PREPARED STATEMENT OF

U.S. ENERGY SECRETARY BILL RICHARDSON

BEFORE THE SENATE COMMITTEE ON AGRICULTURE,

NUTRITION AND FORESTRY

JULY 20, 2000

Thank you for giving me this opportunity to speak with you about the near- and long-term ways we can improve America's energy security. I would also like to address the alternative opportunities we now have -- specifically in biofuels, on which your Committee has worked very hard - which can help ease our nation's excessive dependence on fossil fuels.

ADMINISTRATION ENERGY POLICY

Mr. Chairman, we both have opportunities to answer the nation's energy challenges. My responses to the energy issues of this year have been grounded in the Clinton-Gore Administration's energy policy. This unwavering policy is based upon several principles, and focuses serious attention on ensuring our energy security. We believe in:

ÿ market forces -- not artificial pricing;

ÿ diversity of supply and strong diplomatic relations with energy producing nations;

ÿ improving the production and use of traditional fuels through new technology development;

ÿ diversity of energy sources, with long-term investment in alternative fuels and energy sources;

ÿ increasing efficiency in the way we use energy; and

ÿ maintaining and strengthening our insurance policy against supply disruptions - the Strategic Petroleum Reserve.

Mr. Chairman, as you know, we are seeing some recent signs of encouragement in our oil and gas markets, thanks to our adhering to this policy.

GOOD NEWS ON PRICING

The Energy Department's Energy Information Administration reports that regular gasoline has dropped almost fourteen cents per gallon since this time last month, nationwide. This is good news for American consumers.

And as you know, diesel is in the same "family" as heating oil - and we are concerned about heating oil supplies for the upcoming winter. We need to build stocks, so this is creating some price pressure on diesel, which affects our nation's farmers and truckers.

But we do have some good news. According to EIA, retail on-highway prices for diesel are down about two cents in just the past two weeks, nationwide. In the Midwest, diesel is down three cents over that period.

Part of this relief stems from our work of the past seven months, when we moved vigorously to boost supply. As you know, I've talked extensively with oil producing nations. OPEC and other producers have heard our concerns and have twice boosted their output. We now believe the markets have signaled a need for yet more oil and we welcome signs that OPEC governments are willing to respond to those signals - and that some members are considering other increases. We hope they continue to keep an open mind.

Our latest data shows that there are roughly 3.5 million barrels per day more oil on the market than during this time last year. That is a welcome addition to the world market, and is exerting downward pressure on gas prices.

But we can't claim victory. Regular gas is, on the average, around 38 cents more expensive than it was at this time last year.

This is mainly because we have simply not been able to replenish stocks as demand continues to soar. Unfortunately, we see no chance for alleviation any time soon. The world demands larger and larger quantities of oil -- and even the addition of 3 million barrels per day cannot assuage this exploding demand.

Mr. Chairman: we need to exercise longer-term solutions. We need to not only ease this demand, we need to ease America from its dependancy on imported energy resources.

MEETING DEMAND: THE BIOENERGY SOLUTION

President Clinton is committed to such a vision, introducing proposals to boost domestic production, spur energy efficiency, and increase the use of alternative energy resources.

We have extensive energy opportunities in the field of bioenergy. Mr. Chairman, I know that this issue is of great personal interest to you, the Committee, and to your constituents. Examples of your leadership in this area include:

ÿ this Committee's previous hearings on the importance of biofuels;

ÿ your attendance and presentation at the signing ceremony and subsequent hearing on Executive Order 13134, "Developing and Promoting Biobased Products and Bioenergy"; and, most recently

ÿ passage of the Biomass Research and Development Act of 2000, signed by President Clinton on June 22nd, 2000.

Finally, I would be remiss if I didn't acknowledge your role in aligning the research programs at the Departments of Agriculture and Energy in this extremely important area.

Bioenergy resources already meet more than 3 percent of our nation's energy requirements, and consumption has been rising by 2 percent annually since 1990. But even this growth cannot meet our rapidly expanding concerns on air quality, climate change, dependence upon foreign energy supplies, and the sluggish economic conditions in the nation's farm and forestry sectors.

If we are to see a meaningful decline in our future reliance on fossil fuels; if we are to lessen our vulnerability to interruptions in energy supply; if we are to kindle a whole new field of agricultural and forestry economics, then we need a cooperative national effort to develop a range of renewable energy sources. Bioenergy can be at the heart of such an effort.

Creating such a vigorous market will dramatically increase demand for dedicated energy crops - providing new revenue streams for farmers, and new cash-flow for rural economic development. The current uncertainties on the farm and in our forestry industry could be dramatically eased by long-term energy crop contracts with biorefineries. This is the focus of the bioenergy initiative: integrating the existing bioenergy and bioproducts programs within the energy Department and the Department of Agriculture. In fiscal year 2000, we awarded more than $18 million dollars in contracts to promote the biorefinery industry.

And new crops, new planting, and new harvesting technologies can better farmers' use of marginal lands, while helping preserve the ecosystem. Better forestry management can improve the health of our nation's woods -- while reducing the danger of fire. And our investments in new bioenergy technologies can boost profitability for U.S. firms competing in global markets.

