Remarks at the Renewable Fuels Association's 13th Annual National Ethanol Conference

Assistant Secretary Alexander Karsner's remarks to the 13th annual National Ethanol Conference in Orlando, Florida

February 26, 2008

Transcript by Federal News Service, Washington, D.C.

I can't say enough good things about Bob Dineen. Look at this crowd; I wasn't expecting this. This was a big meeting last year—I think it was the biggest one that I had a chance to address.

I'll tell you a funny story. I was working on the speech last year at the very last minute trying to get all the things in, because I knew what was in the State of the Union and I knew what we had to get through Congress. And we were typing it in the business center at the last minute after we had the executive board meeting for breakfast that day, you guys will remember. And I was up at the stage, and Bob was giving the intro, and I was behind a curtain like that, and I dropped all the papers. And they weren't numbered.

And he was finishing his intro, and I was grabbing the papers, and it was the most disheveled and disorganized I came to a speech. And I got up to the podium, and I thought, to hell with it, I'll just speak from the heart. And it was the only standing ovation I got all year. So thank you all for that. Thanks.

They call Bob "Reverend Dineen" back in Washington. As you all probably know, I call him "Brother Bob" because we don't usually get a chance to meet and have lunch and sit down. We're usually on the stump together. We're at hearings together. I think we testified almost 20 times together to get the Energy Independence and Security Act passed only one year from the time the president first called for it in the State of the Union—a 20% reduction in our gasoline consumption within the decade. Nothing that big in this country, or any country, has ever been tabled with that ambition in size, in scope, in time table.

And within a year, because of the leadership of this organization uniting people on the left and on the right, and uniting them with their common sense, and sense of mission, and urgency, we didn't take a decade that it took to get the Energy Policy Act in place, and the smaller RFS we are currently operating on less than a year later. Bipartisan legislation signed, and you should congratulate yourselves for that.

And what a year it has been. Think of all the things that have changed. I have tried to do the little micromanagement things, the legacy things that Bob talks about—rebalancing our portfolio of technologies, diversifying hydrogen and plug-in fuels, plug-in hybrids, electrons and protons, and flexible fuel platforms and onboard efficiency to allow the carmakers to achieve record new vehicular efficiency targets the first time that we have ever moved CAFE since CAFE was introduced.

But above all, with the things that you all face, think of the things we have achieved together. We have defined and crystallized the problem with poignant language never before used in this country, and used by the president of the United States during his most important address to call it out for what it is: an addiction to oil. And beg the cure, beg the need the overcome it. And there are people who say that the cure itself is more harmful than the addiction.

We're going to talk about that in the course of talking about a changing climate of dialogue, because that is the theme of your conference. But we have got to do more than change the climate. We have got to change the quality and the substance and the depth of the dialogue, to ensure that all the facts are on the table with veracity and validity, and all the sources and assumptions are accounted for, so that this nation can proceed to lead the world into an intelligent debate about the way biofuels reduce our greenhouse gas emissions, reduce our carbon footprint, enhance our environmental sustainability, and have an imminent and inevitable role in benefiting our quality of lives as we improve our energy security.

We got it onto the president's desk. We defined the problem. We defined new technological pathways. We committed, in this last year alone, no less than a billion dollars. Now, proportionality and perspective would tell you that it would take me 40 years and a billion dollars to get to one oil company's annual profits last year. So, we've got to keep things in perspective.

But we should also note that the president's five-year hydrogen fuel cell initiative was $1.2 billon, and we committed a billion dollars to parallel paths of investing in next-generation cellulosic biofuels advances to see that we commercialize them at scale by 2012, and begin to replicate them and proliferate them so that we can have a smooth transition from edible and existing conventional sources, even as they become more efficient. We begin to transition to next-generation sources that will take us higher and fulfill the mandates, which are now in law.

