USDA Global Conference on Agricultural Biofuels - Minneapolis, Minnesota, August 21, 2007

Thomas C. Dorr Under Secretary for Rural Development - Closing Remarks

Thank you, Dr. Buchanan, for that very kind introduction. It is a distinct a pleasure to be with you today.

I want to begin by applauding the work you are doing ... everyone here ... Dr. Buchanan and ARS ... and your colleagues from around the country and indeed around the world ... to accelerate the development of biofuels and the carbohydrate economy.

The work that you are doing is transformational. I am convinced that when we look back ten and twenty years from now ... and assess the impact of what you are doing today ... the results will be profound.

Your work promises to transform the world's energy balance ... our national and energy security ... the environment ... and, not least, the economy of rural America and indeed agricultural producers around the world.

Our grandchildren, of course, will take it all for granted ... but you and I know better. What you are doing IS important. Thank you.

At any conference, the final speaker has two special obligations. The first is to acknowledge and thank those of you who have resisted the rush to the airport and stayed for the final session. The second is to make those who left early think they missed something important.

The hard thing about this assignment is that most of what needs to be said has already been said -- and probably more than once. So let me change gears just a bit and spend a couple of minutes looking ahead.

Where do we go from here?

In particular, given that agricultural biofuels - and other renewable energy sources as well - are moving into the mainstream, how do we manage the logistical, regulatory, and industrial policy issues associated with large scale development of distributed energy production?

Make no mistake: we are indeed entering a new era. Renewable energy ... including but certainly not limited to biofuels ... is moving out of the lab and into the mainstream. Renewables are going commercial.

$60 and $70 oil has changed the equation. Aggressive policy leadership in recent years has also made a difference. The Energy Title of the 2002 Farm Bill, the Energy Policy Act of 2005, the President's Advanced Energy Initiative, and the 20 in 10 Initiative have changed the equation.

Finally, YOU have changed the equation as well. You are helping to pioneer an exciting new frontier. Together we ARE moving the needle:

• On the research front, since President Bush took office, the federal government has invested $12 billion to develop cleaner, cheaper, and more reliable energy sources ... everything from biofuels to hydrogen fuel cells to carbon sequestration to next generation nuclear. The entire energy sector is in play.
• Installed wind capacity in the United States has quadrupled since 2000. We led the world in new capacity in 2005 and 2006 and are likely to do so again this year.
• This is an international story as well. Globally, installed wind capacity rose 25% last year. Europe, especially Germany, still leads ... the U.S. is gaining fast ... and Asia is just now getting into the game in a big way.
• Looking to solar, global photovoltaic installations have increased an average of 25% annually over the last 10 years, with worldwide growth rates for the last 5 years of over 35%. Other solar technologies are also growing rapidly.
• And finally, to bring the discussion back around to the purposes of this conference, you all know the numbers on biofuels:
• In the United States, we have tripled ethanol production in this decade and will double it again in the next two years.
• The first generation of commercial scale cellulosic ethanol plants is under construction. We still have to demonstrate the technology at a commercial scale, but the groundwork is being laid now.
• Last but not least, biodiesel production in the U.S. has increased from 2 million gallons in 2000 to an estimated 379 million this year -- that's USDA's latest number -- headed to around 700 million by 2010.

Clearly this decade marks a turning point for renewable energy, both in the United States and abroad - and we are just getting started.

Renewables are building out from a very low base -- still only about 6% of U.S. energy consumption overall. Some look at that statistic and say that the glass is mostly empty. Others - including, I'm sure, most of us here - look at it and say that the growth potential is almost unlimited.

I agree - and from the standpoint of USDA Rural Development, it is that growth potential that commands our attention today.

Bottom line, renewable energy isn't just good for national security, energy security, the economy, and the environment. It IS all those things ... but it is ALSO the greatest new opportunity for investment, jobs, and wealth creation in rural America in our lifetimes ... and it is happening fast.

For those involved with biofuels research, this isn't theoretical anymore. For the first time, private capital in large amounts in flooding into renewables. Real bets are being placed in competitive markets.

I've attended the Renewable Energy Finance Forum in New York City the last several years, and the growth in interest is phenomenal. Dollars are being committed. Dirt is being turned. The buildout has begun.

With hundreds of companies seeking competitive advantage in various niches ... with over a hundred biorefineries in operation and many more to come ... with the hunt just beginning for new energy feedstocks as we move beyond corn ... the pace of research and innovation is almost certain to accelerate. This is not yet a mature technology. We are still climbing a learning curve, and the best is yet to come.

