These remarks were delivered by Samuel W. Bodman at the 60th annual conference in November, 2006.
Prepared Remarks to the Middle East Institute's 60th Anniversary Conference November 13, 2006
U.S. Secretary of Energy Samuel W. Bodman
Thank you, Ambassador Mack, for that kind introduction. And many thanks to you and your colleagues at the Middle East Institute for inviting me here today. The Middle East Institute has a long history of bringing people together – scholars, businesspeople, diplomats and government officials – to examine some of our world’s most intractable conflicts. And it does so with an eye to one goal: creating an environment of mutual understanding and respect. Everyone associated with this Institute understands that in order to develop solutions that stick, we must first listen to each other in an informed and civil way. And so, I greatly appreciate the opportunity to share a few thoughts with all of you . . . and also to hear from you.
As evidenced by the theme of this conference – developing new approaches to enduring conflicts – there is certainly no shortage of tough issues facing the Middle East, and the United States’ relationship with that region. Today I’d like to concentrate on one such issue – energy concerns . . . and specifically, the global dependence on fossil fuels. I thought I might give you my take on both the major problems that we all face – and also the major opportunities that we all share.
First off, as we all know, the global demand for energy is rising rapidly and will continue to do so. The Energy Information Administration (EIA) estimates that, by 2030, global energy consumption will grow by over 70 percent. Not surprisingly, the strongest growth is expected in developing economies in Asia – including China and India – with growth projected to triple in that region over the next 25 years.
Secondly, most national economies around the world, including the United States’, are fundamentally hydrocarbon-based. And they will remain so in the near-term. Though we estimate that oil’s share of total energy use will fall slightly in the coming decades (from 38 percent in 2003 to 33 percent in 2030), the demand for oil is still expected to grow strongly, reaching 118 million barrels per day by 2030. The United States, China, and India together will account for half of the projected growth in world oil demand. It’s fair to ask: is that type of growth even sustainable? Will the supply be available?
And that’s not even the whole picture. There is an appropriately high level worry about the impact of energy prices on American families and American companies . . . and similarly, in recent years we all have heard about the booming economies of China and India and their nearly insatiable appetites for more and more energy. But what we do not hear as much about is the impact that high energy prices have on smaller, developing economies. It is not an understatement to say, as the President did recently, that high oil prices can literally wreck economies. They can restrict development in a way that stifles business growth and, more notably, inhibits improvements in the health and well-being of so many around the world.
What I’m saying, is that this is a global problem . . . and it goes like this: if we are to encourage economic growth around the world . . . if we are to raise living standards for all people of all nations . . . the world needs a clean, affordable, diverse energy supply. If we look two or three or four decades into the future, we know that hydrocarbons alone will not meet the needs of a growing world economy. Even with all the technical expertise the world could offer and all the political will it could muster, eventually, we will run out of oil. And, even before then, the price of a dwindling supply will be prohibitive. At present, our world is overly focused on, and overly dependent upon, one source of energy. And that path is unsustainable.
And now comes the hard part: what do we do about it?
That answer is complex, of course, and the solution will be multifaceted. But, it can be summarized this way: we must grow the pie of what’s available. And we need to start right away.
In the very short-term – like, now – we certainly must stop doing the things that we know will not help. For example, we know that purposeful market distortions – such as rationing supply, cutting production, or creating price floors and ceilings – do not work. That is, market interventions have been proven ineffective for controlling prices. I can’t stress this enough: the global oil market must be allowed to function in a predictable and transparent way.
And, in the same way, we all recognize that the market is now demanding alternatives to oil. Which means that we must actively move toward developing and deploying alternatives to diversify our global energy supply. To be sure, the private sector has a major role to play here – and companies are realizing that they can make money in the alternative energy business. But, I also believe that governments – all governments – must lead the world to a quick and aggressive transition to alternatives.
We know, for example, that there are technologies on the verge of breaking through that will provide cleaner, more efficient energy. And, there are new sources of energy and production methods on the horizon that will one day be available to our grandchildren. All of these advances will be revealed through the basic scientific research that is taking place in government laboratories, at universities, and in corporate labs around the world. And they will require significant and sustained investments.