We did all these things together, and in doing so, we committed with force of law, for the first time as a nation, to long-term objectives, Apollo-like metrics, 20% by volume within a decade—not aspiration, not rhetorical, enforceable by law. And there are folks who weren't happy with that law being put into action. And their happiness won't abate now that the law is being implemented. But it is time to bring everybody around the table to figure out how we, together, enable everyone to profit from what must be tantamount to the national and global good. And that is really where the Department of Energy is now focusing its efforts.

There are so many reports out on these things. I read lots of them. I'm a junkie for what is going on with climate change and energy security. It's endemic to what I do. But whether you read Hewlett Foundation or the Pew Foundation or the Nobel-winning IPCC report or the McKinsey report on what cost for climate change—all of these things tell us the same thing. Acting with a sense of urgency is not optional. Diversifying away from a carbon-based economy is not a luxury up for discussion.

So even as we begin to optimize the way we produce renewable biofuels, we have to bear in mind context is important above all. We must disrupt the status quo, and we must do it with continued and sustained focus. That is where the president is trying to lead us. I have every confidence that that is where the remaining presidential candidates will lead us as well. We have a great base to build upon. The growth rates have been enormous. And we have to pay attention to the detail as we begin to penetrate marks in new ways.

The report I like to quote the most is from an odd source for many, but is actually quite credible for many of you who participated in this room. It's the report on the hard truths that actually came out of the Petroleum Council. It was cosponsored by DOE earlier this year. There were some unique things in that report. It basically acknowledged, for the first time, that this isn't just about drilling our way out of our problems. Enable more drilling, and we'll find more solutions. For the first time, the Petroleum Council tabled a report that basically indicated that our risks to conventional energy production from the conventional fossil fuel economy have never been greater. And those risks are not going sideways, they are not going down, they are escalating. There is almost no scenario where demand stops outstripping supply between now and 2030. And we have to answer for that.

Something else the Petroleum Council indicated for the first time is that efficiency had to become a priority in accompanying our search for new sources. And of course that makes sense. They also indicated that consistency in carbon policy might be desirable to affecting this general equation. The committee was chaired by none other than Lee Raymond, the ex-CEO of Exxon, a known great apostle of climate change. And so, when you span the range of data that is now on the table all across the sources that are now contributing, and they all tell you the same thing—that we have to act, and act with urgency. The things that we are doing right now, the clear conclusion is they are not temporary.

It is nothing but a catalytic startup to the eminent drive that government must have in a sustained multi-generational way to partner with you and your efforts on research, on development, on lowering the cost curves, on accelerating market penetration, on growing with new sustainability standards that effectively and continuously unleash market forces for you all to invest predictably in new technology as it arises. That is the relationship you have had and begun with this administration. That is the relationship I predict for you will continue through many administrations—Republican and Democrat—for years to come.

We have made so much progress since 2001—where the administration began, when the prices were in excess of $6 a gallon for cellulosic next-generation biofuels. Today we rate them, even with plug-in numbers that we think are conservative and on the high side, at about $2.40 a gallon at the laboratory and bench scale. It's not a question of "can we do it," it's a question of how much can we do profitably, and at what frequency, and when do we begin the acceleration curve and reach the inflection points that begin modifying the existing facilities, utilizing the balance of the corn plant to become more efficient, utilizing waste streams to have less competition with edible food sources. These things have a sense of inevitability. The folks at this table have been investing in the technology. So many of you in this room—more than 100—applied for many of our detection 932 grants, for the EPAC provisions; many more— 140—applied for the loan guarantee programs. So the stakeholders have announced themselves.

The interest in new technology and partnering with the government to lower the cost and find profitable pathways is quite clear. We're doing all of these things, no longer sequentially. We're doing them in parallel pathways, both the 932's commercial-scale facilities that we're standing up that take two to three years to construct—many of which are moving ahead of schedule. Range fuels broke ground in November. I think it's moving ahead this week with financing announcements. The negotiation is proceeding with most of these facilities that we expect to come online in the next 24-36 months, cumulatively representing almost 130 million gallons of cellulosic-produced biofuel for first rounds, giving us the models.

We're also doing the 10% scale that gives us more flexibility and agility to try different feedstocks, with innovative technological platforms and biochemical and thermochemical routes that we can validate. There is so much good going on, and I am so grateful for the partnership of this organization.

