[Congressional Record (Bound Edition), Volume 151 (2005), Part 17]
[Senate]
[Pages 22836-22838]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         ENERGY COMPETITIVENESS

  Mr. BAUCUS. Mr. President, in the 12th century, in the Bay of Biscay, 
Basque sailors began to hunt right whales. The Basques melted the 
whales' blubber into oil to fuel their lamps. When the whales died out 
in Spanish waters, the Basques sailed north to Iceland pursuing the 
source of their lamp oil. By the 16th century, whalers hunted 
extensively in Icelandic waters to find the fuel for light.
  As our former colleague Phil Gramm wrote in 1973, from American 
colonial times through the middle of the 19th century, whale oil 
provided the major source of artificial lighting in America and Europe. 
But in the middle of the 19th century, America faced an energy crisis. 
The price of whale oil was rising. From a low of 23 cents a gallon in 
1832, it rose to $1.45 a gallon in 1865.
  But then in 1859, people discovered petroleum oil in western 
Pennsylvania. The rising price of whale oil encouraged an engineer to 
invent a process to convert that western Pennsylvania black oil into a 
new fuel, kerosene.
  The whale oil era was ending, and the petroleum era began.
  One hundred fifty years later, at the turn of the 21st century, 
gasoline prices are rising. As late as December 2002, Montana gasoline 
prices averaged a little more than $1.30 a gallon. On September 5 of 
this year, the average price hit about $2.90 a gallon.
  In the wake of Hurricane Katrina's disruption of oil refineries, many 
Montanans feel gouged by sky-high gasoline and diesel prices. High gas 
prices hit low-income Montanans particularly hard. Peggy Grimes, 
director of the Montana Food Bank Network, says: ``[P]eople are going 
without food more often and coming to visit local food pantries more 
often.'' Just think of people having to make choices such as that.
  Rising natural gas and fuel oil prices have many Montanans concerned 
about how they will heat their homes this winter. And rising fertilizer 
costs will hit many Montana farmers hard.
  In the short term, petroleum price increases are forcing painful 
adjustments. In the medium term, we need to invest in conservation, 
weatherization, and upgrading the efficiency of cars, appliances, and 
machines that use energy. And in the long term, we need to adjust 
intelligently to higher petroleum costs, systematically and 
purposefully diversifying our energy sources.
  In the middle of the 19th century, America led the way to the next 
energy era, leaving the whale oil era behind. Now, at the beginning of 
the 21st century, America must once again lead the way to another 
energy era, an era that severs the world's dependence on Middle Eastern 
oil. Domestic oil and gas production will remain a critical part of our 
energy security for some time. But to lead the world to a new era, we 
will have to make major investments in new innovative forms and uses of 
energy.
  Once again, we have cause to look again across the waters to Iceland.
  Iceland is leaving the petroleum era behind. Iceland is entering the 
hydrogen era. The government has announced its intention to become a 
hydrogen-based economy by 2030.
  In Iceland, icy water cascades down from massive glaciers. And in 
Iceland, boiling water bubbles up from just beneath the surface. 
Iceland already harnesses these renewable resources to generate 
virtually all of its electricity and heating from hydroelectric and 
geothermal sources.
  But with no fossil fuel resources, Iceland relies heavily on imported 
oil to power cars, buses, and the fishing trawlers that provide 70 
percent of Iceland's income.
  To break that dependency, and to reduce greenhouse gases, Iceland is 
turning to fuel cells. Fuel cells use hydrogen and oxygen to generate 
electricity to power engines. And the vehicles powered by those engines 
emit only water as exhaust.
  Iceland plans to use its cheap electricity to split water--
H2O--into its component parts--hydrogen and oxygen. Iceland 
uses the process of electrolysis. Electrolysis runs an electric current 
through bonded elements to separate the elements.
  Iceland's capital Reykjavik intends to replace its entire fleet of 80 
buses with fuel cell buses. Next, Iceland hopes to convert private 
cars. And after that, Iceland hopes to switch the huge Icelandic 
fishing trawlers to hydrogen power.
  Iceland thus hopes to convert its renewable hydroelectric and 
geothermal energy into a form that can power its transportation system, 
and, in the process, Iceland hopes to slash emissions and end its 
dependence on fossil fuels.
  Maria Maack, the project director of Iceland New Energy, explained:

       We are so reliant on our fisheries, and the fisheries are 
     totally dependent on oil. So we have a chance to be quite 
     independent of this. . . [I]t's being independent and relying 
     on ourselves to continue the way we live.

