Nearly four years ago, in March of 2001, I delivered my first major policy address as Secretary of Energy. It came at a time when energy issues, which only make it into the headlines when something really goes wrong, were suddenly very much in the headlines.

There were rolling power blackouts in California. There were looming shortages of natural gas and other fuels, which were pushing prices upward and putting pressure on an already-strained economy. And OPEC had just announced a one-million barrel-per-day cut in output.

But these were just the most visible problems. The energy challenges facing our country – and the entire world, for that matter – ran much deeper. And the headlines we have seen over the four years since, provide even more evidence that the world’s energy situation is a matter of great concern.

• A massive electricity blackout that knocked the lights out over large areas of the northeast and Midwest – and parts of Canada – in August 2003, which cost our economy billions of dollars over just a few hours.
• Similar power blackouts hitting major cities in Europe and other parts of the world.
• Record-high prices for oil, which escalated costs of gasoline, jet fuel and other petroleum products – straining family budgets and helping push airlines and other businesses toward bankruptcy.
• Terrorist attacks on petroleum facilities in Saudi Arabia, Iraq and other oil-producing countries that were clearly intended to disrupt the energy markets.
• Huge increases in natural gas prices that have had devastating effect on the chemical, pharmaceutical, steel and agribusiness sectors.
• A strike and political unrest in Venezuela, a nation that supplies more than one million barrels a day to the U.S. market, which sparked higher prices and recurring fears of supply disruptions.
• And claims by commentators that world oil reserves are hitting their peak and, someday soon, might start running out.

We are fortunate that the Bush Administration recognized the seriousness of the situation, and the President’s National Energy Policy — our country’s first in more than a decade — addresses many of the fundamental issues that affect our energy security.

The President’s plan represents a bold, effective strategy for addressing energy security and it deserves full support, including congressional passage of an energy bill this year.

But, in reality, we are just at the starting point of dealing with what I believe is perhaps the largest and most daunting long-term challenge facing the United States and every other nation over the next half-century or more.

People don’t often think about energy in such a profound way, but they should, because energy is the lifeblood of society. Energy drives the technologies that define our modern existence, like global telecommunications, instant information processing, space exploration and miraculous advances in medical science. And energy has been at the center of civilization’s advancement ever since mankind’s earliest days on Earth – when the cavemen first learned to use fire to cook food and keep warm.

As mankind’s use of energy evolved through the years, and the fuel mix eventually expanded from firewood to coal, we developed the steam engine, and the industrial age was born – and it transformed the way we live. The discovery of oil as a source of energy led to the development of cars and airplanes for a new age in transportation. The advent of electric energy ushered in instant lighting and air conditioning and refrigeration, and led to television and computers and countless other devices that once again transformed our society and the way people live and work.

With each succeeding age in human development, energy has played a larger and more vital role. And as society continues its march forward, our reliance on energy will keep growing accordingly.

And therein lies the problem.

Most of our major current sources of energy – fossil fuels like oil, coal and natural gas – are finite resources that are serving what appears to be an infinite demand. While we are certainly not in danger of running out of these resources anytime soon, they are getting more difficult to find and more expensive to produce, and their development is increasingly impeded by political opposition, regulatory constraints and protracted litigation.

In my remarks four years ago, I said that America faced a major energy supply crisis over the next two decades. And I said that failing to address this coming crisis would threaten our nation’s economic prosperity, compromise our national security, and literally alter the way we live our lives. All the subsequent data confirm my earlier predictions.

Let’s look at the numbers. In its latest world energy outlook, issued this past October, the International Energy Agency predicts that global demand for energy will rise by about 60 percent over the next 25 years, and that two-thirds of the increase will come from developing countries. The IEA also predicts that world demand for oil – to fuel the growing transportation sector – will increase from the current 82 million barrels a day to about 121 million barrels a day by 2030. The U.S. Department of Energy’s Energy Information Administration sees world electricity demand doubling by the year 2025, while the demand for natural gas climbs by 67 percent over the same period of time. The statistics are even more startling for the developing world, where electricity demand is expected to increase 125 percent by 2025.

The EIA also predicts that between now and 2020, the total increase in worldwide energy demand could average nearly 2 percent a year or more, with the developing world’s growth rate averaging closer to 3 percent per year or more. According to EIA, oil consumption could rise by up to 2.5 percent per year, with natural gas demand growing each year by up to 2.7 percent, and coal demand rising by as much as 2 percent.