Mr. Chairman: there are also ample opportunities in wind power, which I know is of interest to the Committee. I spoke a moment ago of new crops and new planting helping boost revenues and increase the use of marginal lands. Wind - one of earth's fundamental resources - can further that progress and prosperity. Of the top 15 wind resource states, 12 are located in America's agricultural heartland.

To take advantage of this, in June of 1999, I announced the Wind Powering America Initiative - which challenges the nation to harvest enough of this area's vast wind resources to generate just 5 percent of America's electricity needs. Just 5 percent will return economic benefits of over $60 billion dollars. [One good example, Senator Harkin, is Storm Lake in your home state of Iowa -- which has developed the world's largest wind farm. Total annual payments to landowners in that area are already $500,000 dollars and will continue over 20 years. Imagine what we can do nationwide.

Mr. Chairman, I want to take a moment to commend you for the bill you forwarded to make sure we take aggressive action on the promise of bioenergy. As you know, we have been working under the President's Executive Order - for Developing and Promoting Biobased Products and Bioenergy - since August if last year. That Order set a goal of tripling the use of bioenergy in the U.S. by 2010. We can get there.

We have already established the National Biobased Products and Bioenergy Coordination Office, and have produced our first integrated, multi-agency strategic plan for biofuel and biopower research. Our FY 2001 budget includes substantial increases for biofuels and biopower - $49 million at the Department of Energy, and $44 million at the Department of Agriculture.

With your bill's enactment, we have taken an important step toward that goal. The world is demanding more energy. It is wise that we position America's farmers as the suppliers to meet that demand.

We would like to ask that this Committee lend its support to our R&D budget requests, so that we can make our research plans a reality and meet our goal of tripling the use of bioenergy in the U.S.

ADMINISTRATION ACTIONS FOR AMERICA

Mr. Chairman, the Clinton Administration has taken other steps during this year to ensure America has the energy resources it needs.

You remember the heating oil shortfall we had this spring. To meet it, the President released nearly a third of a billion dollars in the spring, to help low income families pay their heating bills. He asked for $600 million dollars more in Low Income Housing Energy Assistance funds, which Congress provided in the Emergency Supplemental Act of 2000.

And as you know, the President has also proposed the new heating oil reserve. Of course, you need to think creatively when it's 90 degrees here in Washington. But when winter comes, we will be glad that we took this unprecedented step to help the American family stay warm through winter.

We also addressed the issue of supply, through increased support for tankers; Small Business loans for distributors; and encouraged refiners to ramp-up their production.

We're helping independent oil producers test new production technologies, and giving a hand to small producers who are already in the field. And our ultra clean fuels program is helping refiners adhere to the new EPA tier II rules as these rules go into effect over the next few years.

But still, America, and the world, are demanding their fossil fuel. Refineries in the U.S. are working at 96 percent - and at full capacity in the Midwest. Demand right now is absorbing nearly all of that. But I think, in time, we will see the price pressure eased a bit.

But there is still more that we can do to get relief to consumers.

Mr. Chairman, last month, President Clinton sent a letter to Senate Majority Leader Lott, urging that the Congress work with the Administration to enact the President's pending energy proposals without delay.

A central mechanism in the President's energy initiatives is a $4 billion dollar package of tax incentives to encourage domestic oil and gas production, and for consumers to purchase more efficient cars, homes, and consumer products. This plan has idled on the Hill for two years.

The President has also continually requested increased investments to meet our energy needs. In FY2001, the President advanced a $1.4 billion dollar investment for Energy Department programs in:

ÿ energy efficiency;

ÿ renewable energy;

ÿ natural gas; and

ÿ distributed power systems.

The Senate should be commended for supporting 97 percent of the Department's FY 2001 budget for renewable energy resources, an increase of $50 million dollars above the final House mark. I hope that the Senate prevails in budget reconciliation deliberations before the Conference Appropriations Committee.

And the Department is urging Congress to appropriate our entire request of $154 million dollars for our Weatherization Assistance Program in 2001. This will be a step towards full restoration of this vital program that reduces the heating and cooling costs of low income families by an average of $200 dollars per year, thus helping them cope with the high prices of fuel that they - of all Americans -- are least able to afford.

Also of concern, the Congress has postponed action to extend the Energy Policy and Conservation Act, which authorizes two central components of our nation's energy security: the Strategic Petroleum Reserve and our participation in the International Energy Agency.

The President also submitted the Comprehensive Electricity Restructuring Act two years ago. Congress has not yet enacted a bill.

Mr. Chairman, it is no longer a question of "if" the electric utility industry is going to change. It is "when." I know that this issue is of particular interest to rural communities, and to the farming sector.

Mr. Chairman, we need to act on this issue now. I have crossed the country talking to Americans, warning them about brownouts this summer. Power went out in the San Francisco bay area last month when temperatures soared. And three weeks ago, utilities in New England and on the West Coast were stretched to the limit as a one-two punch of hot weather and the unexpected loss of several power plants nearly brought on blackouts.

Mr. Chairman, these are our actions -- both performed and proposed -- to respond to the energy issues encountered this year. We have seen some success, and I believe that is based on our adherence to the Administration's informed energy policy. But we have a lot more work to do. I am ready to work with you to get it done.