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U.S. Chamber of Commerce Biofuels Dialogue Series: Outlook for an Emerging Global Biofuels Market

January 29, 2008 - 10:53am

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Remarks as Prepared For Delivery by Secretary Bodman

Thank you very much, Bruce, for that kind introduction.  My thanks also to Tom Donahue and the leadership of the Chamber for inviting me to be with you today.

I was quite pleased to hear that the Chamber was sponsoring this event.  As anyone who knows me - or has heard me speak recently - can tell you, the biofuels industry is a favorite topic of mine.  In my view, advanced biofuels offer tremendous promise for helping our nation to bring about a new energy future-one that is cleaner, more sustainable, more affordable, more secure and less reliant on foreign sources of oil.  While biofuels are certainly not the only component of our energy future, they are a critically important one.  We must aggressively pursue their development and widespread deployment along with a portfolio of other advanced energy technologies.  And, as this conference recognizes, I believe that all nations of the world must be involved in this effort.

I just returned from a visit to the Middle East which included stops in Jordan, Saudi Arabia, the UAE, Qatar and Egypt.  And I made precisely that point throughout the trip: when it comes to new energy options, we need everyone at the table.  Even those nations that possess tremendous hydrocarbon resources must turn their attention to alternative and renewable energy.  Because the fact is, the world needs safe, reliable, clean, affordable, and diverse energy supplies - and in considerably greater numbers than it now has.

This is a global challenge, perhaps one of the most significant of our time.  The International Energy Agency estimates that the world's primary energy needs will grow by 55% by 2030.  Meeting this demand will require literally billions of dollars annually for decades.  We also know that this investment must occur around the world - in developed and developing nations alike - and at all stages of the energy cycle.

At the same time, we all must recognize the realities of global climate change and look for ways to develop cleaner sources of energy that generate electricity and power our vehicles more efficiently and in an environmentally responsible way.

And of course, that's not even the full picture.  Throughout this nation there is an appropriately high level of attention on the impact of energy prices on our economy, our families and the health of our businesses.  I share that concern - believe me, it's what keeps me up at night.  The pain of high energy prices is very real and very significant for many Americans - when they fill up at the pump or face high home-heating bills or try to keep a small business going.

Even beyond our own borders, we know that the effect of high energy prices on smaller, developing economies can be severe.  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.  As a matter of principle - and as a matter of policy - I believe that we must keep the energy needs of the world's poorest nations in our discussions.  We cannot leave the developing world behind.

Given all this, it is simply not enough to say that we should expand - or should diversify - the energy options available to us.  In reality, we must.  We have no choice.  As President Bush made clear last night, our economic competitiveness, our national security and our environmental health require reducing our dependence on oil.

So, now comes the question: what do we do about it?  Well, the answer is certainly not one dimensional.  It is as complex and multifaceted as the problem itself.

First, we must work to bring sufficient hydrocarbons to market globally in a manner that is cleaner and more efficient.  We need more supply from more suppliers along with new supply routes and improved infrastructure.  And we must continue to demand transparency in the global oil market.

At the same time, we must dramatically change the way that we use energy in this country and around the world.  The truth is the biggest source of immediately available "new" energy is the energy that we waste every day.  I believe that improvements in energy efficiency can be achieved - in relatively short order - on a global scale in our industrial and power-generating sectors, our government agencies, our homes, our offices, and our transportation sector. Collectively, these measures will not only take some pressure off of demand, but also improve the health of the environment.

And finally, and perhaps most importantly, we must aggressively expand the availability of alternative fuels and advanced energy technologies - and do so on a global scale.

By way of just one example: in China, a nation of over one billion people, there are more than 31 million highway vehicles on the road today - that's about thirty vehicles per one-thousand people.  Over the next 25 years, we expect that number to grow to over 200 million vehicles.  By comparison, today the United States is a country of 300 million people with about 240 million vehicles, or about 800 vehicles per one-thousand people.  We must work together so that we can help meet this global growth in demand with clean energy sources like advanced biofuels and other cutting-edge technologies.  And, as President Bush called for in his State of the Union address, we should create a new international clean technology fund, which will help developing nations like India and China make greater use of these clean energy sources.

I'm proud to say that we are already well on our way to harnessing the tremendous power of clean-energy.  Through the President's Advanced Energy Initiative, we are identifying the technologies that could have the greatest impact in the relatively near future-say, the next 5-10 years-and then going after them with increased resources and aggressive timelines.  I'm talking about things like: commercially competitive cellulosic ethanol and other biofuels; advanced hybrid vehicle technologies; hydrogen fuel cells; solar photovoltaics and high-efficiency wind power; as well as technologies to more cleanly and efficiently use fossil fuels.  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.