  Bragi Arnason, a chemistry professor at the University of Iceland and 
a leader in hydrogen technology, beamed:

       I think we could be a pilot country, giving a vision of the 
     world to come.

  This is my sixth address to the Senate on competitiveness. Starting 
this summer, I spoke on competitiveness generally. I spoke on the role 
of education in meeting that challenge so we Americans can be more 
competitive in the future. Education at all levels--K through 12, 
continuing education, higher education, technology schools--is the 
long-term key for America to remain the biggest and strongest economic 
power in the world, given the challenges of China, India, and other 
countries that are taking advantage of the Internet and other 
technologies which are making other countries more competitive than 
they have been in the past.
  I spoke on the role of trade, how we have to be more aggressive in 
trade to market our products overseas better and knock down trade 
barriers. I spoke on the role of controlling health care costs which 
make us less competitive worldwide. Our health care costs per capita 
are twice that of the next expensive country, and I doubt we are twice 
as healthy. I spoke on the role of capital and savings. We are not a 
net savings country, we are basically a net deficit country. Other 
countries save so much more than we save. That means capital that is 
available to develop new technologies, both technical technologies and 
human technologies.
  Today I wish to speak about the role of energy in competitiveness. If 
we are to be a strong country and meet the foreign challenge, clearly, 
we need to be much more independent in energy production.
  Iceland's Professor Arnason is not alone in his vision of a hydrogen 
future. At the University of Montana, Missoula College of Technology, 
Dean Paul Williamson has a similar vision. He is working to use 
hydrogen as the focal point to build a state-of-the-art college of 
technology and futures park. He wants to create something that folks in 
Geneva will get on a plane to

[[Page 22837]]

come to America to see. So we are not always going overseas to see what 
they are doing, they will come to see what we are doing. It is a 
laboratory of excellence, to serve as a gateway to alternative 
technology in a much larger community.
  Dean Williamson's vision is to marry Montana's resource base with the 
best trained workforce, and he is working to make the Missoula College 
of Technology a focal point to transform that vision into reality. 
Missoula College of Technology is creating the educational venue, and 
with it, they will match a business gateway to help to bring business 
and industry to the area, creating networks of microenterprises.
  All around Montana and the Nation, people are working on renewable 
and alternative energy research and industry. Rising energy prices, 
combined with smart Government incentives, have spurred innovation, and 
we are already beginning to reap the benefits.
  I have already talked about one example, hydrogen. Another example is 
coal conversion.
  Coal gasification can be used to help produce hydrogen, and coal 
gasification can also be used to produce fertilizers, other chemicals, 
and diesel fuel. Our State's Governor, Brian Schweitzer, and I have 
targeted a process to turn Montana's coal into clean-burning diesel and 
jet fuel. The process is called Fischer-Tropsch, or F-T for the German 
scientists who developed it in the 1920s.
  Energy technology firms in America and elsewhere are fine-tuning F-T 
to make it even cleaner. F-T fuels are relatively clean. The process 
can recover sulfur, mercury, and arsenic as marketable byproducts.
  Jack Holmes, president of Syntroleum, extols the cleanliness of F-T 
diesel. He says it can be burned straight or blended with regular 
diesel fuel. He says:

       It's like a single-malt scotch.

  Not quite, but we get the drift of it.
  Governor Schweitzer calculates:

       It would cost less than $1 per gallon to make that diesel.