I'm not bold enough to put a number to this potential. As a lifelong farmer, however, I do know that when my dad started farming, corn yielded about 40 bushels an acre. Today we average over 160 bushels ... more than 200 on good ground ... and yields continue to increase.

If you ... those of you in this room, and your colleagues around the world ... can achieve anything similar with regard to energy yields, the future is bright indeed.

It is a new ballgame outside of the labs as well.

As we look at this enormous potential ... at the new infrastructure that we will be building out in the years to come ... one of the key features conditioning development is that the new resources coming online are inherently distributed ... broadly owned ... and predominately rural.

This is a classic case of "back to the future." Once upon a time, of course, all energy production was distributed. You gathered or chopped your own firewood, or hired someone to do it for you.

Economies of scale - first in coal, then in natural gas, oil, and nuclear - changed all that. Over the last 150 years, we have grown increasingly accustomed to a highly centralized energy economy. Our logistical, regulatory, and investment models are patterned accordingly.

But now distributed resources are back, and in a big way. The new resources are the oldest of all: wind, sunlight, and agricultural and forest feedstocks.

From a rural development standpoint, the good news about this is twofold: these are predominately rural resources, and ownership is dispersed or, in the case of wind and solar, free for the taking.

This means anyone can participate, provided you can put together a financial and business plan to underwrite the capital costs. One of our objectives at USDA Rural Development is to ensure that farmers and other rural investors are able to take advantage of that opportunity.

The distribution is geographic as well. With cellulosic ethanol, virtually every part of the country apart from high desert areas can participate.

Wind and solar potential varies from one region to another -- but again, virtually every part of the country can participate to some degree.

The map is being redrawn. Here's just one sign of the change. We've not built a new petrochemical refinery in the United States since 1976. Over 120 ethanol production facilities have been built in the same time period ... and we're just getting started.

Yes, the ethanol plants are smaller. They rely on local sourcing. The distribution network will run from the heartland to the coasts, not the other way around. Biofuels will require new and very different gathering, storage, and distribution systems, mostly in rural areas, with significant economic opportunities at every point of this value chain.

An ethanol plant, for example, isn't just corn and enzymes. It's trucking, railroads, and eventually pipelines. It's construction and maintenance ... water and power infrastructure ... workforce training ...finance and insurance. It ultimately means more families in town, more kids and teachers in school, and more pizzas delivered on Saturday night.

Similarly, for wind and solar the implications go far beyond power to the grid. They include land rent and royalties ... transmission corridors and rights of way ... and again, construction, finance, insurance, and a ripple effect across the whole community.

There are of course challenges to be overcome. The integration of distributed generation into the grid poses technical, regulatory, and pricing challenges to legacy systems. We are studying these issues and working with stakeholders to resolve them.

There are also challenges for traditional farm lenders and the rural banking community. Money center banks enjoy economies of scale in finance. If rural communities are to participate fully in the new opportunities, traditional rural lenders need to step up.

Again, we can help. We stand ready to provide technical support and financial assistance to help mitigate risk and encourage participation by rural lenders.

Finally, perhaps the greatest challenge of all is to rural entrepreneurs. Farmers own about a third of the nation's current ethanol production capacity, but only 12% of the capacity under construction. When you consider that farmers own 100% of the underlying resource, from a rural development standpoint that is a significant missed opportunity. But we are still early in the game.

In his 20 in 10 Initiative, for example, President Bush has proposed an Alternative Fuels Standard of 35 billion gallons by 2017. This is roughly a seven-fold increase over current production. The Energy Bill recently passed by the Senate is in the same ballpark.

For those who missed Phase I of the buildout, this is a wakeup call. A remarkable opportunity is opening. It is big. Leaving wind and solar aside and looking just at biofuels:

• America's bill last year for imported oil exceeded the dollar value of production from all of our farms and ranches combined.
• A 35 billion gallon biofuels industry means a new market for producers half the size of today's net farm income.

That is why the renewables revolution has become a top priority for USDA and USDA Rural Development. We are an investment bank for rural America with a portfolio of more than $97 billion invested in rural infrastructure, housing, businesses, and energy development.

Our mission is to increase economic opportunity and improve the quality of life in rural communities. And clearly, renewable energy is one of the principal drivers of economic growth in rural America today ... and for years to come.

In closing, therefore, let me say simply that we appreciate what you are doing to make this possible. We are excited to be your partners in the renewables revolution. We are in the early stages of a transition that may take decades to unfold ... but there is no going back, and the future is bright. Thank you.