United Airlines is taking a significant step forward in its use of biofuel with a plan to buy 15 million gallons of the stuff during the next three years.

The airline signed an agreement with AltAir Fuels to buy fuel it will use on flights departing Los Angeles beginning next year. United says the renewable jet fuel is "price competitive" with the fuel now used by airlines and should, on a lifecycle basis, reduce greenhouse gas emissions by at least 50 percent.

"This is a great day for United and the aviation biofuels industry," Jimmy Samartzis, the airline's director of environmental issues, said in a statement.

The news comes after a period of relative quiet about the use of aviation biofuel. There was a flurry of activity in the time between 2009 and 2011 as airlines around the world announced demonstration flights and passenger flights using a variety of biofuels. Even the military was burning biofuel in fighter jets. But the high cost of alternative fuels at the time made it unlikely cost-conscious airlines would embrace them for the long term.

Alaska Airlines said in 2011 that it was paying around $16 a gallon for the 75 passenger flights it made using a fuel derived from used cooking oil and meat processing byproducts. At the time, traditional Jet-A was selling for $3.15 a gallon. Fuel is the number one cost for airlines, accounting for about one third of their total expenses. And when jets are burning thousands of gallons per trip, pennies per gallon make the difference between red and black ink in the books.

AltAir will be retrofitting idled refining equipment at an existing refinery near Los Angeles. Using technology licensed from Honeywell, AltAir says the retooled facility will produce around 30 million gallons per year from "non-edible natural oils and agricultural wastes." Like other biofuels used by the airlines, the fuel to be used by United is a drop-in replacement – requiring no modifications to the aircraft – and will meet the same standards as Jet-A fuel long used by the industry. The refinery will also be able to make other renewable fuels.

"It will be the first commercial refinery that will have inline capability to produce aviation biofuels," AltAir president Bryan Sherbacow said, explaining the Los Angeles refinery will be able to produce both renewable jet and renewable diesel fuels.

With a 30 million gallon capacity, that leaves 25 million gallons not being used by United each year. Sherbacow says the company is in discussions with other buyers, but wouldn't provide specifics. One advantage of the able to switch between renewable jet and diesel fuel is the ability to react to customer demands.

"If the market is telling us there is more of a need for renewable diesel fuel we can do that," Sherbacow says, explaining it's almost as easy as pulling a lever to switch between the two.

If AltAir can sustainably produce renewable fuel at competitive prices, it marks a major milestone in the aviation industry for plans to increase the use of lower emission biofuels in the future.

The military continues to research using biofuels in its vehicles, including large Navy ships and aircraft. Several lawmakers objected to the higher costs of the fuel last year, saying the money would be better spent elsewhere. But this spring the Senate rejected an amendment that would have reduced funding for a drop-in biofuel replacement program, meaning that even with the sequester in place, the military will continue to pursue the increased use of non-petroleum fuels.