Of course, we also have a parallel effort going not just within my program, the Office of Applied Science, but $405 million was dedicated last year to three bioenergy research centers from the Office of Basic Science, where one can aggregate the greatest minds in this country—and, in fact, in this world—to centers around the nation of universities and entrepreneurs and companies and scientists and national laboratories; great centers that have become the focal point of the discussion on how the advances in genomics will affect this, how we can more efficiently unlock the C-5 and C-6 sugars that we'll be talking about with the enzymes awards today.

And all of these centers, I am pleased to announce—with the collective database and knowledge of years of federal research, of innovators on the cutting edge—is open to anybody in the media who cares to take an investigative look at what the whole set of facts are.

We invite you to our 17 national laboratories, which are treasures, in the same way that we invite the Chinese and the French and others worldwide that recognize Nobel-leading leadership in biofuels, with both public- and private-sector stakeholders and participants. We invite you to be more investigative, look under the hood, get all the facts. Don't publish things that are sensational for the sake of hard copy or the news item of the moment. Find out what new penetration of biofuels means to this economy, to our security, to our planet. We will make it easy for you and give you as many scientists' papers, dialogues, debates, discussions as are worthy to be entertained in a new era of eroding our addiction to fossil fuels and greenhouse gases.

We've accomplished so much together; that's clear. And why I keep referring to transition in the time ahead, this is ultimately the time you do it.

I was with George Shultz. He said, Karsner, there is no such thing as a lame-duck administration. It's a construct of the media and the imagination so that people can pay attention to the next election. Your power doesn't diminish. Your capability to function administratively doesn't diminish in any way right up until January 20th.

The most productive period George Shultz had as Secretary of State after seven years in office was when they began to call him a lame duck. And so I was quite inspired by Secretary Shultz who, by the way, is a big backer and enthusiast of your industry. Quite inspired to take up this time ahead, and to tell you we don't intend to let up one bit.

I think you will hear the same from my colleague, Tom Dorr, tomorrow. You'll hear it from other agencies and other people who are visiting from the federal government—the department of Transportation, the EPA—dare I even say the IRS is present? I saw that somewhere on the schedule.

We can't let up precisely when it is time to accelerate, precisely when it is time to do more, and not recognize this period of time as an aberration, but rather as the catalytic moment of change, of commitment, of an unswerving, legally enforced path forward.

You all have to rise to the challenge. You have to continue to invest and develop with the confidence—I'd go so far to say the confidence that is our birthright, that we can innovate a better future for our families and for our nation and for our world. That's why I love speaking to this group. That's why I like going off-script. I look around the room and instead of having theorists or people who only have dreams about what ought to be, instead of having people who just blindly take action with no connectivity to what the dreams of the nation are, Bob, you've got 2,700 people in here who are doers that are dreamers, and dreamers that are doers. And you are the agents of disruption that the nation needs now, and we will be with you every step of the way.

I'm very pleased to announce today that amongst you doers, there are four companies that I would like to stand up and be acknowledged if they are represented here, because I have an opportunity to award $33.8 million more to support the development of commercially-viable enzymes, which is the key step to bio-based production of clean renewable biofuels like cellulosic ethanol coming to our cost points by 2012.

The four companies we've selected, and I hope you all could stand and be recognized by your peers, are DSM Innovation of Parsippany, New Jersey; Genencor, a division of Danisco from Palo Alto, California; Novozymes of Davis, California and Franklinton, North Carolina; and Veridium Corporation of San Diego.

Thank you for your leadership in helping us break down processed biomass into fermentable sugars. It's one of the most major challenges that we have. And lowering that cost, as Novozymes and Genencor have worked with us previously, has been instrumental into lowering the price by a factor of three, and it will be instrumental in reaching scalable models of process integration that allow for more broad production, more efficiently of the fermentable enzymes. Targeted research projects like this at DOE are pushing the science past the economic inflection points and making a real difference in speeding the availability of these technologies into the marketplace.

