Bill Richardson photo

Energy Speech to Bear Stearns

March 14, 2007

Thank you for that kind introduction.

Some may wonder why a Governor from a state that actively promotes renewable and alternative energy would come to speak to a conference dedicated to Oil and Gas.

But the same reason why I'm talking to you today—is the same principle I've always held.

It's OK to talk.

Sometimes talks yield little—an agreement to disagree.

But, sometimes direct talks work.

Direct talks mean looking across a political or philosophical divide to find common ground and to build a better solution.

As a Democratic Governor in a red-state it's something I'm familiar with.

I think some Democrats may not recognize that its business that creates jobs and builds an economy.

But not this Democrat—I'm a pro-business, tax-cutting Governor and I would remain the same as President.

Today, I'd like to talk to you about the threats to America's energy security, and our generation's challenge to build a new economy based on clean energy.

This is my vision--some parts you may agree with---some parts you won't—but afterwards we can talk it through.

Energy is central to US Foreign policy.

It's easy to say the US is addicted to oil.

Understanding the stranglehold of that addiction – and constructively working to end our "habit" – is hard.

Oil is a strategic commodity often controlled by repressive governments.

Production levels – and price – are strongly influenced by a global cartel.

Oil dependence is America's Achilles-heel, and it's allowed our foreign policy to go weak in the knees.

Our oil addiction limits our power to deter Iran's Nuclear Program, to challenge Russia when it behaves badly, to respond effectively to anti-American rhetoric from Venezuela's president, to push for reform in Nigeria, or to build a coalition to stop the genocide in the Sudan.

And our options in Iraq are constrained by the fear that Iraq's vast oil reserves could fall under the influence of Iran.

And while America's last two wars in the Middle East weren't only about oil—our dependence on oil is too often the unspoken subtext that compels us to act and causes others to view our foreign policy with suspicion.

As everyone in this room knows—growing energy demand in Asia, coupled with already high consumption levels in the developed world, has launched a race for control of the world's ever-scarcer energy resources.

Also, there are few new, large discoveries of oil in the world.

Development of pristine areas like ANWR or Otero Mesa in my home state, will yield relatively little oil – not nearly enough to alter the inevitable reality of higher prices due to increased demand and finite supply.

This scenario is already evident.

The average family will spend $3,500 on fuel in 2007—almost double what they spent only six years ago.

Almost 70% of the world's oil reserves are concentrated in the Middle East or in OPEC nations.

The cartel's ability to control oil prices leaves consumers, investors and policy makers perpetually off-balance: Oil price volatility with highs and lows so divergent that they either stunt the world economy, or kill investment in and development of alternative fuels.

But while significant, this is not my greatest concern.

Instead, as we fight the war on terror, I most fear a more immediate and fundamental strategic reality of our oil addiction: a significant portion of the $450 billion petrodollars we export each year is most certainly funneled to fund our Jihadist enemies.

As such, I think it's time we acknowledged this simple truth: Our ability to drain the swamps of terrorism depends in part on our political will to change how we produce, distribute and consume energy.

But funding our enemies with exported oil revenues is not my only concern.

The other result of our oil and energy addiction – climate change – also has global, strategic implications.

Scientists use the term "disruptive impacts" to describe what climate change could mean to the nations and regions of the world.

I think it's time we stopped using this sterile euphemism and instead acknowledge what this really means – severe weather, flooding and drought and the alterations of agricultural production, rising sea levels, new disease patterns, widespread economic dislocations and destruction and a host of other problems that threaten the community of nations.

As the Governor of New Mexico—a growing and prosperous—desert state, I must pay attention to this threat and what it means for our scarce water resources.

In the West, it's not just the liberal college kids who ask what we are doing about global warming—it's the conservative farmers and ranchers whose way of living is at risk.

And like the rest of America, we can't afford to gamble that the vast majority of the scientific community is somehow wrong on global warming---especially as our country remains the largest producer of greenhouse gases and is on track to double its emissions in the next 50 years.

