MODERATOR: Good morning from Washington. I'm Larry Quinn speaking to you from the Broadcast Center at the U.S. Department of Agriculture. Welcome to today's news conference with Secretary of Agriculture Mike Johanns and Secretary of Energy Samuel Bodman. They will be highlighting renewable energy efforts.

Before we begin today, I'd like to remind reporters that if you'd like to ask a question during our question period, please press *1 on your telephone touchpad. That alerts us to call on you.

Now it is my pleasure to my pleasure to introduce Secretary of Agriculture Mike Johanns.

SEC. MIKE JOHANNS: Thank you very much. And let me just start out and say it's a pleasure to have Secretary Bodman with me today. We are very pleased to announce today a joint Department of Energy, United States Department of Agriculture Renewable Energy Conference to be held from October 10 though the 12th in St. Louis, Missouri. DOE and USDA are the two leading federal agencies in providing research and investment and accelerating the commercialization of renewable energy technologies.

This conference not only joins government leaders who have been tasked with addressing our energy problems, but it also has been strategically timed to bring together agricultural and rural investors, industry leaders, public sector utilities, and state agencies with a stake in this very important issue.

Additionally, stakeholders from the renewable energy sectors of solar energy, biomass, and wind will have a rare opportunity to meet together. DOE and USDA expect the conference to produce the following five outcomes:

Examine key incentives and policies such as tax credits, loan guarantees, expedited approval processes and other measures to reduce risk for investors in alternative energy.

Two, increase awareness of the federal and state regulatory tax and investment challenges.

Three, identify other barriers to expanding renewable energy sources in the marketplace and sustaining consistent demand and begin to ascertain solutions to these barriers.

Four, review the challenges of developing new legacy distribution systems;

And five, advance public and private collaboration on these issues.

The conference is designed to tackle tough issues, areas where government can play an important role in helping to overcome obstacles to the expansion of renewable energy.

It also builds upon President Bush's advanced energy initiative. In the State of the Union Address this year he set forth a goal of significantly reducing our dependence on foreign sources of energy. To do this we need to help unleash the entrepreneurial innovation of American farms and industry to build a new energy economy. This will require more focused research and development, as well as new creative solutions to approaches and policies throughout the public and private sectors.

Together we will work to accelerate the growth and availability of renewable energy for consumers. We want to make use of renewable energy and change from an alternative to the norm.

Reducing our dependence on foreign energy sources not only increases our security, it also provides an additional income source for rural America and boosts their economy.

Speaking of rural America, I'm also pleased today to just take a moment to announce a project that exemplifies our efforts. USDA is providing a loan guarantee and grant totaling nearly $4 million for the construction and operation of a new biodiesel production facility in Iowa. The facility will have the capacity to produce 10 million gallons of fuel per year from soybeans.

Since '01, USDA Rural Development alone has invested over $356 million in 650 renewable energy and energy efficiency projects. But those investments have leveraged over $1.2 billion in private dollars. In the President's budget proposal for '07, USDA's core investment in energy-related research and public lands projects increases to $85 million from $67 million this year.

We also expect to provide more than $250 million per year this year and next in Rural Development programs that generate increased energy supply and efficiency.

Demand for renewable fuels like biodiesel and ethanol are certainly rising. The current demand is 300,000 bushels per day, and we have over 100 ethanol plants in operation and 30 more plants under construction to meet demand. And 5 billion gallons of ethanol are expected to be produced in '06, and by fall of '07 our production capacity is expected to rise to over 7 billion gallons.

We're very pleased with our current success but realize there is tremendous opportunity to increase the economic viability of alternative fuels. The DOE/USDA Renewable Energy Conference in October is an important step in bringing together key stakeholders from the financial, agricultural and energy sectors. It has been great to strengthen our partnership between USDA and the Department of Energy. I do want to again say personally how much I appreciate Secretary Bodman's leadership in this area and his commitment to our joint work and to renewable energy.

