A Balanced National Energy Policy
Remarks by
Robert S. Kripowicz
Acting Assistant Secretary for Fossil Energy
U.S. Department of Energy
at the
Ohio Energy Summit
Columbus, Ohio
October 1, 2001

Good afternoon. I appreciate the opportunity to visit Ohio again and to participate in this summit. Secretary Abraham asked that I express his regrets for not being here. I grew up in, and still have family in Western Pennsylvania, so I'm a long-time neighbor. Growing up, I can remember the cries of "Ohio driver" every time we had some kind of traffic altercation.

This is a difficult time. The events of September 11th have changed many things, perhaps permanently.

I think we need to reflect on those events and realize even more that our nation's national security is tied to our energy security. It will gain even greater importance as we enter into a prolonged period of a struggle that will undoubtedly test global alliances. A diversity of energy resources leads to inherent energy stability, and that, in turn, leads to greater energy strength and greater energy security.

It is difficult to discuss such matters as energy supply and demand, or energy prices, or energy reliability in the context of "business as usual." There will be little in this country that will be "business as usual" in the coming days. But energy - and energy security - must never be far from our national attention, even if the attention is currently focused on more immediate needs. And although it was crafted in different circumstances, the President's National Energy Plan is completely relevant to the current situation.

When President Bush presented his energy policy to the American people it contained 105 specific recommendations - ranging from energy efficiency measures to incentives for increased production to improvements in the way energy moves.

It addressed not only actions we can take within our own borders, but also actions that can be taken internationally to expand and diversify energy supplies.

Of the recommendations in this report, most can be implemented by the federal government without explicit Congressional approval. And our Departments and agencies are moving ahead to implement them. The remainder will require the actions now being taken by Congress.

Here is our energy problem in its simplest form:

• In the next 20 years we expect overall U.S. energy consumption to increase by more than 30 percent.

• We expect oil demand to increase by one third.

• We expect consumption of natural gas to increase by 62 percent.

• We expect electricity demand to grow by 45 percent, owing at least in part to the growth of power hungry information technology.

Americans now consume 98 quadrillion Btus - or 98 quads - of energy each year.

If the energy intensity of the U.S. economy - the amount of energy needed to generate a dollar of our Gross Domestic Product - remained constant, our energy demand in 2020 would be 175 quads.

However, our plan and current policies are projected to improve energy efficiency to the point that energy demand in 2020 can be lowered from 175 to perhaps 127 quads.

Improved energy efficiency can help close much of the gap between projected energy demand and projected domestic energy production. But I think it is important to point out that to reduce energy use by this amount means that we will have to achieve energy conservation gains that exceed those of the last 10 years.

Even if this is possible, we know that improved energy efficiency cannot do the whole job. If we do nothing to encourage increased energy production - above the 1989 through 2000 growth rates - we are looking at a widening energy gap over the next 20 years, ultimately extending to nearly 30 quads. To put that in perspective, we increased energy production in the last ten years by one quad. That's right. One quad.

For that reason, the United States needs an energy policy that includes both aggressive energy efficiency measures and equally aggressive measures to boost energy supply.

This is the course that President Bush set when he presented his National Energy Policy. The President's plan centers on 5 core themes.

The first is to modernize our conservation efforts by employing cutting edge technology.

The U. S. economy has become more energy efficient in the last 30 years.

The refrigerators in our homes now use only 1/3rd of the electricity of the refrigerators of 1972. We now have fluorescent light bulbs that use only 25 percent of the electricity compared to conventional incandescent bulbs.

Our automobiles use, on average, only 60 percent of the gasoline they did in 1972 to drive a mile.

But more can be done. Several new and innovative technologies offer expanded opportunities to become more energy efficient.

So the President's National Energy Plan calls for a variety of energy efficiency initiatives.

In fact, more than 50 percent of the National Energy Policy's recommendations focus on energy efficiency - encouraging the development of fuel efficient vehicles, higher efficiency appliance standards, efficiency-based tax credits, and combined heat and power technologies.

Second, our Plan calls for a diversity of energy supply sources.

As I mentioned earlier, in the next 20 years, electricity demand in the United States is forecast to rise 45 percent.

There are roughly 5,000 power plants in the United States, with a total generating capacity of nearly 800,000 megawatts. But to meet the increase in power demand between now and 2020 will require the equivalent of adding 1,300 to 1,900 new power plants.

If current policies and practices remain unchanged, most of those plants - in fact, more than 90 percent - will be fired by natural gas. That accounts for the sharp rise in the demand for natural gas.

We believe energy security dictates a more balanced approach to new power generation.

So in addition to measures that encourage the greater use of natural gas, the Plan also recommends a 10-year, $2 billion program to develop improved clean coal power technologies. This program and its results could be of great benefit to the state of Ohio.

And the Plan also reopens the nuclear option to give us a broader mix of energy needed to meet growing demands.

The National Energy Plan also addresses the energy delivery network in our country. We have more than 2 million miles of oil pipelines and 1.2 million miles of gas pipelines. We recognize that the current oil and gas delivery system is coming under increased stress, and bottlenecks are developing.