I can assure you that President Bush understands this quite well. The President’s American Competitiveness Initiative proposes, among other things, an increase of half-a-billion dollars this year for the Department of Energy’s research budget, and a doubling over ten years. The complementary Advanced Energy Initiative proposes to increase funding for clean energy technologies by 22% this year. Our goal is to identify the technologies that could have the greatest impact on the marketplace in the relatively near future, and then really go after them with increased resources and aggressive timelines. These are things that are already in the pipeline and, as a matter of sound public policy, need to be pushed more quickly to market. In my view, key areas include:
· The development of commercially competitive cellulosic ethanol;
· Advanced hybrid vehicle technologies – with a focus on developing better batteries;
· Hydrogen fuel cells;
· Solar energy, including an acceleration of the development of solar photovoltaics;
· Wind energy; and
· New technologies to burn coal for electricity production with near-zero emissions.
We also must safely expand the use of nuclear power – in this country and across the world. And so, as part of the Advanced Energy Initiative, the President has proposed a Global Nuclear Energy Partnership, or GNEP. An international effort, GNEP aims to address our growing global energy demands in a way that will foster economic development around the world, improve our environment, responsibly manage nuclear waste, and significantly reduce the threat of nuclear proliferation and terrorism. GNEP will develop the technological capability to increase the energy extracted from spent fuel by repeatedly cycling it through advanced burner reactors. There are two major advantages: first, the energy benefits will be enormous. But that is not the only – or arguably even the most important – up-side. This process of repeatedly reprocessing and recycling spent fuel – which would consume, not separate, plutonium – has the potential to reduce proliferation risks and reduce in the amount, heat-load and radiotoxicity of nuclear waste.
There are a few key ideas that underpin all these initiatives. The first is that innovation offers the best path to bold, new energy solutions. The second is that if we are to make critical advances in this area, we must train enough scientists and engineers to do this important work. This is a crucial component. We need more highly-skilled researchers devoted to these problems. There are too few in the United States – and, indeed, around the world. Which brings me to the final piece: this is a global problem that demands a global solution. I hope that other nations follow America’s lead here and devote significant, national resources to one of the greatest challenges that the world community faces.
So, let me tie this up, if I might, with a few points.
Point one: the global demand for energy is only going to grow. And that’s a good thing because that demand is fueling economic growth around the world.
Point two: we cannot meet future demand with hydrocarbons alone. Period.
And so, point three: we must grow the pie . . . we must expand the availability of and access to clean, affordable, diverse sources of energy around the world.
To achieve it, we need a global response . . . and, by that, I mean all nations, including those that produce our world’s oil supply. In my view, the idea of moving toward increased use of alternative energy should not be viewed as a threat to oil-producing nations. First of all, such a move provides an opportunity to diversify energy industries around the world – with plenty of advance warning. After all, even an aggressive transition to alternatives will not happen overnight. Secondly, the introduction of alternatives will actually prolong the life of earth’s fossil fuel supply, which is certainly not unlimited. And not incidentally, there is another global benefit: the pursuit of new energy sources will allow poorer, developing nations to “leap-frog” over some of the dirtiest (but most rudimentary and prevalent) fossil-fuel-based technologies – improving public health and our earth’s environment. We can’t afford to have any nations sitting on the sidelines here – protecting their own short-term interests. I believe we all should get into this game.
So, right now and into the future, the bottom line is this: if we work together . . . if we promote the very type of understanding and collaboration that this fine Institute was founded upon . . . we can expand our world’s energy supply in a way that is cleaner, more diverse, more secure, and more affordable to all people of all nations.
I thank you very much for your time. I’m happy to take any questions.
Question & Answer:
Question: The first question does get to your last remarks about not keeping any government on the sidelines. Iran says its goals are peaceful nuclear power. Do we support Iranian development of peaceful nuclear power?
Secretary Bodman: We certainly do. I think that's been clear all along. I think the question is whether Iran is going to seek to produce plutonium and to seek to produce nuclear weapons. That's been the whole issue all along. Even the Russians I believe have offered their own GNEP approach – they would produce sufficient low-enriched uranium to provide to the Iranians in their nuclear reactor that is currently being constructed, as I understand it, and they would provide such raw materials, and then would take them back and reprocess them and replace that with additional fuel. So sure, I think that's quite consistent with what I said.
Question: Moving a little farther to the east – India, a growing energy consumer. We understand that you probably have had discussions with the Indians. What can you say about expectations for a civil nuclear agreement with India? Any chance this will get through the current lame-duck session of the Congress? What is the administration's outlook for that?