The surer bet—is to do what's right to slow, stop, and reverse global warming.

Believe it or not, there is common ground between Democrats and a number of Republicans on energy policy—like conservation, promoting renewable fuels, and addressing global warming.

But while the Bush administration has begun to recognize the global warming threat, there is a gap between rhetoric and policy.

In the same year President Bush admitted "America is addicted to oil," he has missed deadlines to release new efficiency regulations, resisted higher gas mileage standards, and chose instead to subsidize gas-guzzling Hummers and SUVs.

President Bush also said "we need to reduce our reliance on foreign energy sources."

But he is pursuing a policy course that will make the U.S. as dependent on those same countries for natural gas that currently hold the world hostage to their oil reserves.

The 2005 Energy Bill streamlines the development of a global LNG market.

We should not lose sight of the following however: Forty-five percent of the world's proved gas reserves are in just two countries – Russia and Iran.

Consider the geopolitical implications of that relationship.

Further, almost two thirds of the world's proved gas reserves are in either OPEC nations or Russia.

Again, the proximity of these gas supply centers to the consuming regions of Europe and Asia, put US LNG consumers at a distinct price and supply line disadvantage.

If all the LNG re-gasification terminals approved by this administration since 2005 were built and operating at full capacity, we would be importing almost sixty percent of our natural gas, in addition to an even higher percentage of our oil.

It's true that in the near to mid-term, we need additional supplies of clean burning natural gas – it can help mitigate greenhouse gas emissions in the near- to mid-term.

Also, 60 million Americans heat their homes with natural gas – affordable supplies of gas mean lower heating bills for our families and businesses.

But we need to be mindful of the geopolitical realities of the LNG marketplace.

Also, natural gas end use efficiency and environmentally-sensitive production of technically recoverable domestic reserves will substantially reduce the need for LNG imports.

Strict building efficiency measures alone – using currently available technologies – would decrease gas consumption and dramatically lower carbon emissions over the next several decades.

As a former Secretary of Energy and as the governor of an oil and gas producing state, I've come to know some of the needs of your industry.

Energy companies and investors base decisions, not on political terms of two, four or eight years, but in generational terms of 30 years or more.

I don't believe your industry fears change.

But to make the billion and trillion dollar energy infrastructure and resource development investments---you don't need a conflicted vision of next year---you need leadership and consistent vision of the next fifty years.

I believe it's time for America to get off of its knees and stand up for a new energy future.

We should lead the world in reducing greenhouse gasses and in preparing for the post-oil economy of the future.

Gradually, but deliberately, we can wean ourselves of our oil addiction.

This is not a task government can do alone.

Government's role – indeed its obligation-- is to provide a clear vision, strategic investment in technology development, incentives to move forward – and most importantly, legal and regulatory certainty.

You are responsible for managing incredible risk and high-dollar portfolios – you have every right to know the federal "rules of the road" as you make key investments in our energy future.

Government investment in new technologies can serve as a sparkplug for energy "invention" but it is the role of the investment community to transform those inventions to marketplace "innovations" -- and the role of the business community to move innovations from the business plan stage to true technology diffusion.

Only when government and industry work together as partners can we successfully link together all these pieces of the energy innovation chain -- pushing the nation beyond the tired divisions of "good jobs OR the environment" and moving to "even better jobs AND a clean environment."

But for any solution to work, it must be both market- and reality-based.

We should set bold standards, but use incentives to bring along consumers and the private sector.

And we should use tax credits to ease the path for lower income groups and small businesses.

I have never feared using tax-cuts and tax-credits to unleash the power of the private sector.

In New Mexico, we've cut over $1 billion in taxes, invested into high-tech job creating companies, and created tax credits for companies that provide high-wage jobs.

Today, 84,000 more New Mexicans are working, and incomes are on the rise.

• We became the first state to join the Chicago Climate exchange and signed an agreement with California, Arizona, Oregon and Washington to set greenhouse gas reduction goals and use a market-based system to achieve them.

