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For Immediate Release
Office of the Press Secretary
February 1, 2006

Press Briefing on the President's Advanced Energy Initiative
Via Teleconference

      The Advanced Energy Initiative

Secretary of Energy Samuel Bodman
Allan Hubbard, Assistant to the President for Economic Policy and Director, National Economic Council

2:10 P.M. EST

DIRECTOR HUBBARD: Thanks you all for giving us this opportunity. Obviously, we are extremely pleased with the President's speech and his vision for America, a very positive vision about how to keep America number one in the world. And with respect to energy, how we're going to finally start achieving energy independence.

The good news is, as he pointed out last night, because of significant investment, over $10 billion since the beginning of his administration in new technology, we're on the verge of some significant breakthroughs that are already starting to take place in hybrid vehicles, and will begin to take place with respect to ethanol from non-corn, other plant products and byproducts, beginning in 2012, that, as the President pointed out last night, will lead the country into a position of being able to reduce the amount of oil consumption in this country by 75 percent of what we expect to be importing from the Middle East in 2025.

So, again, significant technological breakthroughs are very close in the fuel category. We've also made significant investments in technological innovation and electric power generation. The President mentioned nuclear last night, which we expect to become more and more important. The President believes, as many do, that in the long run nuclear is the least expensive and cleanest fuel available for electric power. There's also significant investment in clean coal technology, solar and wind -- which Secretary Bodman will be talking about all of the above.

Again, we appreciate you all giving us this opportunity, and let me turn it over to Secretary Bodman.

SECRETARY BODMAN: Thank you, Al. There are a couple of things, I guess, that I would like to say first. The way I look at this advanced energy initiative is really part of the broader competitiveness initiative that we talked about in another forum. In that initiative, the President has committed to increase the funding for the Department of Energy Science Office, the National Science Foundation, the National Institutes of Standards and Technology in the Commerce Department. Those three -- doubled the combined budgets of all of them within the next 10 years and he's made a real down payment on that which we will talk about, each of the agencies will talk about next week.

But this is -- this underlies everything that, to me, that the advanced energy initiative really stands for, because it will invest in and reverse a trend of kind of a sideways funding picture for the physical -- the research and development and the physical sciences that we in the Energy Department believe is a real landmark. This is historic and will change the future of science in this country and will be a real statement to our colleagues -- science colleagues around the world. So we are very excited about it and very pleased with it.

Now, that's been coupled with an initiative in the 2007 budget that deals with a variety of specific activities, in addition to the overall interest in the science office, which, in turn, is responsible for most of our national laboratories. Within the budget we will have an increase of some $54 million for FutureGen, and -- or a total of $54 million for FutureGen and $281 million for the clean coal technology program in the department; a total in the solar energy of $148 million, which is an increase of $65 million for solar energy; wind will be $44 million, or an increase of $5 million. And then we have the issue of ethanol and the production of ethanol from a variety of cellulosic raw materials. The total budget will be $150 million, or an increase of almost $60 million from the '06 appropriation.

Coupled with that will be two other initiatives, one in batteries, for a total of $30 million, or an increase of almost $7 million there; and for hydrogen, the hydrogen initiative that that President had announced three years ago in his '03 State of the Union message, this is a continuation of that. And it will be $289 million in the '07 budget, or an increase of $53 million.

So in each case it's a significant increase, and this, as I say, will be coupled with efforts to make much more effective use of our national laboratories and to continue to establish the United States as the world's leader in research and development in the physical sciences.

So this is something that, as someone who has come from that world, I'm quite thrilled about, as are the people who will be working directly on that.

So that's my opening remarks. Dana, if you want to take questions.

MS. PERINO: Sure, we'll go to questions now.

Q Thank you. Gentlemen, could you walk me through the arithmetic on how much oil we expect to be importing from the Middle East in 2025, and whether replacing that by this program means finding other sources of oil, or finding substitutes for oil, or would there be any change in consumption where we'd increase CAFE or something to produce oil?