With that, I would love to turn the microphone over to Secretary Bodman.

SEC. SAMUEL BODMAN: Thanks very much, Mike. Let me if I may join my friend and colleague in just saying how pleased we at the Department of Energy are to cosponsor this upcoming Renewable Energy Conference. We see this event as a significant step in advancing the President's agenda for expanding our investment in renewable energy technologies, which will diversify our energy portfolio, which will reduce our dependence on fossil fuels and should make America more energy-independent.

Mike has already outlined some of the features of the President's Advanced Energy Initiative. In his budget he called for a 22 percent increase, up to a level of $2.1 billion to accelerate research into energy technologies that hold the greatest promise to transform the way we power our homes, power our cars and power our businesses. This includes a request for almost $150 million next year for the Solar Energy Initiative, $44 million for wind energy, and $150 million for cellulosic ethanol research-- that is to say, to manufacture ethanol using cellulose as a feedstock or a raw material.

Those are the key items that will be the focus of this conference.

Today's announcements continues the ongoing cooperation between our two departments of Energy and Agriculture, and we've been working jointly to help our nation's farming communities prosper by supplying energy for our growing economy. Projects like this highlight the different and really the complimentary strengths that our departments bring to this effort. The Agriculture Department has extraordinary resources for the deployment of renewable energy projects, and our department strength is really on the research and the development side.

The Department of Energy is the largest funder of basic research in the physical sciences -- that's physics, chemistry and math -- in the federal government. We operate a network of national laboratories with research equipment and facilities that are really unmatched anywhere in the world. We're very blessed with some of the brightest scientific minds in the nation that work in these labs.

My point of all of this is that we believe we will be very good at supplying the scientific and engineering research for developing clean energy technology which we then believe that the Agriculture Department can help put to work in practical demonstrations and practical expansion of these ideas.

Since Secretary Johanns took this opportunity to make an announcement, I would like to make our own announcement at this point in time. Our department will soon -- that is to say I would think in the next month or so -- will be issuing a funding opportunity for establishing up to two new bioenergy research centers that we hope will revolutionize biology-based energy production in our country. Systems biology research into microbes and plants may be able to overcome critical roadblocks to cost-effective production of cellulosic ethanol and other renewable energy from biomass, all carried out on a very large scale.

It could also mean a potentially huge boost for our agriculture sector. Mimicking nature through artificial photosynthesis could yield fuel directly from solar energy. This is what these new centers will be designed to help achieve.

Universities, national laboratories, nonprofit firms, and private companies and appropriate combinations will be eligible to compete to set up one of these centers. These centers we expect to be funded for a period of five years initially, and we'll be reviewing their progress along the way.

We'll be supporting break-through research at the centers on microbes and plants with the goal of tapping nature's own powerful methods of producing energy and learning how biofuels can be produced more cost-effectively even than today. We're very excited about these new centers, and I look forward to sharing more information with you as the program unfolds as I said, which we expect an announcement sometime I hope during the month of July.

Let me conclude by reiterating our support for this upcoming conference that is being announced today. We very much look forward to future cooperative projects with partners in state and local governments, with the private sector, with academia, and of course our friends at the USDA and across the federal government.

Larry, I think that completes what I have to say, and we'd be happy to take questions.

MODERATOR: Thank you, Secretary Bodman and Secretary Johanns. And now we are ready to begin taking questions from reporters, with this reminder. If you do have a question you'd like to ask, please press *1 and that will indicate that we can be alerted that you have a question for us.

Our first question today comes from Peter Shinn with the National Association of Farm Broadcasters. Peter, go ahead.

REPORTER: Thank you. I'd like to ask a question of each of you if I could. For Secretary Bodman, the high price of oil seems to be making much of this interest in investment in renewable fuels attractive. And we've seen spurts of interest in alternative fuels and when energy prices are high before. And then that interest really fades when crude oil prices begin to fall. What are the reasons that won't happen this time?