To do this most effectively, the federal government requires intense, strategic collaboration with the private sector and academia.  To facilitate that collaboration we are employing a range of models - including cost-sharing partnerships and loan guarantees.

So, for example, during the past year, the Energy Department has committed to major investments that will help fuel the growth of a robust, sustainable domestic biofuels industry.  Our strategy is, in part, to build on the vast accumulation of knowledge in the American biotechnology industry and to use it in the production of cost-competitive alternative energy.  To that end, our Office of Science is investing over $400 million over five years in three Bioenergy Research Centers in California, Wisconsin and Tennessee that will work to apply the great strides we've made in human genomics to our energy challenges.

In addition, last February we announced the selection of six large-scale biorefinery projects that together will receive up to $385 million over the next four years.  Combined with industry cost-sharing, the total investment is expected to be more than $1.2 billion.  When fully operational, these six biorefineries are expected to produce more than 130 million gallons of cellulosic ethanol per year.  And, the projects are already underway.  Just a few months ago, I was in Georgia - at Range Fuels - for a ground-breaking ceremony for one of these plants.  The first two phases of the Range Fuels project are expected to process about 1,000 tons per day of wastewood to produce about 40 million gallons of biofuels and chemicals per year.

And today I'm very pleased to announce a third significant investment that will speed the development of advanced biofuels across the nation.  The Department has selected four companies to develop small-scale cellulosic biorefineries.  The total funding for these four projects is approximately $331 million, with a federal investment of $114 million and a private investment of over $216 million. These biorefineries will operate at a level equivalent to about 10 percent of a full-scale commercial plant.  So we're talking about more intensive, frequent, and variable demonstration and testing of the performance and operating characteristics of cellulosic biomass feedstock throughputs of at least 70 tons per day.

The four competitively selected, cost-shared projects are being awarded to: ICM, Inc. (for a proposed facility in Missouri), Stora Enso, which was recently acquired by NewPage (for a proposed facility in Wisconsin), Pacific Ethanol (for a proposed facility in Oregon), and Lignol Innovations (for a proposed facility in Colorado).

In essence, what we're doing here is supporting a group of projects that will demonstrate and test a wide range of innovative conversion technologies.  These biorefineries will use a diverse set of cellulosic feedstocks, including agricultural residues like wheat straw and corn stover, energy crops like switchgrass, wood waste from the paper and pulp industry, and forestry residues.  Our goal is to lower the technical hurdles associated with financing full-size commercial plants that utilize these kinds of sustainable feedstocks.

And, let me also mention this - which I view as a very good sign for this market - we had an overwhelming response to the solicitation for these funds.  In fact, we have so many potentially worthy proposals that we plan to announce a second round of awards sometime in the next few months.

In my view, these biorefineries will help us to address the twin challenges associated with advanced biofuels.  First, we must make them cost-competitive; and second, we must produce them in sufficiently large quantities from a diverse - and sustainable - group of feedstocks.  If we can do that - and I certainly believe that we can - we will unleash the tremendous potential that biofuels have to offer for our economy, for our environmental health, and for our national security.

All of these investments will advance President Bush's goal of making cellulosic ethanol cost-competitive with gasoline by 2012, and help us to reduce America's gasoline consumption by 20% by 2017.  And, of course, they will help our nation meet the new Renewable Fuel Standard mandated by the Energy Independence and Security Act of 2007.  As many of you well know, that law set forth ambitious goals for renewable fuels generally - and cellulosic biofuels in particular.  Among other things, it requires advanced biofuels to provide 21 billion gallons of fuel by 2022, or about 60% of the total requirement of 36 billion gallons of renewables. And, of that total, cellulosic biofuels must contribute at least 10 billion gallons by 2020 and 16 billion gallons by 2022.

But I don't want to get too bogged down in specific mandates, which I believe we will meet and likely exceed.  What these federal investments are really about is aggressively pushing these technologies forward to get them out into the marketplace as quickly as possible - so they can have a real impact.  By cost-sharing these investments with the private sector, we are kick-starting these projects and taking some risk out of the equation, if you will.

With biofuels as well as other advanced energy technologies, our strategy recognizes that many of the transformative breakthroughs are likely to happen in the private sector, and that the government must take an active role in encouraging that activity.   Because the challenges that we face are too large and too important for a "business as usual" approach.  As the President said last night, we must trust in the creative genius of American researchers and entrepreneurs.  We must bet on technology . . . and we must take some risks.  And we must all work together.

If we do, we will solve this problem; we will achieve a cleaner, sustainable, affordable, and secure energy future for our nation and our world.  And advanced biofuels will be a key component of our success.

I thank you very much for your time and I'm happy to take your questions.

Location: Washington, DC

Media contact(s): Julie Ruggiero, (202) 586-4940

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