Transcript of Remarks by Agriculture Secretary Mike Johanns At the Renewable Energy Conference - St. Louis, Missouri
October 11, 2006
SEC. MIKE JOHANNS: Well, thank you very much for that great introduction, and ladies and gentlemen thank you very much for that very warm welcome. I can't tell you what a pleasure it is to be here with you today.
Well, I also begin today with a very special thank you to a great friend of mine, my colleague on the cabinet, Secretary Bodman. He will speak in a few minutes. I wanted to say thank you, Sam, for your commitment to renewable energy and of course for cohosting this conference. I certainly appreciate his partnership in the effort to expand renewable energy sources.
I also want to start out this morning and say, welcome to students of Clyde C. Miller Career Academy and Lutheran South High School right here in Missouri. They are here as my special guests today, part of the next generation of renewable energy leaders. We're glad to have them here.
Allow me also to say thank you to our talented employees at USDA and the Department of Energy. They have worked so hard to make this conference the success that it is. And I'd especially like to say thank you to each and every one of you for being here today. Your presence at the conference shows to the world that you believe in the potential for renewable energy, and I share that belief. In fact I believe the potential of renewable energy has never been greater than it is now, never been greater at any time in history.
It's true that America has headed down this road before. When oil prices rise we begin looking for an alternative. Of course in the past when oil prices have normalized, interest in renewable fuels has declined. But ladies and gentlemen, we are not living in the past. Today we have more reasons to support renewable energy and more reasons to believe that it will succeed.
Why is it different today? Why do I believe that renewable fuels are gaining a permanent foothold in the energy market? Why will we not turn off the path to renewable energy this time? Well, the answer to these questions I believe lies in a combination of factors.
First, the enormous benefits of renewable energy are more recognized and appreciated by Americans today. I'm talking about benefits beyond a competitive price. For example, renewable fuels are environmentally friendly, producing fewer emissions of greenhouse gases than fossil fuels. Renewable fuels reduce our dependence on foreign oil, which contributes to our nation's security. And renewable fuels are often produced in rural areas providing a source of income for farmers and ranchers and rural Americans.
The second major difference is the new technology that is available to us today. We are getting far more bang for our buck when we produce ethanol which is the highest profile renewable fuel at this point in time. But many others are growing very fast.
Animal waste is being turned into methane gas, which is used to power generators. Biomass is being used to create fuels to generate electric power and to replace petroleum-based products such as plastics and chemicals. These techniques allow us to reduce unwanted pollution.
Additionally, research into wind and solar energies, it's advancing at a very impressive rate. But what makes me more confident in the potential of renewable energies is the third factor. It's the market investment that we have seen.
Let's start again with ethanol. Six years ago there were 54 plants in operation, which could produce a combined total of less than 2 billion gallons per year. Now today, ladies and gentlemen, those numbers have literally doubled. More than 100 plants now produce a combined total of close to 5 billion gallons per year. An additional 44 plants are under construction, which are expected to add another 3 billion gallons of ethanol to that growing total.
Now let's turn to biodiesel which has its own success story. The number of plants has multiplied by more than eight times in the last six years, from 10 plants in 2000 to 86 plants today. Another 78 plants are either under construction or they are expanding literally as I speak. This will increase our production capacity by more than 1 billion gallons of biodiesel per year nearing 2 billion. The energy market is highly competitive.
Numbers like these demonstrate a strong upsurge in interest amongst our investors. The market is ready to embrace these fuels.
Now of course there are still naysayers. I'd like to take on a few of their arguments if I could.
Let's begin with a claim that without government subsidies ethanol costs too much to be competitive with oil. Currently federal law authorizes a tax credit of $.51 per gallon for ethanol through 2010. It costs an average of about $1.10 to produce a gallon of ethanol. The average wholesale price of gasoline has risen to over $2.00 per gallon in 2006. At those prices, ethanol is competitive with gasoline even without tax credits. In fact, ethanol will continue to be competitive with gasoline so long as oil prices don't drop below $30 per barrel.
By all predictions, tight supplies and an increasing demand for energy will very likely continue to keep oil prices at a higher level. The Department of Energy has forecast that oil prices will even out in the long run at a level higher than $50 per barrel.
So while tax incentives encourage ethanol production, they certainly aren't creating demand that isn't there.
Another contention I've heard is that we aren't capable of producing enough corn, the raw material, to meet the demand for ethanol. Those who would make such a case, well they haven't met the same farmers who I've encountered across America.
The one constant in farming is change. And farmers have learned to adapt and to respond to market demands. If the skepticism is directed instead at the efficiency of farmers, again I point to the statistics that demonstrate just how efficient our farmers have become. The number of farm households responsible for the majority of cash receipts is half; half what it was just 20 years ago. And yet our grocery store shelves are not half empty.
