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Diplomacy in Action

Remarks to the American Jewish Committee's National Energy Committee


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Robert F. Cekuta
Department Principal Deputy Assistant Secretary, Bureau of Energy Resources
Washington, DC
May 2, 2012

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Thank you, Henry, and let me thank the American Jewish Committee (AJC) very much as well for organizing this event and for offering this opportunity to talk with you about improving America’s energy security.

Since President Obama took office, U.S. domestic oil and gas production has increased each year. Our reliance on foreign oil has decreased, and that trend is expected to continue thanks in part to the historic fuel economy standards established by President Obama, effectively doubling the efficiency of the cars we drive and saving consumers thousands at the pump. In 2009, the United States produced 5.3 mmbd. Current U.S. crude production is 6.1mmbd, a figure which is equal to the production we saw at the close of 2011, when U.S. crude oil production reached its highest level since 2003. The 6.1 mmbd U.S. production figure is also an increase over 2010 levels by an estimated 120,000 barrels per day.

Another important fact: U.S. dependence on imported oil fell below 50% in 2010 for the first time in more than a decade. We have seen U.S. oil imports dropping since 2005, and net imports as a share of total consumption fell from 57 percent in 2008 to 45 percent in 2011 – the lowest level since 1995. Moreover, U.S. natural gas production grew by more than 7 percent in 2011 – the largest year-over-year volumetric increase in history – and easily eclipsed the previous production record set in 1973.

For my part this afternoon, I would like to sketch out steps which the United States is taking today to reduce these imports and to look at these steps as part of an overall effort to boost the United States’ energy security and economic well-being. After these remarks, I hope we can have some time for questions and discussions on this important foreign policy issue.

Let me first of all note something Secretary Clinton has said: “You can’t talk about our economy or foreign policy without talking about energy.”

Putting this statement into practice, the Secretary, as part of the Quadrennial Diplomacy and Development Review, established a Bureau of Energy Resources in October 2011. The Bureau is designed to unite U.S. diplomatic and programmatic efforts to build sustainable, transparent, and predictable international markets for conventional and unconventional hydrocarbons, civilian nuclear power, and electricity, to promote renewable energy, energy efficiency, and to increase access to energy and encourage good governance and transparency in the energy sector. All of these factors advance our national security interests, and those of our allies, advance our environmental goals, and advance a strong national and global economy.

The Bureau of Energy Resources takes a broad view of what is integral to U.S. and global energy security. Doing so means focusing on three areas. The first is what we have traditionally thought of as energy security, going back to the days of the Arab oil embargo and before: the flow of traditional hydrocarbons, in particular oil and gas. Hydrocarbons today still make up 85% of the world’s fuel resources. We continue to use our diplomacy to ensure that access to oil, gas, and coal is adequate, reliable, and affordable. However, we need to be aware even this

traditional aspect of energy security is changing as new markets and new technologies alter the traditional energy landscape. For example emerging market economies such as China and India are driving tremendous growth in the world’s demand for resources. New technologies – shale oil in North Dakota or the revolution in unconventional gas – and new producers, such as Brazil or countries in East and West Africa, are affecting the supply picture. The realities of climate change are also a factor.

The second focus of the Bureau of Energy Resources and its work to promote energy security is on the energy of the future. The focus here is on the opportunities that clean and renewable energy offer, whether to the United States and other established industrialized economies looking to advance their energy security and to meet the challenges posed by the realities of rising CO2 emissions and the concerns about climate change, or to other countries looking to develop or to cut their bills for imported oil.

The President has frequently cited the opportunities and benefits these technologies offer. American companies are world leaders in wind, solar, hydro, power transmission, efficient generation, and smart grids. The scale of this market is huge. The International Energy Agency estimates that the world will see $5.9 trillion – yes trillion with a “t” – in new investments in hydroelectric and other renewable power between 2011 and 2035. Those numbers come on top of the $2.8 trillion that will be invested in coal-, gas-, and oil-fired power plants around the world during those years, and $1.1 trillion in nuclear power. This shift to renewable power is market- driven and is unprecedented in history.

In this focus on the energy of the future, an important source will be boosting energy efficiency. Raising Fuel Economy Standards, for example, is part of this effort to use less energy, to use energy more wisely. Taken together, the Obama Administration’s standards for cars and light-duty trucks span model years 2011 to 2025 and represent the first meaningful update in over three decades. Under this program, average fuel efficiency will reach a performance equivalent of 54.5 miles per gallon by 2025 and will save consumers $1.7 trillion at the pump over time – or roughly $8,200 per vehicle – and reduce oil consumption by 2.2 million barrels a day by 2025.

There is a third focus in addition to the energy world that we have long known and the energy world of the future – that is the access to energy for the 1.3 billion people around the world today who do not have it. We are already seeing the effects of expanding access in those who only a few years ago had no access to energy in Brazil, China, India, or the other rapidly industrializing economies have had on global energy markets and the expectations regarding supply and demand.

Energy is an essential component for development. We often forget this, but we can see this in how and where factories and businesses first developed in the United States. The first textile and other mills were established along the Merrimack and other rivers of the Northeast because they were the source for powering machinery in the late 18th/early 19th centuries. The need for energy is core today for manufacturing, commerce, and our daily lives, but in today’s world, energy is also essential for providing health care – cold trains for vaccines or basic diagnostic equipment cannot work without electricity – or for the communications sector and how this shapes even the most basic of human activities. Think about the use of cellphones in

countries around the world for fishermen to identify which port to put in with the fish they have caught or where the best markets are for their produce.