• We're requiring utilities to start producing energy from renewable resources—to generate 10 percent of their electricity from renewable sources by 2011 and 20% by 2020.

• We used tax credits for solar, wind and biomass to attract some of the most innovative renewable energy businesses in the world—to New Mexico.

• And we are creating the country's first renewable energy transmission authority—so we can buy and sell renewable energy to interested states.

New Mexico's economy is bolstered by its oil and gas production.

We've consistently invested production revenues into bettering our schools, improving our infrastructure, diversifying our economy -- and laying out a series of incentives to wean us from our addiction to oil.

• We've opened one of the largest bio-diesel plants in the country, we've increased the production of ethanol by a factor of six, and we're about to set new standards for bio-fuel content in gasoline.

• We eliminated taxes on hybrid cars, and are now the new home of Tesla—America's first large-scale production site for electric cars.

New Mexico is becoming the clean energy state.

There's no reason why the United States cannot become the clean energy nation.

I'd like to lay out a part of my vision for regaining America's energy security---a combined program of business innovation and government investment comparable in scale to the Manhattan project to split the atom, or the Apollo Project to put a man on the moon.

Our goal should be bold—to reduce oil imports by 40% AND replace one quarter of liquid fuels with bio-fuels by 2025, and reduce greenhouse gas emissions by 75% by 2050.

1. Conservation and Efficiency programs

Opportunities for efficiencies abound – from the fuel consumed in the vehicles we drive to the energy used to power our homes, appliances, factories, and office buildings.

We know that our economy is about half as energy –efficient as Japan or Western Europe's.

Indeed, improving efficiency is the single-most important way to cut our oil consumption and greenhouse gas emissions.

That's why as Energy Secretary, I set new standards of energy efficiency, for buildings and appliances.

Those standards represent carbon reductions equivalent to taking one million cars off the road.

Automobile efficiency has actually declined over the last 20 years – this is unacceptable.

We should be rewarding auto manufacturers for building and selling cars that use less fuel and establish one uniform Corporate Average Fuel Economy for all vehicles.

By using lighter but stronger material to build our cars, by increasing engine efficiency and by increasing the use of hybrids and other advanced technologies, we could get America's car fleet to 50 miles per gallon in the next 10 years.

We can also reduce our energy and net emissions by 5 percent next year, and then an additional two percent each year thereafter, by:

• Strengthening energy efficiency building codes.

• Enacting stronger national appliance efficiency standards.

• Establishing National Carbon Sequestration Goals.

And Government should lead by example.

In New Mexico, not only did we put forward new standards for energy efficient buildings, but we also issued green building tax credits.

We should set a goal of cutting the federal government's energy bill by 20 percent by 2010 and challenge municipalities, corporations, universities, and hospitals to do the same.

And our tax system should make this easier for everyone to do the right thing—that includes:

• Expanded tax breaks for energy efficient building and retrofits

• Tax credits for hybrid cars and public transportation passes, not for hummers and SUVs

• And the creation of a system of tradable emission credits to encourage private companies to invest in conservation and clean alternative energy technologies.

2. We must expand the use of Alternative and Renewable Energy Sources

The 2005 federal energy bill included a nationwide renewable fuels standard (RFS) that will double the use of ethanol and biodiesel by 2012.

This is a good start, but it does not go far enough to increase production of renewable, domestic fuels.

We need a more aggressive national goal of producing 20 percent of our transportation fuels from renewable sources by 2020, and an incentive program to make it happen.

More specifically, we should fund cutting edge bio-fuels research and provide incentives for its distribution by, for example, helping gas stations convert at least one pump to handle E 85 or other bio-fuels.

The federal government also should use its vast purchasing power to transform the energy marketplace by, for example, purchasing more hybrid and flex fuel cars for its own use – providing a huge guaranteed market for efficient vehicles.

Finally, we should significantly ramp up federal investments in research and development and dramatically improve its effectiveness, starting with some kind of funding certainty over time to make the government more attractive and reliable to its industry research partners.