SECRETARY BODMAN: Matthew, this is Sam Bodman speaking. Al has the got the numbers here, and he'll go through them with you. I just should mention, we're having trouble hearing you. Your voice was coming in and out.

Q I'm sorry, is that better?

SECRETARY BODMAN: Yes, that is better. And I think we just got the gist of your question. Why don't you go ahead, Al, and give him the response.

DIRECTOR HUBBARD: Okay, my suggestion to get the precise numbers is you might want to touch base with the -- directly with a Department of Energy official --

Q Energy information.

DIRECTOR HUBBARD: But the DOE currently projects that we will be importing in 2025 from the Persian Gulf about 6 million gallons per day.

Q Barrels.

DIRECTOR HUBBARD: Barrels, 6 million -- sorry -- barrels per day, excuse me. And we currently -- and they project that we will be reducing, in terms of demand, because of the technology that we're talking about, the cellulosic ethanol, the new hybrid, the new battery technology and the hydrogen car, by 5.26 million barrels per day. Now, I don't know if you want to get into this much detail. There's a displace -- of that 5.26, around 90 percent will actually be a reduction in imported fuel.

Q Okay.

DIRECTOR HUBBARD: So that's where we come up with the 75 percent number.

Q Okay, thank you.

Q Al and Mr. Secretary, sacrifice -- (inaudible)-- in terms of energy, there is some sacrifice to be had. It sounds like from this program, except for the money that's going to be expended, which is, in fact, great, in terms of a giant program to reduce energy, there isn't going to be much sacrifice; is that correct?

SECRETARY BODMAN: Well, that depends. This is Sam Bodman speaking. I guess that depends on what you mean by sacrifice. The efforts here are to continue the program that has been in place for some time but to accelerate it in making, first, the underlying science of the department, and the department's energy efforts, in particular, the foremost in the world.

Secondly, there have been a number of efforts made to increase whether it's coal or solar or wind or the various supply efforts that are underway, that we believe will lead to a diversity of less-expensive fuels in the future. And that, we think, is very important.

Now, there are also programs that Al has just referred to, in terms of the various types of vehicles that are available. We believe -- this administration believes in the free market, and believes that it's very important for individuals to retain the flexibility of making judgments. Many Americans would believe that they're already sacrificing by paying the prices that they're paying for gasoline and for heating oil and natural gas. There's plenty of -- the way I view it, there is plenty of sacrifice to go around. The issue here is what do we do about it and how do we deal with it more effectively. And we think that this approach is the right one.

Q Secretary Bodman, can you give me -- can you give us an overall figure for how much the budget calls for in 2007 for these programs? And, two, how much of an increase is FutureGen and clean coal getting under this budget?

SECRETARY BODMAN: What I have given you is pretty much what I'm at liberty to give you. We're going to have a session on Monday, at noontime, where we will be discussing the budget for the Energy Department. And what we are attempting to do earlier this morning and today is to discuss the overall budgetary focus of the President on the two initiatives -- the energy initiative that I've alluded to earlier, as well as the competitiveness initiative, which relates to the increase of the science fund.

So there's not much more that I can give you. The clean coal research initiative is $281 million, I think I mentioned that.

Q What was it this year?

SECRETARY BODMAN: In '06? If you'll give me a minute, I'll --

Q As well as for FutureGen.

SECRETARY BODMAN: -- try to find that for you.

MS. PERINO: We can have somebody follow up with you afterwards. We'll get back to you on that.

Q Okay. And regarding FutureGen, isn't that just one plant that's going to be up and running in about 10 years?