But a country being a source for energy, for oil and gas, can also bring challenges, especially when the proceeds from the oil and gas sector are not used for the benefit of a country’s population.

The energy sector all too often provides great opportunities for mismanagement and corruption, and has fueled bad behavior in too many countries to name. The United States continues to be a leader in transparency, accountability, and good governance in the energy sector, and in promotion of these important values around the world. As Secretary Clinton underscored in recent testimony, the State Department will use its full diplomatic capabilities to encourage transparency in the extractive industries around the world.

To that end, as part of our overall efforts to focus attention on good governance in this sector, we have significantly increased our engagement on one critical aspect of good governance – transparency. In March I joined the EITI board on behalf of the U.S. government, elevating our engagement with that institution. The EITI has come so far in just a few short years of existence, and is quickly becoming the global standard for transparency in the extractive sector. It is providing a means for people in the countries that have signed up to see how much money their governments have earned from oil or other extractive industries. With this knowledge, the people in these countries can hold authorities accountable, and they can utilize the resulting transparency to help fight and prevent corruption.

President Obama announced last year the United States would pursue becoming an EITI compliant country, the second industrialized country after Norway to do so. However, as you also know, EITI is not the only extractive sector transparency effort the United States is undertaking. The Cardin-Lugar Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act requires companies that file reports with the U.S. Securities and Exchange Commission to disclose payments they make to foreign governments in the extractives sector. When the final rules are issued, we will work closely with our embassies around the world to explain to companies and governments how this law will be implemented and what it means for them. We will also engage with the European Union and others who we hope will consider similar rules. Our goal is to create a common platform for transparency across the globe.

The State Department is also working hard to help countries that are developing their energy sectors do so safely, responsibly, and accountably in all aspects. Better technology, innovative approaches, and changing economics have brought the potential for oil and gas development to new countries and regions of the world. This expansion has the potential to bring tremendous benefit to those countries, as well as to global energy markets. In order to compete in the global economy, countries – or rather the companies, entrepreneurs, academics, NGOs and governments of those countries – must understand the resources they have and how they can be exploited responsibly to the maximum benefit of their population. The State Department’s Energy Governance and Capacity Initiative (EGCI) works with emerging conventional oil and gas producers by providing technical advice and engagement on a range of

issues related to energy sector management, including legal and regulatory reform, technical capacity development, and revenue management.

This initiative supports a broad range of U.S. foreign policy objectives, including ensuring the security of global oil and gas supplies, supporting clean energy goals by maximizing the efficiency of oil and gas resource development, furthering political and economic stability in developing countries, promoting democracy and human rights, and combating corruption.

Thus, the State Department and the U.S. government as a whole is pursuing what President Obama has repeatedly stated is necessary: an all-of-the-above approach to American energy security. This all-of-the-above strategy aims at reducing our reliance on foreign oil, saving families and businesses money at the pump, and positioning the United States as the global leader in clean energy.

The United States will keep relying on responsibly produced oil and gas in the near future, but over the long term, the Obama administration is committed to a policy that allows us to transition from oil towards cleaner alternatives and energy efficiency. While there are no silver bullets for meeting our energy needs, we’ll continue to build on the progress we’ve made over the past three years. Through a sustained, all-of-the-above approach to American energy we will continue to reduce our reliance on foreign oil, and create an economy that is sound and sustainable.

The Administration has made the largest investment in clean energy in history and the United States has nearly doubled renewable energy generation since 2008. Last year, according to industry experts, the United States reclaimed the title as the world’s leading investor in clean energy technologies. Through initiatives such as the 1603 Treasury program, which partially reimburses the cost of renewable energy installations, and the Production Tax Credit (PTC), which provides a tax credit for the production of utility-scale renewable energy production, more specifically providing an income tax credit of 2.2 cents per kilowatt-hour for the production of electricity from utility-scale turbines and 1.0 cent per kilowatt-hour for bioenergy, geothermal, and efficiency upgrades to existing facilities during the first 10 years of operation, the Administration has dedicated itself to encouraging the growing clean energy economy. In addition to these tax programs, the Department of Interior has worked to make public lands accessible for renewable energy projects as well as working to improve the safety and reliability of offshore oil and gas production.

It is important to note as well that building on the $4.5 billion in Recovery Act investments in smart grid technology demonstrations and deployment, the Administration published a smart grid policy framework in June 2011 and has invested more than $150 million in smart meters, grid sensors, control systems, and other smart grid technologies in rural America.

Moreover, since October 2009, the Department of Energy (DOE) and the Department of Housing and Urban Development (HUD) have completed energy upgrades in more than one million homes. The Department of Energy’s Weatherization Assistance Program alone has

completed energy efficiency upgrades in approximately 860,000 homes across the country. On average, these upgrades save American families more than $400 on their heating and cooling bills in the first year alone.

Let me conclude by saying that the goals and initiatives I have discussed are all part of the U.S. government’s goals of increasing global energy security and promoting economic prosperity. The steps are not just for governments; citizens and the private sector have essential roles in building a secure energy future as well. In some cases, the steps may seem mind boggling. As I noted earlier, the IEA forecasts that the world will see $5.9 trillion in new investments in hydroelectric and other renewable power, $2.8 trillion in coal, gas and oil-fired plants, and $1.1 trillion in nuclear power between 2011 and 2025. But let me also note, there are important steps we can take that do not have such huge price tags. Investing in technologies such as energy-saving light bulbs and other appliances can also help in our efforts. So can investments in new, more energy efficient technologies. The bottom-line is that energy security remains an important and basic concern, something we can all take steps to help achieve.

Thank you very much.



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