Our answer to rising demand over the past decades has been to simply produce more energy. We have always managed to overcome supply shortages by finding ways to increase production and bring the prices back down. Hence, while the energy crises we’ve experienced through the years have often been inconvenient and economically painful, they have always been temporary.

Yet, I do not think it is too far-fetched to say that someday, the crisis might not be temporary. If demand keeps going up and political objections and litigation keep hindering production, this – combined with possible natural production limits – will indeed create serious problems.

Imagine a world in which energy markets are so tight as a result of these problems that energy prices are dramatically higher than they are today. Imagine if the cost of jet fuel significantly limited the volume and flexibility of air travel; imagine if gasoline were so expensive that recreational driving became a thing of the past; imagine if the cost of home heating – already a burden for many – were substantially higher than today.

Implausible? Not really. If we continue on our current demand path, our self-imposed supply constraints, along with natural supply limitations, will eventually impose harsh limits on economic growth and quality of life. It could drastically hamper the economies of the developing world and force profound changes in the lifestyles of ordinary people everywhere.

Consider oil. The United States produces about 40 percent less oil today than in 1970, while demand over the same period of time has increased nearly 40 percent. As a consequence the United States and many other nations depend increasingly upon imports. Back when the OPEC oil embargo touched off severe gasoline shortages in the early 1970s, Americans were importing about 36 percent of the oil we consumed. Today, we import about 56 percent, and – at our current consumption rate – we’ll be importing 68 percent by 2025. Also very worrisome is the possibility that someday the oil supply from those countries might be severely disrupted due to political instability, or might start running out.

The real and potential disruption of the oil supply is already being felt in the market, and the issue of declining reserves is no longer outside the realm of public debate. A study published in 1998 in Scientific American estimated that world oil production would peak in the decade between 2000 and 2010 – or right about now.

Authors of several recent books on the subject also worry that world oil supplies could soon begin to decline. Recently, we’ve seen speculation in news reports that some major Saudi oil fields might be hitting their peaks. And while the Saudi oil ministry has argued otherwise, the point is that the question is being seriously raised about how much more affordable, accessible oil the world actually has.

And the problem isn’t just limited to the oil supply. As I have mentioned, we are also anticipating enormous demand increases for electricity and natural gas in the years ahead. The challenges in these areas are just as significant as those facing the oil sector. Consider these facts:

• Nuclear energy provides 20 percent of America’s electricity, but the United States has not built a new nuclear power plant since the 1970s. If no more nuclear plants are built, that percentage will drop to 14 percent by 2025, and then to 10 percent and 5 percent and on toward zero by the middle of this century.
• Also consider that the demand for natural gas in the United States is expected to grow 50 percent over next 20 years – meaning that about 25 percent of our gas will need to be imported from outside North America. The only way to do that is with imported liquefied natural gas. But the United States has only four terminals capable of unloading and processing LNG. Many more terminals are needed, and several are planned. But those planned terminals, like so many other energy projects, are facing strenuous opposition.
• Consider too the impact of all the political opposition to energy infrastructure – protests and lawsuits against new coal plants, new power lines, new hydroelectric dams, and even clean, renewable facilities like wind farms – that delay much-needed projects, run up the costs, or cancel them altogether.
• Add to all this the fact that environmental regulations and other moratoria against offshore exploration and production of oil and gas are putting large and important domestic energy supplies off limits – making our country even more dependent on imports.
• Finally, consider, the added uncertainty of imprecise regulations such as the New Source Review requirements or future clean-air emission targets – uncertainty that significantly inhibits investment in coal-fired power generation.

Against that backdrop, let’s now consider what might happen if the headlines ever became even more somber or frightening than the ones I mentioned a little earlier.

• For instance, what if a natural or intentional act were to destroy a major U.S. oil refinery, or shut down multiple oil or natural gas pipelines or knock out part of the electric grid?
• What if we determine that world oil reserves are, in fact, significantly less than we previously thought?
• Or what if political instability or opposition to the West shuts down access to oil from one or more of the major countries we depend on today?

Earlier, I outlined the significant impact on lifestyles and economic growth that could result from failing to address our growing energy problems. But what if, in addition to those challenges, any of these other, even more serious, things happened? Then, we wouldn’t just be talking about challenges like high prices for gasoline, heating oil or plane tickets. We’d be talking about real shortages, real dislocation, and very serious social and economic consequences.

The bottom line is this: World energy demand is rising fast, and our current sources of supply are having trouble keeping pace. The energy infrastructure and energy sources are physically threatened as never before. Moreover, rules and regulations that impede production are making it even harder to keep up.