Now consider this. These farmers account for only one-third of agricultural lands.
Well, how is that possible? There's just a single word answer to that, and it's "productivity." Just recently a top seed company announced that it's developing an experimental drought-tolerant corn seed that may boost yields in dry areas by an astounding 40 percent, not in the next lifetime but in the next few years.
Our economists, some of the very best in the world I would suggest, calculate that ethanol production could nearly double in the next five years without forcing us to choose between corn for food or for fuel. Actually corn used for ethanol creates a byproduct that makes great cattle and dairy feed. One bushel of corn used for ethanol creates about 17 pounds of the byproduct that is used for feed.
Looking years into the future, we understand concerns about competing demands for corn; that is, if we envision ourselves depending solely upon corn to meet the ethanol demand. But we have no intention of doing so.
Things like pecan shells, woodchips, switch grass, materials we call "biomass," are so important to this discussion. Cellulosic ethanol has the potential to help us meet this future demand. The naysayers will tell you that we're a lifetime away from being able to turn biomass into energy. But ladies and gentlemen, we're doing it today.
In fact as I speak we're fueling schools in the northwestern United States using some of these very products. We're accomplishing this through an innovative program called "Fuel for Schools." Woody biomass from our nation's forests is being used to heat and to cool schools. The Forest Service Program is now expanding beyond the demonstration phase toward commercialization. In fact there's a machine in the exhibit area of this conference that converts the woody biomass into energy. It's called the Biomax, and it holds enormous potential.
In reality the cellulose and biomass has the potential to create a great deal more energy than corn, and with each passing day we come closer to a cost-effective technique for releasing that energy on a broader scale.
See, for all these reasons I am sincere in my optimism about the future of renewable energy. But that's not to say that the bright future I envision is a guaranteed future. We must remain steadfast in our commitment to renewable energy research. Additional technological advancements are necessary to continue the renewable energy revolution.
We must build the infrastructure to accommodate renewable energy's transition to the mainstream and the main streets of America.
To that end, today Secretary Bodman and I have the pleasure of announcing that through our joint biomass research and development initiative we are awarding more than $17 million to fund 17 biomass research development and demonstration projects.
Developing renewable energy is a priority for the Bush Administration as demonstrated by grants like those I just mentioned and the vision that was laid out by the President himself that you saw this morning on the screen.
Last year he signed into law the first national energy plan in more than a decade. Recognizing the significant potential of renewable energy, the Energy Policy Act of 2005 provided tax credits for wind and solar and biomass energy. It included the first ever tax credit for residential, solar energy systems. And a few months later in his State of the Union Address the President announced his Advanced Energy Initiative, which calls for a change in the way, we power our homes, our offices, and even the automobiles we drive.
President Bush is committed to this issue, as you will hear tomorrow when he speaks to you. His Advanced Energy Initiative is a promise to America, a promise that our government will work hard to promote clean domestic sources of energy. And USDA is working hard to fulfill that promise.
Between 2001 and 2005, USDA spent nearly $1.7 billion on energy related programs. In '06 alone our economists estimate that USDA will spend more than $270 million on these programs. Our assistance includes research activities, energy-transmitting infrastructure developments, information distribution and financial and technical support.
Already we've seen the results from these important investments. Alternative energies are growing quickly. My hope is that before long we're producing 1 billion gallons of biodiesel per year.
We're on track to increase ethanol production capacity to more than 7 billion gallons per year in the very near future. In 2005, 14 percent of corn went to ethanol production. In '06 it is estimated that the number will grow by 20 percent. Demand lifts corn prices. In '06 the price per bushel is up 35 cents from '05's price, and that's good news for our ag community.
Ladies and gentlemen, mention was made of our Farm Bill Forums. Let me quote from a farmer in Iowa. He told me, "These projects helped Iowa farmers develop new sources of income. In addition to cutting costs, they increase our nation's energy security and they provide clean energy for all of us to use. They also provide jobs and rural economic vitality." I could not have said it better.
Renewable fuels help to power our nation. They provide income for rural America. They are gentler on our environment, and they offer an alternative to foreign sources of oil. Our challenge is to increase the production and use of alternative energy across this great nation, to maximize its potential so that renewable fuels are an economically viable and sustainable alternative.
Well I told you at the beginning of my remarks that I'm confident that we can make this happen. I know that with your continued cooperation, American ingenuity will prevail when the challenges are presented. We have started down the path towards a very bright future, a future in which we buy our energy by the bushel and not by the barrel.
The resources are available. The market interest is apparent. Your government is dedicated, and the technology continues to quickly evolve. This time we will not look back. Our sights are firmly focused on the future. Thank you again for being here today, and thank you for putting your energies and talents into achieving this great goal of energy independence.