And then Secretary Johanns if I could ask if the economic impact of renewable fuels, if that's enough to offset major funding reductions for support to farmers in the next Farm Bill. And then what happens if outside interest in the renewable fuel industry fades a few years down the road?

SEC. BODMAN: This is Sam Bodman. Let me try to answer your question, the first question, and that is the question related to oil prices and why they won't decline precipitously again as they did 30 years ago.

First, I'm not going to tell you that they won't. That's not -- I studiously avoid trying to make forecasts on oil prices. I would say however that really for the first time in my lifetime, my business lifetime which extends almost 50 years, for the first time we are seeing the suppliers having great difficulty keeping up with demand. We have seen huge increases in demand largely coming from Asia, from both China and India as well as increases of demand here in the United States.

This is good because it's a reflection of the fact that their economies are growing and they're doing very well, and we're very pleased with that. But it is a challenge, and it has forced these prices up as demand has increased and supplies have been unable to respond very quickly.

We're seeing some, a lot of investment being made. And I think most people looking at this situation are of the view that it's unlikely that we're going to see declines of the nature that we saw 30 years ago. I would expect to see some decline, but I would think that it's unlikely that we're going to get down to the $10 a barrel, that sort of thing, that we saw before.

SEC. JOHANNS: Peter, I'll offer a couple of thoughts on the question that you've asked of me. The first piece of that was just the economic impact and what that might mean in terms of the next Farm Bill.

Well, I can tell you even today as we've seen a stronger price for corn than we've seen for a few years. For example today corn on the board is probably trading in -- I haven't looked at it, but it's probably in the $2.60, $2.65, $2.70 range, thereabouts. That's probably going to mean that even in this Farm Bill you might not see an LDP payment, or you might not see a countercyclical payment simply because you have stronger prices than we've seen in awhile.

If those payments aren't made, it truly is accomplishing what farmers want to accomplish; and that is, to farm for the marketplace, not farm for the program.

Now what may happen in the next Farm Bill, just depends what that Farm Bill looks like. And boy there's just so many pieces to that it's hard to speculate, and it would be very difficult for me to speculate. But I can tell you today because of the stronger price you probably will impact the cost of the current Farm Bill.

And then the whole issue of what happens if demand fades. You know I'd just offer a thought. It just seems like a very strong demand. The world economy at the moment is pretty strong, but if part of our goal here is to lessen our dependence on foreign oil then even if you see a weakening economy you still have a pretty high priority in that goal, in that policy approach.

So I can't predict the future any better than anyone else, but it does seem like a pretty stable demand here. And I would say that for the foreseeable future. It looks solid to me.

MODERATOR: Our next question will come from Matt Kaye of the Burns Bureau, and he'll be followed by Tom Doggett (sp). Matt, go ahead, please.

REPORTER: Thank you very much. And I did have a question for each of the two secretaries. Let me ask the question for Secretary Johanns first, and thank you for taking the question.

The Senate Appropriations Committee this week marked up the Legislative Branch Appropriations Bill, and it includes a requirement that ethanol-compatible vehicles and ethanol-based fuel be used in the Legislative branch of government to the extent possible. The bill also requires the installation of an E85 fuel pump on the capitol complex.

Can you tell us, Secretary, do you have all of the, does the government have all the authority that it needs? Or do you need more authority from Congress to be in the driver's seat in putting E85 pumps in all of the agencies and getting E85 vehicles used by all the agencies?

And then I'll follow up with my other question.

SEC. JOHANNS: That's a really good question in terms of all other federal agencies. Now, to be very honest with you, Matt, I'm not sure I can give you the answer to that just off the cuff. What I'd encourage you to do though is touch base with Ed or Terri here. And they can get that information in your hands.

I can tell you here at the USDA even the car I drive now is E85. So we try to move in that direction.