Every source of energy has opposition. People say it’s good to have more oil, but don’t drill for it here. Natural gas is great, but don’t develop it offshore, and don’t build any new LNG receiving terminals. Existing nuclear plants are fine, but don’t build Yucca Mountain and don’t build any new reactors. Coal is acceptable, but only if there’s no mercury or carbon dioxide emissions. Wind farms are fine, but only if the windmills are invisible – except to the bats and birds that might fly into the turbine blades.

Not a pretty picture. Now, add in the potential consequences of any of the catastrophic events I just described, and the prospects are truly devastating. Can our nation really afford to be vulnerable to this sort of risk? What must we do to mitigate the potential for sudden – or eventual – disruption or depletion of the energy supplies that fuel our economic growth and sustain our quality of life?

Today, I’d like to begin this discussion and outline some of the actions I believe we should take to address the challenges I have posed. 

Let me begin with some less controversial ideas. First, we absolutely must find ways to use our conventional energy resources more efficiently. That means we need a lot more public education on conservation and energy-efficient products. Not many people realize that about 30 percent of the energy in a typical American home is lost through inefficient lights and appliances and inadequate insulation. A serious commitment to increase awareness is essential.

We also need a lot more research on energy efficiency technologies, because one of our greatest potential sources of energy is the energy we currently waste. Solid state lighting is an excellent example of a new technology to boost efficiency. One recent study indicates that by 2020, solid state lighting – if it were in widespread use – could cut more than $50 billion a year in electricity costs. Funding this type of technology is critical.

Other areas that deserve research funding priority are vehicle technologies like hybrids, clean diesel and advanced combustion engines, as well as superconductivity and other means of more efficient electricity transmission.

Second, we really do need to invest in, and try to reduce the impediments to, the broader development of renewable energy. For example, wind technology has made substantial advances in both efficiency and in cost-competitiveness, and it is growing rapidly around the world. In the United States, wind-generation capacity has increased from about 2,500 megawatts in 2001 to more than 6,300 megawatts today. A recent study conducted for the Department of Energy found that offshore areas along the northeastern U.S. coast have enormous potential for wind-energy development, and – with sufficient investment and a reasonable regulatory structure – that up to 100,000 megawatts of wind power could be sited in those areas by 2020.

But despite the advantages of using no fossil fuel and producing no emissions, even wind energy is encountering political opposition both from animal rights groups and because people don’t like it around.

Consider the potential benefits of the proposed Cape Wind project off the coast of Massachusetts. Cape Wind’s 420 megawatts of electric generating capacity would offset up to 113 million gallons of oil per year and eliminate annual emissions of more than 4,600 tons of SOX, more than 1,500 tons of NOX, and more than a million tons of carbon dioxide. And the turbines would be so far offshore that they would only be visible about a half-inch above the horizon from the beach – and then only on very clear days. Yet, the resistance is significant. Projects such as this must be given the support they need.

Energy-efficiency and renewable energy technologies are popular and, comparatively speaking, relatively easy to move ahead. In other policy areas, the energy security solutions get harder to accomplish.

Nothing illustrates this better, of course, than the debate over oil exploration in the Arctic National Wildlife Refuge in Alaska. Opponents claim that vast tracts of pristine wilderness would be overrun with equipment and activity. But the proposed development in ANWR involves only a small patch of land – about the size of the grounds of the U.S. Capitol – in an area about as large as the state of South Carolina.

Opponents always base their resistance on concerns about potential damage to the land and ecosystems. But the drilling and transportation techniques that would be used are state-of-the art, designed specifically with environmental protection in mind. Events of the last year have shown that America needs the flexibility ANWR’s one billion barrels per day can supply and this year, Congress must finally end the impasse and open up ANWR.

In a similar vein America’s energy security is threatened by the regulatory limits on exploration in areas that hold vast reserves of natural gas. Natural gas demand is growing at a record rate – outpacing our current efforts to produce it domestically – which has caused wellhead prices over the past two years to soar 82 percent.

While environmental regulations have prompted most new U.S. power plants to be gas-fired, it’s interesting to note that while one set of environmental regulations promotes the use of more natural gas, another set of environmental regulations hinders gas production. In fact, it is estimated that federal land and offshore areas contain major gas reserves of at least 179 trillion cubic feet – with 72 trillion cubic feet of that in offshore areas – currently subject to moratoria.