  The break-even point for F-T comes when crude oil sells for more than 
$35 a barrel. These days, that looks like a pretty safe bet.
  To develop processes such as these in the just-passed Energy bill, I 
worked to include an investment tax credit for the coal gasification 
technology used by the F-T process. In the highway bill, I worked to 
include a 50-cent-a-gallon tax credit for companies that generate fuel 
using an updated version of the F-T process. I also included a Federal 
loan guarantee so that companies can finance these capital investments.
  We have real opportunity here. The coal-to-fuel technology can be a 
win for everybody if we do it right and if we make sure that any 
facility uses the cleanest and most advanced technology available--
again, if they do it right. It will help lessen our dependence on 
foreign sources of energy while creating thousands of jobs in America. 
I am proud to join our Governor in trying to bring a new investment in 
this technology to Montana and to the Nation.
  A third example is renewable and alternative energy in the form of 
wind energy. They may call Chicago ``the windy city,'' but many say 
Great Falls, MT, is the windiest city in America. ``Wind is like water 
flowing out of the mountains,'' says Bob Quinn, a farmer from Big 
Sandy, MT. Big Sandy is a little bit east of what we call the eastern 
front. It is the Rocky Mountains and the Continental Divide. The 
eastern front falls off similar to a big cliff. That is why we call it 
the front. By the time it gets to Big Sandy, which is not too far away, 
it is similar to water flowing out of the mountains.
  Closer to the mountains, the wind is turbulent, but across the 
prairie, it flows uniformly similar to a huge river, and that makes it 
attractive as a wind farm site.
  Five years ago, Bob traveled to Germany to research his ancestry. He 
visited a distant cousin who had developed a wind project and was 
contemplating others in Chile or South Africa.
  Bob asked him, Why are you thinking about going clear to Chile to 
build a wind farm when you can buy one in Montana, where we have this 
river of wind? The cousin reconsidered and chose Montana. Along with 
another partner and two cousins, they formed WindPark Solutions America 
and began looking for sites.
  They settled on Judith Gap, a town of about 150 people in central 
Montana. Eventually, WindPark sold the project to Invenergy Wind, a 
Chicago-based company that will own and operate the project. Invenergy 
is now building a $150 million facility, the Judith Gap wind farm.
  Billings resident Ludlow Howe manages the construction. His work 
crews erected 130 turbines in two phases. The wind farm will cover an 
area about 8 miles long and 5 miles wide, straddling Highway 191 
between Judith Gap and Harlowton.
  So far, workers have assembled at least 27 towers, colored white-gray 
to blend with the sky. Each tower is 260 feet tall. On top of each 
tower sits a generator box the size of a motor home. Seven-ton rotors 
with 122-foot blades sweep up to 387 feet into the air. Each turbine 
weighs more than 400,000 pounds. A system of 140 bolts secures each 
tower to its base.
  The rotors come from Houston, the turbines come from North Carolina, 
and tower sections come from China, Korea, and Fargo, ND.
  Ludlow says of the wind turbines:

       They will actually seek out the wind at 9 miles per hour. 
     They will pitch their blades, just like a sailboat.

  They will trim their sails.
  The plant should be in full operation soon. NorthWestern Energy will 
buy power from the 150-megawatt wind farm for customers in central and 
western Montana.
  Wheatland County Commissioner Tom Bennett says admiringly:

       It's environmentally friendly. It's renewable. It's 
     something we'll have forever. You tell me any negative on 
     this. We couldn't find any.

  A fourth example of renewable and alternative energy is biomass and 
ethanol.
  Energy competitiveness can also come from a clear commitment to the 
development of biomass and ethanol-based fuels. Currently, most 
alternative fuels are not profitable without a Federal subsidy, but if 
we continue to support the industry until it reaches profitability, 
much as with wind power, it will become a self-sustaining model in its 
own right.
  A Pentagon-sponsored study called ``Winning the Oil Endgame,'' 
projects that biomass and ethanol-based fuels can create 750,000 new 
jobs. This effort could revitalize rural and agricultural areas of 
America. It could add tens of billions of dollars to farmers' revenue 
every year.
  Rural America is at the center of the next age of domestic energy 
production. Rather than spending $50 billion a year overseas to buy oil 
from foreign countries, we could be buying into rural America. We must 
continue to support these new industries.
  The man who headed the research team that created the hybrid Toyota 
Prius tells his young researchers:

       Forget about concentrating on such things as trivial 
     increments in performance or cost cutting. If you restrict 
     yourself to refining the prevailing paradigm, you will never 
     come up with an earth-shattering idea or technology.

  That is the guy who heads the team that formed the new hybrid Prius, 
which is doing very well.
  America needs to follow that sage advice. We need to move beyond 
trivial increments in refining the prevailing petroleum paradigm. We 
need to move on to the next Earth-shattering ideas and technologies.
  During World War II, America created the Manhattan Project in an 
effort to develop the first nuclear weapons and win the war against 
fascism. That important effort involved sites at Hanford, Los Alamos, 
Oak Ridge, and more than 30 locations in all. By 1945, the project 
employed more than 130,000 people. It cost nearly $2 billion, or $20 
billion in 2004 dollars, that is, in current dollars.
  Today, America needs a new Manhattan Project. As Tom Friedman put it 
in his book, ``The World is Flat,'' we need ``a crash program to . . . 
develop clean alternative energies.''
  On May 25, 1961, President John F. Kennedy told the Congress:


[[Page 22838]]

       I believe that this nation should commit itself to 
     achieving the goal, before this decade is out, of landing a 
     man on the Moon and returning him safely to the Earth.