When we say we want to achieve these commercial-scale models by 2012, that is not an aspiration or a punt; that is a business plan with measurable milestones and metrics that we are adhering to and, in fact, have bent the curve and are ahead of. If your company isn't presently investing in next-generation biofuels to complement the existing sources that ultimately these have to be built on the back of, you need to get in the game. Most of you already are. Most of you understand the imminent growth opportunity that faces us.

It's a truism to call these things domestic fuel. For a long time, we thought domestic fuel and ethanol meant E85. I love E85. And I love governors like Tim Pawlenty and Senator Norm Coleman whom I had dinner with last night, who do their utmost to see that their states are leaders in E85 retail distribution. We need more of it. But it is not the exclusive pathway. We are going to try and remove all the obstacles.

We were very successful in removing many of them at the pumps and at the gas stations, relics of policy and thinking past that impeded the proliferation of E85. But to achieve these massive volumetric goals, we have also got to come to the realization that there is a whole world of blends between E10 and E85. And the government has an assertive role in assuring the validating, the testing, and ultimately, should these things prove out, the certification of midlevel blends as an indispensable tool to get biofuels into the marketplace in an uninterrupted, continuous, and consistent way.

I was better without my notes, I think. Sustainability is a big issue. We don't ask for much on that, except that you partner with us, that you lever your resources so that we can amplify the messages with clarity and truth.

Sunlight is the best disinfection. We should not have a fear in the world about accommodating and integrating a dialogue about climate change, about environmental impacts, about direct and even indirect land use. These studies that compel a dialogue, and a debate, and a deepening of discussion should be welcome among this group—because with that dialogue, if we weigh in with the totality of facts, if we get balance in the way that public media decides to look at the totality of facts, inevitably in the context of the entire equation, we have an industry here that is beneficial and getting better every day. But you've got to tell the story. You've got to make sure that people understand the story.

This is not a local industry anymore; this is an industry that the whole world is watching. I had the honor of representing our country in Bali when the United States rejoined a consensus and formed something called the Bali roadmap that set a timetable and metrics—24 months to achieve, in 2009, in Copenhagen, a post-2012 global framework on climate change that would include all the nations of the world—United States, China, Russia, Australia, Korea, everyone.

And since then, the president has had us involved in leading a major economies process, involving the 15 countries that constitute 80% of the world's GDP in excess of 80% of the climate change emissions. And your industry is front and center in that discussion.

And for good reason—Kyoto doesn't do a lot about transport emissions. The fastest growing source of greenhouse gas emissions on earth today, with no real abatement in place other than fuel substitution and efficiency, the things you all are working on, is not a major component of the existing treaty that will be displaced. The United States has a technological, commercial, scientific leadership role, and the rest of the world is willing to engage us. And the people in this room are the definition of who will be at the table to actually verifiably quantify how we make this world a better and more habitable place.

Do not fear the forthcoming discussion; expect it, anticipate it, engage in it, utilize the facts, the scientists, the laboratories, the stakeholders, to make sure that you are galvanizing the whole set of truths.

Some of the things we've been doing, we've been doing for years. Of course, I can't compete with CNN's love affair with Dr. Pimentel's work; that's for sure. I'd like to. I'd like to invite Miles O'Brien into our national laboratories to see how cellulosic biorefining is produced and how the well-to-wheels calculation is done with the scientists at Argonne Laboratory. I'd like to explain what the regional biomass energy feedstock partnerships that we've done with USDA and the Sun Initiative Five Climatic Zone grants do with universities to examine varying climatic conditions and soil types and water quality and land use. I'd like to make sure that part of the discussion is tabled.

I'd like to make sure that people understand that we are collaborating in partnership with Conservation International, a renowned global NGO on direct and indirect land use for biofuels, and how we plan out and sustain the future of that growth; how we're performing lifecycle assessments on soil and have already done the studies to demonstrate how 60 billion gallons is possible without affecting the CRP land at all, up to 30% by 2030 using biofuels; the collaborative effort with states and DOE and EPA and USDA and DOT and the growers and the environmental organizations on a U.S. national bioenergy GIS mapping tool and atlas to demonstrate how we get to environmental quality. We want that story told.