While we certainly should take legitimate environmental concerns into account, we simply must come to grips with the fact that keeping these important energy resources off limits drives up prices and, at a minimum, erodes our national energy security. It also means we will soon be importing even larger quantities of gas from politically unstable parts of the world. Therefore, it’s time to seriously re-examine the regulatory policies that increase our dependence on gas imports.

As I mentioned earlier, our nation may need to import as much as 25 percent of our natural gas within the next 20 years. Meeting this demand will require new ways to get natural gas to the U.S. market, which means importing more liquefied natural gas.

As I have also noted, a significant number of new terminals will be needed to supplement the four U.S. LNG facilities that are in place today. But, here again, political opposition is a problem. Many of the people who have vigorously opposed other energy projects are now turning their attention to LNG receiving terminals, once again focusing on safety concerns.

But instead of allowing opponents to create mass panic with uncontested assertions, we must put the LNG safety issue into proper perspective. Liquefied natural gas has been around for about 40 years, and during that time there have been no serious accidents or injuries associated with any LNG tanker or in any LNG receiving terminal.

Without additional LNG infrastructure, our nation faces a much greater potential for shortages and high prices for the natural gas that has become such a key part of America’s energy mix. What we need is aggressive action. This is such a critical matter that I believe we should consider enhancing the federal role in the siting and development of new LNG facilities to ensure they are built, where needed, if efforts to site and construct more terminals continue to be thwarted.

Another fuel source we must fully employ is coal. We’ve got plenty of coal and we need to use it. So does the rest of the world. Our clean coal technology programs and carbon sequestration initiatives absolutely must receive priority attention. Opposition to coal and mining must be met forcefully for pragmatic reasons, but also with real and robust investments in the technologies that will continue to diminish and ultimately eliminate emissions.

Still another extremely important and necessary source of energy is nuclear power. Nuclear technology has made great strides over the past several years in terms of safety, cost-effectiveness and proliferation resistance and it must because a growing parts of our energy mix.

A study last year by Princeton University called for doubling the world’s nuclear power capacity as a means of offsetting the growth of greenhouse gas emissions. That is an excellent and worthy objective, and I believe we should set a goal of doubling America’s nuclear power capacity by 2030.

However, as we well know, no new nuclear plants have been built in the United States since the 1970s. This is both astonishing and alarming, given the unique benefits that nuclear energy offers – benefits no other major energy source available today can provide.

Foremost is the fact that nuclear power emits none of the pollutants associated with the burning of fossil fuels. Indeed, nuclear plants in the eastern part of the United States have made it possible for many states to meet the requirements of the federal Clean Air Act. Since the mid-1970s, nuclear energy has enabled the United States to avoid emitting more than 80 million tons of sulfur dioxide and about 40 million tons of nitrogen oxides.

Also important is nuclear power’s ability to supply electricity with no greenhouse gas emissions. The nuclear plants operating around the world today displace about 2.5 billion tons of carbon dioxide every year that would have been emitted using conventional coal-fired generation. That’s an extremely significant number when you consider that coal-fired power generation around the world currently emits 5.8 billion tons of CO₂ per year. Can any major lasting reduction in GHG emissions be achieved without nuclear playing a big role? I seriously doubt it.

These advantages make the need for more nuclear energy strikingly clear. But to maintain the role of nuclear power, let alone achieve the goal of doubling our nation’s nuclear capacity, we must take several bold actions. First, I believe the nuclear industry needs to move ahead with demonstrations of new reactor technology being developed by programs such as the U.S. Energy Department’s Generation IV International Forum.

I also believe that to offset the unique costs that will be associated with engineering and building the first few new-generation nuclear plants, we should consider a federal legislative package to help facilitate early construction.

I am not calling for massive on-going subsidies to the nuclear industry, but I do believe some federal financial participation is in order to help defray a percentage of the high first-time costs associated with new generation construction, so long as the industry agrees to build an agreed upon number of new additional units after the government has helped with the first few.

Such a federal assistance package also should strive to provide much-needed liability and regulatory certainty to the construction and operation of new units. I believe there are fair and reasonable ways to do this that we must pursue them vigorously.

A federal legislative package also should address the issues delaying construction of a permanent nuclear waste repository at Yucca Mountain in Nevada. Exhaustive scientific research has established the safety of the Yucca site, and Congress has approved the plan to move forward with the repository. Yet it continues to be mired in litigation and funding battles, despite the fact that utility ratepayers have already contributed more than $12.6 billion to the project.