SECRETARY BODMAN: You've sort of said it in a way that would -- it is one plant. It is, however, a very -- in my judgment, a very significant effort to convert the energy that resides in coal and to basically exchange it and cause it to emerge from this process in the form of hydrogen. In other words, coal that's first gasified, you then add steam to it, undergo a water-gas shift reaction, which will produce a mixture largely of hydrogen and carbon dioxide. You then separate the hydrogen and carbon dioxide -- at high temperature, this all goes on at several hundred degrees centigrade; we've been working and investing in this for some years, and with some success, I might add -- and then the carbon dioxide is sequestered -- that is to say put beneath the surface of the earth -- and you then produce hydrogen, which can either be used to fuel vehicles, if we're fortunate enough at that point in time to have been successful in the President's hydrogen initiative -- or it can be burned in turbine to produce energy. And, therefore, we would be in a position to convert coal into a zero-emission fuel that would have a very meaningful impact on that industry.

So, therefore, I guess you're correct that at just one plant it would be, you know, the first of a kind, it would be a dramatic change -- I think you'll find that's why we've got a number of the leading companies of this country. There are two major electric utilities, there are two major coal companies in the United States, there are two Australian coal companies that are participating, and one Chinese electric utilities that are participating in the program. We have seven companies in the alliance, and other companies have expressed interest, and other countries, have expressed interest in joining.

So I guess I would agree with you it's "just one plant," but we've got a lot of people interested in participating, and I think with good reason.

Q Thank you.

Q Hi, gentlemen, I had two questions. The first is, with the goal of reducing the reliance on Middle Eastern oil, sort of, to what end? Is the idea to weaken Middle Eastern nations? Or is the idea to reduce the U.S. need to be involved in Middle East affairs? And won't China and India just gobble up all that oil and won't it be a wash?

SECRETARY BODMAN: Let me try that, and then I may ask Al if he wants to comment on it.

The idea here -- the President, in using that example, was to just simply do that, to give an example of what would be accomplished if we are successful in the combination of the plug-in hybrids, of hybrids, the availability of ethanol in the quantities that we have mentioned, and have been successful with the hydrogen car in the year 2025. All of those things are assumed to be successful, which we hope they will be. We're going to work hard to see to it that they will be.

Oil is a commodity, you're quite right in suggesting that, that we would continue as a nation. Most of the purchases of oil in this country are done by the private sector. Thankfully, they're not done by the federal government. And they're done by people who are in these markets every day, that are very good at it, and they would make judgments as to where they would optimize whatever business they had at that point in time.

So this was, as I say, is purely an example. It was not mean to suggest anything related to the politics of the situation, other than to indicate that, presumably, at that point in time, if we see changes and we see a more stable situation, where one is buying from a more stable supplier, presumably one would rather do business with a more stable supplier rather than a less stable supplier. So as the world evolves over the next 20 years, I would think that you would see more interest in one supplier rather than another, but it was merely meant to give an example.

Q Mr. Secretary, I would just like to follow up real quickly, because I still don't really get it. I mean, I guess what I'm trying to get to is, even if the private sector does oil purchases, the President must have either a domestic or a foreign policy goal. Is the goal national security, geopolitical dominance, or a concern that the world is going to run out of oil? I mean, I don't really understand. Are we --

SECRETARY BODMAN: Let me try again. Oil is a commodity. It is traded on the world market. Its prices change minute by minute. As we sit here today, it's changing in the various markets of the world. The President's goal, it seems to me -- I haven't asked him specifically this -- but it seems to me is an improvement in our national security that would come from a more readily available supply of domestic motor fuel. And so that's the goal, so that we would therefore be less dependent on the supply of motor fuel from countries that are less able than we would like to see them.

But it's not a matter of world domination, it's not a matter of anything other than trying to improve the security of our country by broadening the availability, the domestic availability of motor fuels and, therefore, lessening the reliance on foreign producers.

DIRECTOR HUBBARD: And just to expand on that, the goal is energy independence. And what the President is saying is by -- we believe there's a very good chance that with these new technologies we will be able to reduce the imports of our oil enough to the equivalent to what we currently project to be 75 percent of what we would have imported from the Middle East. But the goal is to -- you know, beyond 2025, is to continue to achieve more and more energy independence, and this will occur through new technologies.