  Don't you remember that? That was a real challenge, an important and 
necessary challenge. It lifted us up, helped us develop technologies, 
and made America feel good about itself.
  Today, America needs a new challenge. As Friedman puts it, we need 
``a similar legacy project . . . a crash program for alternative energy 
and conservation to make America energy-independent in 10 years.''
  Developing new energy sources in America will contribute to energy 
independence. Energy independence will contribute to national security, 
and energy independence will contribute to the stability of energy 
sources, allowing business to go forward without the jolts of supply 
disruptions. People facing the jolt of supply disruptions is a huge 
additional part of the problem of dependence.
  As well, developing new energy sources in America has the potential 
to turn renewable and alternative energy development into comparative 
advantage for America, to gain an advantage for America. If we can 
figure out how to make clean, cheap energy before other countries, then 
those other countries will pay American companies to build energy 
production there.
  Because of our early investments in the 1970s, America had an 
opportunity to become the world leader of the fossil alternative 
energy. With lower energy prices and decreased Federal support, 
however, our advantage dwindled.
  Countries such as Denmark and Germany built on our initial research. 
Denmark and Germany have become the world leaders in wind generation. 
Danish companies are now the No. 1 provider of wind services in 
America, outnumbering even American companies.
  The Danish became world leaders in wind power production by first 
growing the industry at home. According to the Danish Wind Industry 
Association, the Danish wind industry has created 20,000 new jobs. It 
exports 90 percent of the wind turbines it creates, and it supplies 20 
percent of Denmark's electricity.
  This is all because Denmark was the second country to reach the 
critical production level of 100 megawatts a year in 1987. That was 4 
years after America. But we decided to end wind power subsidies for a 
time. That put them ahead.
  There is a silver lining, however. America still has the resources to 
create technologies that could be turned into comparative advantages. 
Because of our wind power penetration, we are still fairly advanced 
compared to other nations. With a concerted effort for research, 
development, and production of wind generation--or solar power or other 
energy programs that we have been working on--we could easily become 
the world leaders in those industries if we put our mind and effort to 
it.
  America has underinvested in research and development. This happens 
because firms invest in R&D based on the private return to their firms 
alone.
  The social rate of return to investment, however, exceeds the private 
return. As economists put it, positive externalities exist. These 
external benefits come from knowledge spillovers, the creation of 
public goods, and economies of scale. The existence of these 
externalities--an awful word, but it is so powerful--counsels that the 
Government needs to subsidize R&D until the private rate of return 
matches the social rate of return. Traditionally, governments have used 
a few different policy tools to subsidize R&D: the first as government 
research grants to industry and educational institutions but, second, 
to provide tax incentives for R&D. A third tool is the increasingly 
popular and effective technique of offering prizes to spur innovation.
  For example, in 1714, the British Government offered the longitude 
prize, a prize of 20,000 pounds, for precise determination of a ship's 
longitude. John Harrison solved the problem and eventually won the 
prize using precision clocks.
  A year ago, SpaceShipOne won the Ansari X Prize competition. The X 
Prize Foundation offered $10 million to the first private venture to 
send a privately funded craft into space twice in a week.
  The Clay Mathematics Institute of Cambridge, MA, offers a $1 million 
prize each for the solutions of seven Prize problems. The problems are 
classic mathematical questions that have resisted solution over the 
years.
  Prizes like these involve little risk for the Government. And these 
prizes provide a very efficient, market-based approach to subsidy. For 
every success, there will be numerous failures. It is extremely 
difficult to predict who the winner will be. America needs to invest in 
a basket of potential technologies.
  In 1874, it was a dream of science fiction: Jules Verne envisaged a 
world in which water would replace coal as the fuel of the future.
  Now Icelanders believe they can do just that; they can turn that 
dream into science fact. And they have taken steps to create the 
world's first hydrogen society.
  In old Icelandic sagas, whales were either good or evil. The evil 
whales swallowed boats and men. Just talking about such whales while on 
a boat would bring bad luck.
  In contrast, the blue whale protected both boats and men. Blue whales 
would scare away all the evil whales. According to old Icelandic sagas, 
blue whales would warn fishermen by circling a boat three times in a 
row.
  Sometimes energy sources can also appear to be good or bad. With 
hydrogen, Iceland hopes it has found the energy equivalent of a good 
blue whale.
  Certainly, with the 1970s oil shocks and now the Katrina-related 
price spikes, we have been warned at least three times in a row to seek 
out safer seas.
  In the 19th century, America plotted the course to a more productive 
energy future. In this new century, let us see that America once again 
leads the way. Let us once again chart a course to more secure energy 
waters. And let us once again explore the uncharted oceans of 
possibilities and bring the energy that we need safely home.

                          ____________________