How does reducing reliance on imported oil affect foreign policy? Is energy infrastructure at home and abroad properly protected from a terrorist attack? Former CIA Director Jim Woolsey joins OnPoint to discuss these issues in addition to the energy bill, oil industry, CAFE standards, hybrid cars and biomass fuels.
Colin Sullivan: Welcome to OnPoint. I'm Colin Sullivan. Today we're joined by Mr. Jim Woolsey, former director of the CIA and Brian Steinbeck, senior reporter for E&E Daily and Greenwire. Mr. Woolsey thanks for being here.
Jim Woolsey: Good to be with you.
Colin Sullivan: I'd like to first start out with a question about foreign policy versus energy policy. You agree with the president on his foreign policy in Iraq, but largely disagree with some of his production heavy energy policies. Can you explain where you think the president's gone wrong?
Jim Woolsey: I think --
Colin Sullivan: On energy specifically.
Jim Woolsey: I think there's too much emphasis on the very distant future. Hydrogen fuel cells for automobiles are an interesting technology and we ought to spend some R&D money on them, but we've got an urgent problem, both in terms of environment and global warming and especially in terms of national security, and we ought to be moving quickly to reduce mileage or improve mileage on vehicles and to reduce the use of oil and use of alternate fuels. And I think the president's program is weak on that. I think there's altogether too much emphasis on drilling in ANWR. I didn't support that. It's a relatively small amount of oil. If it were a gigantic amount of oil it might be different, but it's not. It could be environmentally damaging and it has to use a trans-Alaska pipeline which is a very vulnerable facility. So I think they really ought to be focusing on things like hybrids, in particularly plug-in hybrids, and they ought to be focusing on some of the new biomass fuels that can be produced from waste, both biodiesel and cellulosic ethanol. I say cellulosic meaning not corn, not corn, not corn.
Colin Sullivan: Now do you think the Republican Party is too closely tied with some of these domestic oil and energy industries to go ahead with processes like that?
Jim Woolsey: Oh, I don't know. I don't know. Look, I grew up in Oklahoma, in Tulsa, which fancied itself at the time, the oil capital of the world, and I don't think it's so much a matter for people from an oil background of self interest, it's more a cast of mind. For generations, really going back to the 1860s, people who've produced oil have done a lot for the country and a lot for modern economy, but sometimes they tend to have blinders and not see the problem as one of say powering vehicles or getting people to move around, but rather to produce more and more oil. I think we just, we have to try to help people from all sorts of backgrounds, somewhat broaden their aperture a bit.
Brian Stempeck: The energy bill really doesn't address some of the things that you're talking about, the cellulosic ethanol and the plug-in hybrids cars. It does have incentives for other alternative energies and things like that, but generally they're talking about regular corn-based ethanol, not the "not corn" that you're talking about.
Jim Woolsey: Yeah.
Brian Stempeck: Do you see the energy bill that the Congress has been working on for the last few years as a failure?
Jim Woolsey: Well, it's the bill they started on four years ago and there's been a lot that's happened in the intermediate years. I think that corn-based ethanol has gotten us started, but you're not going to be able to have nearly enough ethanol to make a difference until you're producing it from agricultural waste, crops such as switchgrass, prairie grass that's grown on a very large share of the CRP lands, that is the Conservation Reserve Program, the soil bank lands. I think that only if you use residues, waste, rice straw from fields, which you have to get out of the fields because it has silicon in it after you harvest rice, waste paper and for biodiesel things like turkey carcasses or chicken manure. You need to be able to use waste or material that is available in bulk everywhere, very cheaply, and some of it, like our animal carcasses, has negative costs, so-called tipping fees. You have to be able to use that kind of material rather than something that you cultivate so carefully and use so much energy to cultivate such as corn.
Brian Stempeck: Do you think that argument is getting through on the Hill? You have so many of these members of Congress who are tied to the farm interest, tied to these corn growers and farmers who have invested in these plants and Archer Daniels Midland as well.
Jim Woolsey: Well, I think the farmers are going to help. I think the farmers are going to get out ahead of some of the corporate interests because farmers see the end of agricultural subsidies coming because of international trade considerations and others. They are increasingly, agricultural co-ops around the country and the rest, are waking up to the fact that they may be able to be paid in rural America for growing energy crops. If you can get paid something just for mowing your CRP lands, which is naturally planted in switchgrass in the Midwest, and selling it to local ethanol producer, producing cellulosic ethanol, not only is that great for the America Middle West, it's great for the farmer in Mali, who may be able to earn an extra few tens or even a hundred or two dollars a year by selling agricultural waste. The oil business doesn't do that for people in countries like that. Some of the poorest people in Nigeria sit right on top one of the world's greatest oil deposits and one of the reasons they're always fighting and in rebellion is because they don't have a piece of that action.