And, obviously, the big one in the '20s, beginning in the early '20s is the hydrogen car, which the goal there is to have a commercially viable hydrogen car by the early '20s.

Q The response I'm hearing from several groups that have been active on energy security issues is they're of course happy to see an increase in research and development dollars -- who can be against that -- but they see a shortcoming in that there is no real policy mechanism to make sure that the technology that results from R&D actually goes into the marketplace. Unless there is something like, say, raising CAFE standards, how do you actually make sure that this gets out in the world and does some good?

SECRETARY BODMAN: I think you might be better off asking the vehicle manufacturers that, to give you my answer. This President and this administration are acutely aware of the pain being felt by the families of America, by the consumers of America. And we are setting about to broaden the portfolio of energy sources. We are making every effort to also, over time, thereby reduce whatever the price might be in the future. There is little doubt in my mind that if we are successful in these endeavors that this will be adopted quickly and effectively without the need for unnecessary regulation. There will be great demand for this. If we could produce an effective and inexpensive ethanol motor fuel today, there would be great demand for it.

I'm often asked, aren't you worried about how the ethanol would get delivered to the marketplace, and whether it gets trucked or by rail car or whatever. And I would tell you, to be honest, I am not concerned about that at all. The issue is, can we get the material manufactured, can we do the necessary fundamental research that would enable us to make the product. If we can make the product, and the vehicles are able to use it, the market will do a much better job than we will about trying to regulate this, of getting this job done, in my opinion.

Q Thank you very much. I just have a question, or two questions, pertaining to how the Advanced Energy Initiative affects power sources for homes and businesses. You mentioned accelerating the breakthrough research. Does this mean that programs already underway, research programs in the area of coal, solar and wind, would be accelerated and there would not be -- do you anticipate any new projects in those areas, or would it merely be an acceleration of what's now on the books?

SECRETARY BODMAN: I would think it would be both. I mean, I think our staff and the -- this is Sam Bodman from the Energy Department speaking -- the staff is still working on the precise programs that will be used, as we have just completed the discussions with the Office of Management and Budget on the amounts of funding. And so we're still working the problem. This is the 2007 budget, so we still have a little ways to go, in terms of the time. And obviously we'll be discussing this matter with Congress.

But my guess is that in most instances, it would be a combination of accelerating the programs that are already there, and perhaps some new efforts. As an example, in the solar energy field, this past year, this past summer, I visited a plant in Michigan where I was quite impressed with the efforts that they -- not just the efforts that they've made to manufacture portable tank solar devices, but also the potential that apparently is there for improving the efficiency of the device. And we dispatched the head of our science office there. He came away, more importantly than my being impressed, he was impressed. And we then encouraged the Energy Efficiency and Renewable Energy Office, EERE, within the Energy Department, to increase their request, which they did, and the folks at OMB were quite responsive and so forth.

So in that case, I would presume there will be a solicitation and the company (inaudible) would be a candidate. There may be others that would be more capable and that we hear from.

But we have also had other programs that have been underway for some time and so we would continue those, accelerate those and perhaps broaden it by enabling the kinds of effort that I described.

One of the things that's quite important here I believe is that a lot of money has been spent over these last four years -- these last five years, by this government; and money was spent prior to that by the Clinton administration. It strikes me -- I'm a newcomer here, I've been here just a year, and as I have evaluated this, I have been surprised, and pleasantly surprised at the rate of progress that seems to manifest itself as you look at these different programs. And I think that this kind of increase in funding is just what the doctor ordered for the acceleration of some of the technologies that seem to be the most successful and seem to offer the most promise. So that's why we're as hopeful as we are.

Now, this is research and there are no firm promises that can be made, and they haven't been made. But we are optimistic that at least in some of these instances we will be successful, whether it's solar energy, whether it's wind, whether it's some of the efforts of nuclear power, whether it's the clean coal initiative, whether it's the various programs for manufacturing ethanol. All of these things make great sense to me and we're quite pleased with them.