Why isn't that what's being investigated? Those are the things that I'll be asking at my press conference today. Those are the invitations we'll be issuing, but your voices are more important than a transient political appointee's. You have to engage our national laboratories. You have to tell the story.

I was in this town a week ago—great weekend with my kids at Disney, no place I'd rather be because I get to teach them about Imagineering That's one of the greatest phrases I've ever heard. Imagineering.

So the kids are at Disney and we're going through the experimental prototype community of tomorrow, EPCOT. And there at EPCOT is Live Green, Go Yellow. And that's a good thing, over at the GM booth, kind of on the side a little bit. You ought to have to walk through it.

But over in the big pavilion called Universe of Energy that Exxon pulled out as a sponsorship almost a decade ago, I'm told, there is a lonely, dated video of Ellen Degeneres taking you through fossil fuels creation with the dinosaurs. And the dinosaurs are very cute and we need fossil fuels and, you know, the stuff isn't ready for a long time. And I thought, this is the worst information message. Thank God the kids aren't with me as I ride through Universe of Energy. And the other thing I thought is that you all need to get together and take over the Universe of Energy. You ought to own that EPCOT pavilion. We ought to be telling this story.

The last thing I want to emphasize to you is that we have a role in more than the science. Government has a role and partnership with you to get to outcomes that are good for all citizens by removing existing barriers. I've already touched on blends. We know the existence of blender pumps and technology are there. We know that there's no big technological revolution, why a flex fuel widget ought to even be called technology. We expressed, on the record, that every American ought to, at a minimum, have the option to have whatever car he or she wants to be flex-fuel modified for cheaper than the cost of mud flaps.

Every automaker that serves the U.S. market, irrespective of the policy benefits coming and going with regard to efficiency that keep us constrained—that's Washington inside talk for saying, the old policies aren't any good for that goal of ubiquitous penetration, coast to coast, across the fleet of flexible-fuel capability that is necessary for national security. We need new things to make sure the automakers are made whole as they make our fleets flexible. I hope we can work together on that. It's so important.

Every car we put out for sale every day, of the almost 17 million annually in this country—every one of them that doesn't have flex-fuel capability costs us 17 years of waiting for an intelligent, secure, uniform, ubiquitous car part that can take the 30% biofuels we anticipate to be on the market. We have to work together. More than that, we need to recognize that blends can be made to work in a way that they can be warranted. And the testing has to bear that out. And on this we have to work together.

The oil companies have to work together. The car companies have to work together. The biofuels industry has to work together. We have got to not lose sight of prospective and proportionality and context with the great challenges that we face today. Removing market barriers means understanding that the existing conventional biofuels, predominantly ethanol, growth in this country is a good thing to stimulate the economy, to abate the challenges we have with national security, to abate environmental degradation. It is a good thing because you don't get to choose your ethanol. It's a chemical property.

We want to produce it better and more efficiently, and we are working together to do those things on timetables and metrics. And now with force of law, people are modeling out scenarios that aren't even legal. I mean, the existing growth that you have down in the last 36 and 48 months that has resumed this nation's rightful leadership as the biofuels leader worldwide—congratulate yourselves, absolutely—is indispensable to creating the terminating facilities and distribution and retail outlets and market penetration for the inevitable new technologies which must be smoothly transitioned and built upon the current growth rates. It seems obvious to me.

There are other people who say, you don't start until you start with the other stuff. The perfect is the enemy of the good. The good right now is not transferring my parents' generation of wealth accumulation to people who are hostile to our security and our interest.

The good right now is recognizing the environmental benefits we gain, not against just the future technologies which are better, but against the incumbent technologies which are unequivocally worse. There are easy things we can do. I'm going to ask Bob to give me a list of the top 10. What's on his mind? What's on your mind? What do we need to do with the remaining time together?