Secretary Bodman: I'm hopeful, I guess I would say. This is an agreement that was struck by President Bush and Prime Minister Singh of India some months ago that would lead to the United States recognizing the fact that India has become an important participant in the nuclear industry, although they have remained outside the formal set of agreements that govern the world's management of civil nuclear industry. This is an effort to bring them into the fold, if you will. It is a program that we're very enthused about. I believe that Congress is quite supportive of it and so we are hopeful that we would get something in this lame-duck session. There are going to be a lot of things that are going to be on the list to be taken up and so the one question will be what the priorities will be as we look at all the issues in this lame-duck session. But we're optimistic.
Question: In addition to seeking ways of increasing the supply of energy, what is the Department of Energy doing to promote energy efficiency – to if not decrease demand, at least limit demand?
Secretary Bodman: That's something that we work on very hard. I personally work on it very hard. We have worked on it inside our department. We have worked on it by trying to advocate with citizens, like this group. I would tell all of you that if each of you would replace one light bulb in your home and replace a standard incandescent light bulb with a compact fluorescent light that has been designed – it costs somewhat more to buy the bulb but it lasts eight to ten times as long and uses one-third the energy. This is something we are trying to advocate that everybody do. If every citizen changed one light bulb, the impact would be quite profound on electricity demand in our country. So this is something we work on.
For those who are interested in this subject, if you go to our website – energy.gov – and then look there, you will be directed to a subsequent website – energysavers.gov. On that website is a brochure that has been made available over the last year or so. We actually put it out a year ago, during the month of October as I recall. It's been something that has attracted a lot of attention and there are good ideas in there about insulating your homes, using better light bulbs. It's about forty or fifty pages, a small brochure, but it's quite well written, if I may say. Doesn't look like a government document, it looks like something that's trying to be helpful. So we work hard at it.
Question: A question that merges into some of the security issues involved in energy supply to the industrialized countries. Since Asian countries are increasingly the main consumers of Middle East oil and gas, why don't they take more responsibility for security in the region? Why does the United States have most of the burden?
Secretary Bodman: There are a lot of issues of history in it, but I think for the most part if you look at India and China as being representative of Asian nations, they are just starting to get their economies growing. If you look at the per capita GDP numbers and so forth, they're just starting to pick that up. They're well behind us. We can afford it so we have stepped forward to work on the security of the region as well as other issues. As time goes on, as they see improvements in their economies, I'm sure they will be taking a more active role.
We have a small office in Beijing – we, the Energy Department – where we are trying to work with the Chinese on a whole variety of things. Efficiency being one – you asked about efficiency before. One of the big problems the Chinese have is burning coal. They're burning coal in a very un-technological fashion, a very old-fashioned way. Lots of soot gets created. The soot ends up – actually it's come all the way across the Pacific and it ends up on our West Coast. We've got measurements of it. So we're trying to work with them to do a better job. As usual, it's going to come down to money, I'm sure. I will be visiting China with Secretary Paulson and a group of Cabinet officers in mid-December. There are two major subjects, one being the economy, the other is energy and the environment. I'm sure this will be a subject that we will have an opportunity to take advantage of Secretary Paulson's excellent connections with the senior leadership in China. We're very hopeful about them.
Question: Coal resources in the United States, they're very abundant.
Secretary Samuel W. Bodman: We have 250 years' worth.
Question: What are your views on the prospects for developing a clean, environmentally friendly coal-burning? About how long and how do we go about this?
Secretary Bodman: The goal is to first burn coal in a fashion that allows you to clean it up before you create the energy in the coal into electricity and then to sequester the carbon dioxide. We have a program in the Energy Department that we are funding part of. I think we put up two-thirds of the money, one-third comes from industry. There's an industry partnership that includes four US companies, two Australian companies, and actually a Chinese utility that are involved in this. The program is called FutureGen. We've had a contest among various communities and states with an interest.
This is the first time, as your Energy Secretary, that I can tell you that I have been lobbied by governors of every state that they want to have this facility put in their state. We have made a preliminary choice and we have picked four sites in two states, in Texas and Illinois. They seem to be the most responsive to the request for proposals and we're now undertaking an environmental look at that. By the middle of the next year we should be in a position to make an announcement of the ultimate winner.
We would then build – this is about a billion-dollar program that would first gasify the coal, add steam to the coal and undertake what is called a water-gas shift reaction, where the water in the steam reacts with the gasified coal and shifts the ultimate product mostly into carbon dioxide and hydrogen. We then split the carbon dioxide and hydrogen in a membrane, if you will, a high-temperature, high-pressure membrane. Sequester the carbon dioxide and convert virtually all of the energy that's in the coal into a stream of hydrogen. The hydrogen then can be used to power fuel-cell vehicles, can be burned to produce electricity, or any variety of things. Up and going, 2012. That's the schedule. We expect that we will meet that schedule.