Q If I may, just a clarifying question on that, and then a follow up regarding nuclear power. On the acceleration and the possible new research that would be -- to make sure I'm understanding that correctly -- that could be included in the 2007 budget request, new research as well?

SECRETARY BODMAN: That's correct.

Q Okay. And on nuclear power, while the administration -- while President Bush last night pointed to it as one of the areas, power sources that could help the country move away from its dependence on foreign oil, it's not included in the breakdown of the R&D, the research initiatives on the other power sources. I mean, you have coal, you have solar, you have wind -- why isn't nuclear in that breakdown?

SECRETARY BODMAN: Well, let me first say that this President is extremely enthused about nuclear energy. He is very committed to it. That's a factual statement. Then the last thing I would tell you is that I would defer any further comment on nuclear energy until we get to Monday noontime, when we announce the budget of the Department. And so I would ask you to defer your question until that time, and I think you will see a response.

Q My question is why is it necessary to make this push for non-corn ethanol? What prompts that need? And isn't the bigger problem with ethanol access for consumers to the fuel, rather than overall supply?

SECRETARY BODMAN: Costs -- as simple as that. This would be a reduction in the cost of the raw material. The effort here is to manufacture ethanol at a compellingly low price in order to make it available. The raw material, which is a sizable part of the cost -- if you look at the cost breakdown for the manufacture of ethanol, raw material is a meaningful fraction, and the raw material that is being considered in the effort is material that is now considered to be a waste product.

Corn stover, which is a term of art, which means that corn cobs, the leaves, the stalk and the other debris that are typically plowed into the field -- we would still plow some of it into the field because the soil needs it, but we would extract a meaningful fraction of it and then use that to manufacture ethanol, using the process technology that is being developed.

I might add that we are working very closely with the Department of Agriculture in that matter. The folks at the Agriculture Department have been deeply involved in this -- they are not here today, but I want to mention them because they have been very active in working with our renewable energy staff and producing an issue that we're very pleased with.

Q Are you saying the switch grass, for instance, would be cheaper than corn products?

DIRECTOR HUBBARD: Jim, this is Al. Let me just add to what Secretary Bodman said. We currently produce about 4.3 billion gallons of ethanol a year; it's growing by about 2 billion a year. That's all from corn. And the experts believe that, based on the amount of corn capacity we have, that's going to peak out about 12 billion to 14 billion gallons. The byproduct from the cellulosic process -- the plant -- corn stover -- all the plant waste that currently isn't being used, when that becomes competitive, we will have the capability of producing 60 billion gallons of ethanol from cellulosic materials. And so that's why it's important to achieve the breakthroughs that Sam has been talking about with respect to making cellulosic ethanol competitive with corn ethanol.

To give you a sense of perspective, we currently use about 140 billion gallons a year. So that's why it's so important that cellulosic ethanol become commercially viable.

Q What about availability to consumers?

CHAIRMAN HUBBARD: Well, in terms of -- Sam made the point that the distribution system will respond to the marketplace. And I've talked to major oil companies about it, and that's not a big deal once we have competitive products. Obviously, we need flex fuel vehicles out there. General Motors and Ford are already selling a significant number, but we're going -- that's going to have to be increased. There's no question about it. And that's something we'll have to do working with the auto manufacturers.

Q Okay, you're saying that once there's a demand for the product that more people will be putting ethanol in service stations?

CHAIRMAN HUBBARD: Absolutely. As Sam pointed out earlier, that will happen. The marketplace will take care of that. There's already a tax incentive from the energy bill to make it easier for these service stations to adapt to ethanol. The costs are -- I think on average they estimate around $17,000 per service station. But, again, once the product is available, the distribution system will respond quickly.

A true challenge is, obviously, we have 230 million or 240 million cars on the road. We sell 17 million a year, and we're going to need flex fuel vehicles out there. So we're going to have to work with the automakers to increase the percentage of cars that are flex fuel.

Q Thanks, gentlemen.

MS. PERINO: Thank you, everybody.

END 2:43 P.M. EST

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