The problem may be most acute in our natural gas infrastructure. The consensus of our gas industry is that the United States will need an additional 38,000 miles of major transmission pipelines and 263,000 miles of smaller distribution lines by 2015 to bring the necessary natural gas to homes and businesses.

We will also need a new pipeline to deliver gas from Alaska to the rest of the nation, and we will need to improve pipeline safety.

Each of these issues is addressed in our Plan - with activities ranging from expedited permitting to new research and development on pipeline materials and leak detection equipment.

Limited refinery capacity was one of the major causes of the sharp gasoline price increases in the Midwest and elsewhere during the last few summers. Our plan recommends streamlining permitting and providing greater regulatory certainty to give the industry confidence to expand.

Our electricity grid needs to move from one designed to meet regional needs to one capable of sending power coast-to-coast. The U.S. power network is built in three large grids: the Eastern, Texas and Western systems. While connected in a handful of spots by direct current lines, these three grids largely operate independently.

One of the major reasons for blackouts in California was simply an inability to move power into the State from areas of the country that had a surplus.

Our plan calls for an electricity "superhighway" - one where power can move easily across the country. Our department is working with the Congress on legislation that can bring us closer to creating a true coast-to-coast transportation system for electricity.

Third, our plan balances our pressing requirements for traditional sources of energy - coal, oil and gas - with the need for more renewable and alternative energy sources, such as biomass, solar, wind, geothermal, and hydro power.

The National Energy Plan recommends tax incentives for the use of certain renewables and provides for more focused research on next-generation sources of energy such as hydrogen. But it also recognizes that it will take years - if not decades - for renewable and alternative resources to make major contributions to our energy mix.

Therefore, in addition to encouraging Clean Coal Technology, the plan seeks to increase exploration of domestic sources of oil and gas by providing greater access for environmentally safe oil and gas operations in areas previously off-limits to development.

Much of the news media - in our country and around the world - has focused on the debate over whether a narrow strip of the Arctic National Wildlife Refuge - the coastal plain in northern Alaska should be opened for exploration.

The House energy legislation that passed last month approved a measure to provide greater access to this region - with limitations on the amount of land that can be disturbed. We believe modern day technology can meet the standards of environmental protection demanded by the public. The marriage of oil exploration with cutting-edge technology means fewer rigs, fewer roads and fewer pipelines...and more successes.

If developed today, for example, the footprint of Alaska's Prudhoe Bay, for example, would be only 1/3 its current size.

But often overlooked in the debate over Alaska's North Slope is the fact that a large portion of the nation's oil and gas resource base in the lower 48 States resides on federal lands or in federal waters where restrictions limit exploration and development.

For example, an estimated 40 percent of potential natural gas resource in the Rocky Mountain region - is either closed to exploration or open only under restrictive provisions.

Therefore, a major part of the energy plan recommends a review of the legal and policy concerns and other possible impediments that currently do not allow development of these resources.

The Plan also calls for the Federal Government to promote enhanced oil and gas recovery through new technologies and to continue to improve these technologies through research and development partnerships with the private sector.

Fourth, our energy plan harmonizes growth in domestic energy production with environmental protection. A commitment to environmental stewardship is a commitment woven throughout our energy policy.

Like energy efficiency, we have made considerable progress in reducing pollutants as our consumption of energy has grown.

Largely because of better technology, we have made environmental progress without compromising the expansion of our economy.

But we can do more - especially if we continue to foster better technology and establish greater regulatory certainty for the industries that will use it.

That is why, for example, in addition to recommendations to streamline the permitting process for power plant siting, the National Energy Policy also directs the Environmental Protection Agency to propose mandatory reduction targets for emissions of three major pollutants - sulfur dioxide, nitrogen oxides, and mercury - from electricity generation.

Fifth and equally important as all the others, the Energy Plan recognizes the need to strengthen global alliances.

We cannot afford to look at energy security in isolation from the rest of the world. We cannot afford to ignore the need for an efficient international infrastructure that allows energy markets to work to their full potential. And we cannot afford to look at environmental protection only in terms of how we produce and consume energy within our own borders.

In early August, the House of Representatives passed an omnibus energy package designed to implement key elements of the President's energy plan.

It became the first major piece of energy legislation to pass the House since the 1992 Energy Policy Act and includes measures to:

• help speed construction of new natural gas pipelines

• spur development of clean coal technology

• extend reductions of royalty payments for deepwater drilling

• provide $34 billion over 10 years in tax incentives for BOTH energy production and conservation, and

• authorize significant increases in funding for energy efficiency and renewable energy programs.

In the Senate, the Energy Committee has also been moving forward on marking up a similarly wide-ranging energy bill. I hesitate to predict where this will lead, or when we will get a final piece of legislation. But, even in current circumstances, energy is back in the national spotlight.

Since this is Ohio, I'd like to say a few words specifically about coal, and the crucial role it plays in the President's plan.

The relevant pieces of the overall energy situation and strategy are these:

• the electric industry is expected to grow by 45 percent in the next 20 years.