We have got eight states that still need to modify a T-50 spec to ensure that they get to maximum penetration of E10. There are easy things we can do. We talked about that yesterday at the governor's meeting in Washington. There's a lot of progress that lies ahead, and you all will be our partners every step of the way.

One of the most important things we've done is not just energize the agencies, but reconfigure our organizational and institutional approach to problem-solving for the things that need to be done to remove the barriers and accelerate the technology and improve the marketplace. Tom Dorr, who is so passionate about this issue, has been my valued partner at USDA. You will hear from him tomorrow, but we together co-chair something called the Biomass R&D board. And Tom and I decided at the outset—let's elevate it. Let's do something unprecedented.

Let's make it all presidential political appointees from the sub-cabinet or higher—the director of the National Science Foundation, the head of the Office of Science, from Agriculture and EPA. We involved DOD, and the Department of Interior, and BLM, and the Department of Commerce and Treasury to talk about tax policy and finance, and OMB, and the White House, and the Office of Science and Technology and the President's Committee for the Advancement of Science and Technology.

Get all of the stakeholders across the room to focus on you. How do we make you successful with the right attributes that are clean and domestic and secure and abundant and available and cost effective? And we've made enormous progress. And those institutional legacies will stay behind and hopefully be energetically administered.

Since I spoke last year, we've had internal working groups that have tackled all of these issues that we began to talk about: mid-level blends, retail distribution, new technology. The results are paying off. The doubters can subside—not so much so in the media—but there, too, we can have an open and free and welcome discussion on all of the facts. But our call to make the market more predictable and more durable, and the signals clear and long-lasting, and the way that the mandate that we have put in place will do for a generation, has been the cornerstone of value in our partnership.

And now we need to build on it with implementation and diffusion of the technology tools that satisfy that mandate, and permanently put aside the doubt that our birthright is one of self-confidence, one that understands that necessity is the mother of invention, one that says all of our families deserve their inheritance of an American dream unimpeded by the wishes of dictators who wish us no good.

In the coming days, I'm going to call on your support further, because we're not done. And you all will be busy with an election and other matters. The good news is, across the political divide, everybody understands what we've been talking about here today.

Everybody—Republican and Democrat—there's a bipartisan coalition for what you do; there's a bipartisan coalition against what you do. It's time and it's education. And we need to work together on outreach and amplifying that message to ensure the things you talk about in the course of these 48 hours are not just for your annual conference, but persist with regularity in our outreach.

I'm going to close as I did last year—I told you about my dad and the kid who watched his dad come home from deployment and of what it meant to the old man to be standing in the gas lines and waiting and thinking about his country's future. I told you about my dad and that kid was me. Since I saw you last year, I had another baby girl. And my oldest daughter, Caroline, grabbed me on the way out today very early. I don't know why she was up, but she notices me coming and going these days. And she asked why I had to go and how long did I have this job. When was that going to end so she could see more of me?

And, needless to say, it brings me back to that kid who had the deployment who's dad was far away for more than a year, waiting for the cassette tapes to arrive by ship mail all wrapped up in plastic so they wouldn't get wet. And I thought, I hate leaving my daughter. I don't know what to tell her. She's only five, but she's old enough to be curious about why papa goes away. But in proportionality, with perspective, with context of the other guys out there humping it across Afghanistan right now with families full of fear and anxiety and trepidation at home, our sacrifice is very small. We just have to make the homecoming worthwhile. We just have to show that the domestic epicenter of the war on terror, cutting the supply lines of cash flows to people that oppose this country and its values is well under way. That's our mission.

I'm writing her a note and it's not finished yet. And I won't finish the speech well because I didn't finish the note well. But I do want to tell her at the appropriate time that papa went away a lot because there was a golden opportunity to work with fine people like you that came from all across the country and understood the moment that we defined our problem with crystal clarity, that we defined the technological pathways and the market needs with absolute precision, that we put into place the laws and the roadmaps and the plans and the benchmarks to achieve what needed to be done to overcome a dangerous addiction to oil and to make our planet a better place. And I want to tell her we did that together. That's why papa went away from home. That's why you're away from your families. I appreciate what you have done.