The latest legal snag might be the most ludicrous of all – when an appeals court, while finding no fault with the EPA’s 10,000-year radiation standard, held that the EPA was required to issue, and the DOE to prove it could meet, a 300,000-year standard. This is a preposterous outcome, and Congress must take action to allow the government to proceed under the 10,000-year standard, so that we can meet our immediate nuclear waste disposal problems. Certainly the EPA, the NRC, scientists and lawmakers should be able to figure out over the next 10 millennia what standards and actions are needed in the year 12,010 A.D.

Finally, it is imperative that we also revive and refocus the public debate over nuclear power. The time has come for nuclear power’s supporters to actively engage its political opponents — especially those who also advocate controlling greenhouse gas emissions — in a constructive dialogue about nuclear energy’s environmental and economic advantages.

Shouldn’t nuclear energy’s ability to meet our growing electricity needs, while producing no CO₂ , SO₂ , nitrogen oxides or mercury, make it a key part of the debate? These environmental benefits make it simply unsupportable to simultaneously favor controlling CO₂ emissions growth and oppose nuclear power. Doesn’t it make much more sense for all sides to address nuclear energy’s issues and challenges, and look for common ground and ways to move forward?

Finally, to meet the intense energy challenges we face, it is critical that we intensify our pursuit of visionary energy technologies for the future. Ultimately, we must develop transformational technologies like nuclear fusion, as well as new technologies to revolutionize the way we produce and use existing sources such as renewables, oil from tar sands, methane hydrates and coal-bed methane.

In my view, the most promising futuristic technology is hydrogen. An economy based on hydrogen instead of petroleum would bring new levels of environmental performance and energy security to the world’s economies. Programs such as the President’s FreedomCAR and Hydrogen Fuel Initiatives, along with the International Partnership for the Hydrogen Economy, launched during our Administration’s first term, are excellent starting points.
 
Already, research has substantially lowered the cost of hydrogen fuel cells as well as the cost of producing hydrogen fuel, with the goal of eventually making hydrogen transportation technology cost-competitive with the gasoline-powered vehicles of today. We are also making major investments in developing clean hydrogen production technology. All of this is important. And what I have seen over the past four years makes me especially optimistic that we can make the hydrogen revolution happen. The key is to maintain strong support for this and other transformational technologies.

Four years ago, when I spoke about energy security and raised initial warnings about our energy crises, I was accused of exaggerating the problem. The same charges were repeated when the President’s energy plan was released in May 2001. It was said we were magnifying the problems in order to justify new policies. Unfortunately, those charges have played a key role in delaying passage of energy legislation and implementing key parts of the President’s energy plan.

And yet, the things about which we warned have taken place. A frustrating yet amusing pattern has ensued. As price spikes, blackouts, and other crises have subsequently occurred, many – including many of those who accused us of exaggeration – have demanded immediate solutions to our energy problems. Then as each crisis subsides, so do the demands for a response. And, thus, needed action — such as passage of an energy bill — is postponed. Until, of course, the next crisis occurs, and the pattern is repeated.
 
I am here today to say that we can no longer afford to delay. The challenges I have warned about are already upon us. The serious consequences of failing to act, which I have detailed, are being encountered — and will be even more severe in the not-so-distant future. These are not problems we can pass on to future generations.

The solutions I’ve outlined today will help us meet these challenges. They, and the ideas of others, deserve to be discussed and addressed now.

Ultimately preserving our energy security will require a commitment of vast financial and scientific resources, intense international cooperation, unyielding political courage and a lot of common sense. And, above all, moving our world into a new energy era will require human creativity.

Sheik Zaki Yamani, Saudia Arabia’s oil minister during the OPEC embargo 30 years ago, is often quoted as saying, “The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.”

What Sheik Yamani foresaw when he made that statement was probably not so much the finite nature of the world’s oil supplies, as the infinite capacity of human creativity. I believe that human creativity can indeed bring us new sources of energy that we haven’t even dreamed of yet. And they likely will arise from areas of study that we are now only beginning to understand. Our research into nanotechnology, for example, might unlock the secrets to developing materials and processes that could make production of hydrogen and other future energy sources more practical and cost-effective. Our research into human genomics might open the way to developing microbes that can produce renewable fuels or consume pollution and radioactive waste.

It’s often said that necessity is the mother of invention – and history has repeatedly shown that human creativity is at its best when we face our greatest challenges. And so, just as human creativity and dedication developed the Manhattan Project, cured diseases like polio, and landed a man on the moon, I believe we can also find the answers to the world’s energy problems – hopefully before an economically crippling crisis leads us to a time when the lights really do go out.