I should also mention that there is a procurement. This actually dates back to the '02 Farm Bill, biobased procurement piece to that, that we are implementing, and I might add with now some vigor.

And we've identified a number of products that now need to be purchased as biobased products, and that is only going to continue and expand.

REPORTER: And on the follow-up, a parochial question for the Energy Secretary. As you might know, a number of the Illinois U.S. lawmakers here have written to the Energy Department arguing that Southern Illinois University at Edwards already has a cutting edge research facility, national corn to ethanol research center, that they say has long been a leading producer of ethanol. We don't need to reinvent the wheel the Illinois delegation says.

What is the facility in Southern Illinois not doing that perhaps you need it to do, or what piece of the puzzle is missing that would make it eligible for it to be one of these centers?

SEC. BODMAN: Well, they may well be a center. That process is just starting, and it would, they will be in competition with a number of other centers including Boston I would think, including San Francisco. We talked to the folks in North Carolina, as well as St. Louis. There may well be an opportunity for them to join in St. Louis. We've talked to Mark Riden (sp), who is the chancellor of Washington University in St. Louis, and he points out that there's a lot of activity in this field going on in and around the city with Monsanto there and then a number of other smaller companies that are involved in the private sector.

So I would think that this would be something where they would be more than eligible to participate, and that may well be an output for them or an outlet for their activities. I think this activity is really big science. This is going to involve the genetic manipulation of the genomes of various microbes and it will be applying very advanced technology that has been developed in the biosciences and putting that to work on our energy problem. So we're optimistic that something good can get created, and we hope that Southern Illinois University participates either alone or with a group.

MODERATOR: Our next question comes from Tom Doggett (sp) of Reuters. And standing by should be Cindy Zimmermann. Tom?

REPORTER: Thank you. This question is for Secretary Bodman, and Secretary Johanns you can jump in if you wish. The spot price for ethanol this week jumped to $5 a gallon. It's come down somewhat, still around $4.00, upper $3.00 range.

Secretary Bodman, how concerned are you or worried that these prices are going to be passed on to consumers at the pump? And more supply would obviously lower those prices. Do you think now is the time for Congress or the administration acting on its own administratively to temporarily lift the import duties on ethanol imports to get more supply in and bring the ethanol price down?

SEC. BODMAN: Of course I'm concerned when we see that kind of price for ethanol. We are at a developmental stage in this marketplace. As you know, you and I have talked about this before Tom, this country produced about 4 billion gallons of ethanol last year. That number is to increase almost 50 percent in the current year that we're in. We should be up close to operating, at year-end anyway, at about a 6 billion gallons per year at that rate at the end of this year.

So we are seeing a very rapid development. I'm hopeful that we will over time find ourselves in a position that the impact will be much more modest, but it is certainly contributing to higher prices, particularly where we need reformulated gasoline in major metropolitan areas such as Washington.

So this is something that we're concerned about. I think the issue to me is about lifting the tariffs is I don't believe a real-- is going to materially affect supplies, certainly not in the short term. The real issue to me is the subsidy because this is an industry that is currently being subsidized. The tariff is merely meant to offset the subsidy.

And the question to me that I think deserves a discussion is the nature of the subsidy, how long it should stay. Right now it's geared to stay for another four years through the year 2010 I believe. And what happens after that and what kind of a picture should we be working on? To me those are the key questions and the areas that will I think determine the ultimate volumes of ethanol available to our taxpayers.

SEC. JOHANNS: If I might just offer a thought. I think there is sometimes this impression that if that duty were lifted that ethanol would come flooding into the marketplace and reduce the cost. Actually the ethanol supply is pretty tight on a worldwide basis, and under an agreement we have there's some ethanol that can actually come in duty-free. And even that has been fairly minimal.

Again it's just a pretty tight market out there. And that's one of the reasons -- the supply and demand phenomena; so it's one of the reasons why you're seeing those spot prices where they're at.