As a Western Governor, I know that energy companies pay royalties to extract fossil fuels.

Rather than deposit such royalties into general revenues, those earnings should be invested in cutting edge research and development of alternatives and renewable energy.

We should also focus less on incremental improvements of current technologies and more on innovations that are truly "disruptive" – transformational technologies.

Technologies that will provide for alternative transportation fuels including bio-fuels from switch grass and other plant matter, dramatically enhanced energy efficiency, carbon free power generation, and the affordable capture and sequestration of carbon from the production and consumption of fossil fuels.

We also need to change the focus of federal research from "fuels" to "consumers" – only with consumers in mind can we comprehensively address affordability, the environment, infrastructure replacement and transformation, end use efficiency, as well as fuel sources.

I would also specifically carve out a new program of federal investment in "Early-Stage Technology Development" to help bridge the gap between "invention and innovation."

Too often the federal government stops short because it is "commercialization-averse" and venture capitalists don't pick up the ball because they are "risk-averse."

Effectively bridging this "valley of death" is essential to our energy future.

In New Mexico, we've been working on it in cases like Advent Solar, where the state government has helped move their solar cells from the research phase at the national laboratories into to the renewable energy marketplace.

Indeed, state governments are critical players in this piece of the technology development chain.

Finally, we should provide a central point of policy focus in the federal government – perhaps within the White House – to provide for greater rationalization of energy policy, research and development, and investment certainty.

3. Lastly, I believe America should integrate our foreign policy with our energy policy.

President Clinton used to send me in to negotiate the freedom of American hostages and political prisoners.

He'd say "Send Richardson, bad guys like him."

(I don't know if that's true)

But I was often asked to negotiate directly with tough characters like Fidel Castro, North Korean generals, Omar Al-Bashir of Sudan, and Saddam Hussein.

Those face-to-face talks often meant the difference between the wrongful imprisonment of American servicemen and citizens--- and freedom.

I think we need the same sort of strong and focused diplomacy with friend and foe to adapt our foreign policy to the global nature of energy.

We should start by strengthening our North American partnership.

Energy is a key component of our relationship with Canada and Mexico.

Together, we should establish a North American Energy Council—both to assure that we are efficiently developing and transporting energy in the North American market and to leverage our combined market power.

We should then use this partnership to engage a broader hemispheric energy strategy.

President Bush's trip to South America, while welcome, may be too little, too late to provide this Administration with any meaningful energy policy focus in its remaining days in office.

This is unfortunate.

Reserves of tar sands and heavy oil in Canada and Venezuela are roughly double the entire oil reserves of Saudi Arabia.

Brazil's experience with ethanol markets and infrastructure could provide valuable lessons to our developing industry.

Mexico and Bolivia have large, undeveloped reserves of natural gas.

Trinidad Tobago, the largest single US supplier of Liquified Natural Gas has very limited gas reserves and will ultimately be supplying its liquefaction infrastructure with natural gas from Venezuela.

Each of these energy opportunities comes with own set of problems – diplomatic, environmental, domestic politics, to name a few.

Steady, sustained engagement of our neighbors, however – be they friends or adversaries -- is critical to meeting the energy and environmental needs of the 21st century.

Now, the best part—the conclusion.

Last week a former CIA director noted that a recent attack on oil infrastructure in Saudi Arabia was carried out by Al Qaeda.

Had they been successful—oil would have hit $100 per barrel and the impact to the US and world economy would have been devastating.

We can't afford not to change.

And in terms of Global Warming, we must ask everyone—citizens, government and businesses--to do their part to dramatically reduce their emissions.

This doesn't just make sense for our air; it's good business.

BP estimates it has saved $600 million to $1 billion over the last several years by addressing climate change and methane loss.

So, indeed we can afford to change.

Change might even be good for the weather and good for the wallet.

Thank you.

I'd be happy to take your questions.

Bill Richardson, Energy Speech to Bear Stearns Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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