One of the problems of the energy area is the scale. It just takes a long time to accomplish things. So when you have this job that I have, you feel a little bit like the person who was sort of in the middle of the line back when they built the great Gothic cathedrals in Europe, where the grandfather, then the father, then the son, then the grandson all worked on the same structure. So that's a little bit what this is like. This takes a long time to accomplish this, but we're committed to trying to accomplish that. I think there is reason to believe. We're getting constructive suggestions. My former colleagues at MIT have written a report and made some suggestions and criticisms obviously of our technical approach. We're going to take a look at that. We're going to do our very best to put the best that we have in this country to work on it.
Question: Some of your remarks about the need for educating scientists and engineers has certainly registered with a representative from the Central Command here, who asks a question about what he calls "aggressive timeliness." How long is it going to take to train all those engineers and researchers that we need? How long do we have to sort out the alternative energy issues? What sort of timeline, from your experience at MIT as well as in industry – just how long is it going to take us to put people into the pipeline in terms of education? How much time do we have before we start feeling serious pinches on the traditional energy sources?
Secretary Bodman: We're already feeling it. It's going to take decades before we really accomplish – before we solve the problem. I'm a product of the Sputnik generation. I stood in my backyard in Illinois and looked up at the sky and looked at that first Russian satellite that was put up. Nikita Khrushchev came here and visited the United Nations and got his shoe off and pounded it on the rostrum and said he was going to "bury us" – remember that? I remember standing in the backyard as a teenager, looking up – I kind of thought maybe he was right, he was going to bury us. We got busy then and launched NASA soon thereafter. The funding for the National Science Foundation went up by a factor of four in one year. I went through graduate school on an NSF fellowship, on a government fellowship.
So I feel strongly about this. This is something that the president has signed on for, that we got it into the '07 budget. I think it enjoys bipartisan favorable response, as you mentioned. It was driven in part by a National Academy of Sciences report that among other things reported that in the United States we produce 70,000 engineers every year. China produces 600,000 every year; India, 350,000 every year. These young people are good. They were some of my best students when I started out life as a teacher. They're competent and capable. So we're behind in production right now. That's what stimulated this. So a lot of this is a combination of increased funding for research, increased funding at the National Science Foundation and the National Institute of Standards and Technology, which is in the Commerce Department, as well as in the Education Department, to try to stimulate more young people studying science and engineering.
Particularly the problem we have in this country is with young women. We tend to lose the girls for some reason in the middle school years. So we need to focus on that, do a better job of teaching and try to demonstrate just what the excitement is about being a practicing scientist or engineer. It's a very important function and we need more of them.
Question: I have an interesting question here from one of the students from the College of William and Mary – a student or faculty member, I'm not sure which. What are Washington's concerns regarding India's petro-relationship with Iran?
Secretary. Bodman: I've talked to the Indians about this. We would rather not see Iran encouraged in their economic development by India or anybody else in the region. We would rather not see it. India on the other hand is a sovereign nation. They make their own decisions. We get inputs into it, as we work at it. So our concern on Iran is that which I described before. We believe that their goal is to produce a nuclear weapon. That's the concern. We're trying to do everything we can do to prevent that, including work with India and other countries of the world. If Iran were to modify their position and accept something along the lines of a GNEP and take material from outside, where we're not faced with the constant pressure as we've seen in North Korea and elsewhere about other nations that have shown an interest in it. If we had more Libyas of the world that have said we're going to stop and we'd like to work and be a member of the world community, a constructive member, then I would assume that our policy would change on a whole variety of fronts with respect to Iran.
The goal here is to try to prevent the bad people of the world from getting their hands on special nuclear materials that can be used to make nuclear weapons or dirty bombs. That's the issue and we're working hard on it.
Question: This is regarding energy cooperation with Pakistan. Does the United States have any special programs that we're working on or have in mind for energy cooperation with Pakistan?
Secretary Bodman: Yeah, I've been to Islamabad myself at the direction of the president, as a follow-up to his visit there. We are working hard with Pakistan on a whole variety of energy fronts, particularly renewable energy. They have a lot of interest in wind energy in that part of the world and we are working with them. We have a national energy renewable laboratory out in Golden, Colorado, and we are working on making that information and the research that we do there available to the Pakistanis as well as to those corporations that would serve Pakistan. They have an interest in an LNG terminal, we've been working with them on that. We have not offered work in civil nuclear power. That's one area that we have avoided but virtually everything else is on the table and we're working actively with them. We had a delegation over here following my visit there. There is a dialogue that has been initiated that the Policy and International Office of the Department of Energy is heading up and working hard on that front.