But having said that, I think the greatest opportunity for expansion -- and you'd probably expect the Ag Secretary to say this but I'll say it anyway -- I think the greatest opportunity for expansion is right here in the United States market with corn we grow here and biomass products.

We have 103 plants now. Five are in expansion and 33 are under construction. This industry is ramping up pretty aggressively here, and when you see the millions and millions of gallons that are being added very, very quickly here I just look at it and say to myself, the greatest opportunity to supply the marketplace will be right here in the United States.

MODERATOR: Our next question is from Cindy Zimmermann with Domestic Fuel.com. Standing by is Tom Steever. Cindy?

REPORTER: I'm pleased to hear about this conference that you have coming up, and I notice that one of your goals is to raise public awareness. That's one of the goals, stated goals for your conference. And that seems to be a pretty big issue. We've got a new survey result coming out today from the Ethanol Promotion Information Council that says 73 percent of American consumers are now likely to purchase ethanol-enriched fuel, but the awareness of ethanol at the pump seems to be an issue despite the media coverage that we've seen. And the study shows that consumer awareness of ethanol availability increases with the presence of ethanol signage at the pump.

What I'd like to ask both of you is, if you have any ideas of how to increase public awareness of especially ethanol but also biodiesel. And right at the gas station where they can buy it, or any other ways, any other ideas you have of increasing public awareness of ethanol.

SEC. JOHANNS: As you know the industry has been working very, very aggressively to try to increase public awareness. But as you point out, we want to have some discussion at the conference. I'm a believer in ethanol, and I believe the consumer given the opportunity to make a choice will make a choice to support a product that is not only raw material grown here but the jobs that process that raw material are here. The investment for the plants would be here in the United States. It does a lot environmentally, it does a lot for rural development. I mean it's just a really positive story to be able to tell.

And whatever we can do to help that consumer make a decision we want to do. So hopefully some of these ideas can be fleshed out at the conference that's coming up.

SEC. BODMAN: I would just briefly comment that we have been working with both the marketers of motor fuels as well as the automotive manufacturers to encourage, first, more flex-fuel vehicles or vehicles that can use ethanol will be manufactured in the future, which we think will happen as more and more people learn about them and as the companies learn about them. It is not a very expensive matter to manufacture a flex-fuel vehicle compared to a standard automobile. And we have encouraged the large motor fuel refiners and marketers also to expand their interest in this subject area.

I have pointed out to the leaders of the major oil companies that they must be under pressure from their own boards because they are seeing a growth in a product that is taking their market away, and looking at it from their standpoint. And so you're seeing more and more of the big oil companies taking an interest in this field.

And I think that's all to the good. It's being market-driven. We had an announcement earlier this week that the forces of both Dupont and British Petroleum are being combined to manufacture a new product, a new fuel additive, an oxygenate called biobutanol similar in chemical composition to ethanol. And they believe that has certain advantages over ethanol and will help the marketplace as well.

So I think we're seeing a lot of very interesting things going on, and this conference we hope will be a good way of increasing people's knowledge.

And Cindy, other than that we just have to keep working at this in order to make sure that people understand what the opportunities are.

MODERATOR: Next question comes from Tom Steever of Brownfield Network. And standing by should be Philip Brasher. Tom, go ahead, please.

REPORTER: Thank you for taking my question. I would like to know with the increasing number of both ethanol plants and biodiesel plants coming on-line and being built, to what degree -- what is your degree of confidence, Secretary Johanns, that we will be able to grow enough corn and soybeans not only to fill the demand for other uses but also to fill the demand for these plants?

SEC. JOHANNS: It's an issue that comes up with some regularity now, this interplay between the need for corn for example as a feedstock for livestock and the need for corn for ethanol. First thing that's really important for me to say as Secretary of Agriculture is I've never believed in any kind of federal policy that makes one commodity cheap so another commodity can profit, if you will. We at the USDA should not be about picking winners and losers.