• if circumstances don't change, the vast majority of our plants to meet that growth will be natural gas based.

• environmental constraints are mounting on the use of current coal-based plants and technology.

But

• coal is an abundant and inexpensive resource

• technology, developed by both industry and the government in partnership, has lessened the environmental impact of coal technologies

• reliance on a single source, natural gas, could lead to constraints on supply or significant price increases, or both.

So the President's policy does four things in this context.

First, it provides $2 billion for clean coal technology over the next 10 years, in addition to our ongoing R&D program, to provide an acceptable alternative to natural gas.

Second, it stresses the need for technological solutions.

Third, it emphasizes that this cannot be just a government program. Rather it needs to be a program with even greater input from the private sector than previous successful programs.

Fourth, it envisions a more stable regulatory regime to provide an atmosphere conducive to investments in coal-based technology.

My concept is this. We need to develop and demonstrate the technologies that will make existing coal plants cleaner to operate and more efficient, thus allowing those plants to continue to generate electricity longer than otherwise possible. At the same time, we need to accelerate the development of technology for new plants, approaching zero emissions, including CO2, so that they can be deployed sooner. Therefore, we must push existing plants farther into the future, while pulling new plants closer to the present.

What makes me think this is possible?

First of all, we have a solid base in our research and development program. Along with industry-sponsored R&D, the government/industry R&D program provided the technology brought to fruition in the first Clean Coal Technology demonstration program, begun in the Reagan and first Bush administrations. Those programs culminated in the investment of nearly $5.3 billion, almost $3.5 billion of which was provided by industry. This investment led to:

• utilization or planned utilization of low NOx burners on nearly 3 out of every 4 coal-burning power plants in this country;

• reduction of the cost of Selective Catalytic Reduction technology for nitrogen oxide removal by almost 50 percent;

• increased reliability, improved efficiency, and reduced cost of scrubbers for SO2;

• commercialization of large scale fluidized bed technology for utility-scale boilers;

• confirmation of the reliable operation of clean, efficient integrated gasification combined cycle technology.

These achievements were calculated by the Southern Company to provide over $100 billion in benefits to the U.S. In this regard, the State of Ohio played a significant role, helping, through the Ohio Coal Development Office, to finance several of the projects demonstrated in the program.

So we think it is possible because we've done it before.

Since the previous Clean Coal Program, we have continued, again in close cooperation with industry, to pursue a comprehensive research and development program in clean power technology. We have had a continued emphasis on improving the operation of existing facilities through programs dealing with particulates, nitrogen oxides, and mercury in particular.

In recent years we have established ambitious goals and begun serious research on high efficiency, ultra-clean, flexible production systems to produce a variety of products including fuels and chemicals - in addition to electricity - in our Vision 21 program. The exacting goals of this program are mirrored by similar efforts of the industry to establish such visions.

And most recently, we have begun the long-term effort of developing technology to capture and sequester CO2 as part of an effort to reduce the climate effects of fossil energy use, particularly coal. Ohio industries and the Ohio Coal Development Office have been involved in this arena also.

So we believe this is a technology base that can be demonstrated over the next 10 years. The President believes, as we do also, that now is the time to undertake an intense effort to take the technologies being developed in DOE and other programs and demonstrate that such technology can be used commercially to lead to an ultimate goal of a zero emissions coal-based power plant.

He also believes, as we do, that such an undertaking needs to be a close cooperative effort between the federal government, represented by DOE, and the industries responsible for producing power for the U.S., as well as their partners in state and local governments and in the research community.

We have been cooperating already. We need to do more. We need to do the R&D and demonstrate the technologies. We need to encourage the broad deployment of demonstrated technologies through incentives and other methods. I know that states like Ohio and Illinois are doing that.

• We need to address regulatory issues concerning the use of coal and their impact on technology.

• And we need to build on and strengthen the cooperative effort between DOE, industry, state and local governments, and the research community, and assure the success of the President's initiative.

The task is a challenge but coal is only part of the solution to the problem. The President has said, "Our administration will be creative. We're committed to protecting our environment and improving our economy, to acting at home and working in concert with the world. This is an administration that will make commitments we can keep, and keep the commitments that we make."

I challenge each of you to work with the President and the Administration to meet the challenges ahead of us in fulfilling our energy strategy.

Before September 11, I would have ended here. But, these past few days, perhaps more than at any time in the last half century, have underscored the importance of unity in both our response and resolve. Our nation is strong, but it will need to summon all of its strength to confront the challenges that await us. Energy is part-and-parcel of our national strength and, likewise, we must summon all of our determination and wisdom to ensure that we remain an energy-strong and energy-secure nation.

National goals have been redefined in the last week, but the fundamental means to achieve these goals has not changed. The will of a strong and resolute people, the technology of a great nation, and the courage to take on the challenges of an uncertain future - these are the values that define our country.

I want to thank all of you for your interest in helping to strengthen the energy future of our country. You are making a positive and lasting contribution. I ask that you continue to do your part to make America stronger and more secure. It is more important than ever.

Thank you.