won't have much to say, because what citizen can use fission?   But coal....if a citizen can burn some coal to keep warm OR to be made into a fuel to keep a plane flying for 1/10 of a second....I'm betting they'd like to stay warm.  

I've not seen any breakdown of the effect of peak oil on policing efforts, but would citizens want to keep street lights on VS lights in their own homes/power for the sewage plants?   How about for keeping patrol cars running?    

And, even more scarry - how about 'its cheaper for the US of A to use a nuke/some biological VS boots on the ground' equation.

sigh  Wet cats.  Sack.  sigh

Let's assume that DOD is able to convert at 50% efficiency (for the sake of argument and simplicity) or 2:1.

128 million barrels of fuel would require ~250 million barrels of biofuel.  

According to wikipedia, one can get 3.3 barrels of biofuels per acre by using mustard (much better than soybeans). So the military would require about 75 million acres of farmland at present rates of oil use. (presumably they could cut way back by becoming far more efficient and conservative.)

There are at present about 470 million acres of arable land in the US. So the military would require about 16% of it for transportation alone.

Once again we come up on the limits to "the present way of doing things".

Biofuel and 'biodiesel' are not the same thing Jim.