Having said that though, we want to make sure that this corn industry is vibrant not only today but in the future. And if you look at the efficiency that is gained, you know I tell the story about the farm I grew up on, 125-bushel-an-acre corn was a big crop. Today that's not a big crop at all. We talk about yields in the 200-bushel-an-acre. And I just believe that productivity if you will is just going to continue to grow. It's better cropping practices, better weed management, better hybrids, drought-resistant products, just a lot of good things going on in this industry.

So I look out there, and I see what's happening in the industry. I see the positive things, and I believe that the industry can meet the needs that are out there.

The other thing I will tell you, and again to me it's encouraging -- when I look at the numbers, and I do literally every day that I'm Secretary, and any time I can see a commodity in the profit range that's positive; and finally, after seeing corn especially around Hurricane Katrina in the $1.55, .60, .65 range, to see it literally a dollar higher than that, that's encouraging. That's what I want farmers to do is farm for the marketplace, farm for the ability to make a profit in that marketplace. I don't know a farmer in America that wants to make the case that they want to farm for the program. They want to farm for the market. And so this is encouraging to me.

MODERATOR: Next question comes from Philip Brasher of Des Moines Register. And standing by should be Michael Janovsky of the New York Times. Philip?

REPORTER: Secretary Bodman, could you talk a little bit more about your thoughts about the tax credit, the 51 cent a gallon tax credit? Are you thinking it may not be necessary to extend that? And can you talk about the impact this has on the credit that has on the market?

SEC. BODMAN: Right now we do have about a 50-cent subsidy that is provided to encourage the development of ethanol plants. Clearly right now the marketplace doesn't require it because it's been pointed out by an earlier question we've got prices today that are north of $4.00, and therefore a 50-cent subsidy, although I'm sure welcome, is not something that's going to make or break an investment.

I think the question that I was raising is, I think that's the issue of the subsidy is the question that needs to be thought about more carefully so that we can get a good flow of capital to continue to come into this marketplace after the year 2010. As to whether it should be extended or not, that's obviously a sensitive question and something people in the business, the political leadership of both farm states and other states have strong views on the question. And that's something I think will get answered in the fullness of time. But I would like to think that having a subsidy program that would encourage the continuing development of these assets after 2010 would be an appropriate thing and should be considered.

MODERATOR: And our final question today comes from Michael Janovsky of New York Times. Michael?

REPORTER: Secretary Bodman, you've talked a lot about your excitement and optimism over these new efforts to generate all this ethanol. In that context then, how do you feel about the way Congress seems to be moving toward opening the Outer Continental Shelf for more oil drilling? Do you think the development of all these new biofuels kind of eases the need to go into the Outer Continental Shelf or into other domestic supplies that haven't been tapped out?

SEC. BODMAN: If there's anything that I've learned in this job it is that we need a diversity of materials that can serve this nation. And whether ethanol is what we've focused on today because that's the subject of this upcoming meeting. I believe that you will find that this administration is strongly supportive of efforts to increase the availability of oil and gas as developed in the Outer Continental Shelf. There are limitations on it that are both legal and some of it political because of the strong views of certain of our states. But we certainly would encourage the development of additional resources off-shore as well as wind energy, as well as nuclear power, as well as the solar energy. All of these things are crucial.

I should also mention coal, which, as many people point out, is our most prominent resource that we have in this country. So all these things are important, and I wouldn't want to favor one over the other. It's a question of trying to develop the technologies to develop each of these in an appropriate way and then hopefully the market will decide by pricing which is favored and which is not.

MODERATOR: Thank you, reporters, for being with us and for your questions today. Any concluding thoughts, Secretary Johanns?

SEC. JOHANNS: Let me just wrap up again and express my appreciation to Secretary Bodman and to everyone out there. We look forward to seeing you at the conference.

MODERATOR: Thank you. Secretary of Agriculture Mike Johanns and Secretary of Energy Samuel Bodman. I'm Larry Quinn bidding you a good day from Washington.