Question: Mr. Secretary, of course you don't have the luxury that some of the rest of us do to focus on foreign policy all the time. I have a question here on a domestic issue that will be coming up in the next Congress. Should the United States, in looking at the new farm bill that will be up for renewal, act to further subsidize production of ethanol or allow the market to find the best energy alternative to oil?
Secretary Bodman: We've seen a substantial growth in ethanol production in our country over the last three or four years. It's really been quite dramatic. Last year, in calendar year '05, we produced 4 billion gallons. At the end of this year, we will be running at the rate of close to 6 billion gallons, with an average production over the course of the year of maybe 5 billion gallons. That's the good news.
The bad news is this nation uses 140 billion gallons of motor fuels every year. So we're still only at – let's say we're running today, as we stand in this room, at about 4 percent. Last year in order to produce that 4 billion gallons, we used 14 percent of our corn crop. That's the main source of the raw material for ethanol production in our country. It's pretty clear that in order to produce, let's say, 5 percent of our material, we're going to be running at the order of 20 percent of our corn crop, even with improvements in the type of corn we grow and the amount of acreage available. Corn prices have gone up. One can see that maybe you could get to 10 percent, 14 billion gallons, a few years out. 2015 let's say, something like that, in eight or nine years.
The reason we've seen such dramatic increases is it has been a subsidized activity. So we are all for increased ethanol production. I'm sure the farm bill will have an energy title in it. I'm sure the farm bill will deal with this matter. To forecast exactly how that's going to work out, I don't know. The current subsidy is in place through 2010. So at least near term, it's not something we have to concern ourselves with. But looking out over the next five to ten years, I think it will be an issue that will become something that will be debated both within the administration and then between the administration and Congress to try to arrive at a solution.
Question: Sticking for a minute to domestic questions, I have a question here from an offshore investor who wants to know what the Department of Energy is doing toward the energy industry to motivate them to explore alternative energy sources. From your remarks it sounded like you felt the market was already pushing in that direction.
Secretary Bodman: The market is moving pretty aggressively in that direction. We see subsidies for ethanol production. One of the interesting things that we've seen happen in my judgment is a partnership that was announced three or four months ago that includes two companies – DuPont, the great American chemical company, and BP, the British Petroleum company. The two of them have announced a joint venture to produce bio-butanol, which is something else that probably many of you have not heard of – I hadn't heard frankly until three or four months ago myself. Bio-butanol turns out to be a superior product to put in your gasoline and motor fuels to ethanol. It has a number of advantages, I won't burden you with all of them, but it has a number of advantages. They are contemplating producing that. Right now it's not subsidized. Ethanol is subsidized. So you then get to the question, shouldn't all bio products be subsidized? So I think that will be a part of the discussion that unfolds.
We are working hard and there are a variety of views on – we have attempted to do this without mandates, without saying "you will produce X and make available through your retail marketing apparatus X percent or X gallons" or so forth. I'm sure our preferred position – and we'll see just what happens as this discussion unfolds over the next few months.
Question: I do have a question here that gets into the question of US policy toward Sudan as well as US policy toward China. With Chinese heavy demand for new oil export sources, how does one go about trying to negotiate with the Chinese to stop its trade with Sudan?
Secretary Bodman: I don't know that we want to encourage them to stop the trade with Sudan but I think we need to encourage the Chinese to encourage the people in Sudan to have a more appropriate approach to managing the refugee problem and the other issues that are prevalent in Sudan. I would assume that's one of the issues that we'll have the opportunity to discuss when I'm there. That's largely in the province of the State Department, that's what they worry about. We tend to worry about energy policy. In this area they tend to overlap a bit and so I'm sure the subject will come up.
But the goal here is to try to encourage increased trade because that's good. It's good for the Sudanese to have increased trade, to have the money from the oil that they produce. The issue is one of, are there other issues or other points that need to be taken up in the governance of that country? I believe there are.
Ambassador David Mack: Mr. Secretary, you've given us a tremendous wealth of ideas here that's going to inform our discussion. We're going to have panels on Iran, Pakistan, Afghanistan, Iraq and Sudan during the course of this conference. You have started us off on a great trajectory here toward looking for new solutions to some of these longstanding problems. Thank you very much.
Secretary Samuel W. Bodman: Thank you very much.