Colin Sullivan: One of the reasons you've called for more money for energy conservation is because we're too dependent on countries like Saudi Arabia and Iran. To what extent do you think oil dollars have funded terrorism against the United States as filtered through Saudi Arabia and other countries?
Jim Woolsey: Oh, I think oil dollars going to the Middle East has been hugely responsible for, directly and indirectly, for terrorism. Alexi Alecsayeth, who used to watch these issues for the Soviets and defected to the U.S. back in the '80s, knows as much about the money in this area as anybody I know and he says using Saudi figures, the Saudis have spent something like $85-$90 billion, that's with a B, since the mid-1970s spreading their form of Wahabi Islam around the world. Now some wealthy families in the gulf fund terrorism directly. Let's say the Saudi government only funds Wahabi ideology, but that ideology is angry, hostile to Sufis, hostile to Shiite, hostile to Christians, hostile to Jews, hostile the women, hostile to music, hostile to modernity, hostile to everything. And it's the soil that the terrorism ideology grows in. Somewhat the same way that German nationalism of the '20s and '30s was the soil in which Nazism grew. Not all German nationalists of the '20s and '30s became Nazis. Not all people educated in Wahabi schools in Pakistan or anywhere else become terrorists, but that's the soil in which it grows and we have been paying for that, $85-90 billion to fund that sort of hideous stuff that's sent all over the world with our payments for oil.
Colin Sullivan: Now one of the reasons the president justifies his war in Iraq is spreading democracy in the Middle East. It seems to me you're saying it has more to do with securing energy independence than it has to do with, or is that a same goal?
Jim Woolsey: No, I think that over the long run we're only going to have peace in the Middle East if we move it toward democracy and the rule of law. Hopefully we will not have to do it with GIs and Marines in all cases and we're starting to see some interesting developments, even in Saudi Arabia and a little bit in Egypt, certainly more in Lebanon and so on. I think directly as a result of our move against Iraq. So we don't want to do this by fighting any more than we absolutely have to, but basically democracies don't go to war against one another, historically. There have been 29 major international wars, a thousand casualties or more since 1945, almost exactly one every other year. Zero between democracies and there have been about 350 wars in the 175 years from the end of the Napoleonic era until the end of the Cold War and about maybe two or three of those 350 have had democracies on opposite sides. Over the long run, we're doing the right thing by helping that part of the world move toward both democracy and peace. It's just going to take a long time. There's going to be backsliding. There's going to be problems, but I think we have to do it.
Brian Stempeck: Why do you think that the argument about reducing our dependence on foreign oil hasn't really resonated? A key way to do that would be to increase fuel efficiency standards, something you argued for as part of the National Commission on Energy Policy.
Jim Woolsey: Yes.
Brian Stempeck: But you also wrote a, basically a dissent in that, in the National Commission report, where you said, "It's kind of a shame that we couldn't come out with a recommendation." Even the national commission, a bipartisan group looking for pretty common sense solutions, couldn't come up with a recommendation. Why such a stalemate on this issue?
Jim Woolsey: Well, I think that part of the problem in the past has been by having specific targets for CAFE standards and requiring people to meet them no matter what. Industry has gotten off onto the idea that suppose we have difficulty getting there, then there's no end to what we're going to have to spend. What we did on the National Energy Policy Commission was come up with a safety valve. Today, for example, I think it's about 55 miles per gallon per vehicle. If you are, let's say, the Maserati Company, and you are not meeting your CAFE standards, you can pay that and exceed or not meet the CAFE standards by that amount. We said, let's make something like that or perhaps a little more, a charge and make it tradable. So if Maserati wants to build fuel inefficient cars they can sell those credits in the same way the sulfur dioxide credits for emissions are sold and the same way carbon trading is beginning to occur. Why not give people flexibility and let them trade credits as between different types of vehicles, as between different types of companies, but put a ceiling on it. And that decision by the commission brought around the representatives from labor and from business, that previously, I think, had not been willing to go along. So we were not able to hit on a specific number. I suggested a 10 to 20 mile per gallon improvement over the next few years in the CAFE standards, but it'll get delegated to the highway agencies and we'll let them decide. You know Europe now is about 42 miles a gallon for the fleet. Japan is about 47 miles per gallon and we are 25 miles per gallon. So even a 10 to 20 mile per gallon improvement, by the United States, puts us short of where Japan is today. It's not as if it's technologically unfeasible.
Brian Stempeck: Do you think oil prices are going to change that? Last week we saw prices at about $57 a barrel, some analysts are even saying $100 a barrel oil is possible in the near future. Is that going to have an impact on the CAFE debate?
Jim Woolsey: It'll have an effect definitely and one thing that is really going to hit people between the eyes, I think, when they realize it, is that hybrids are easily adaptable to having a plug-in feature. We talk about this in the report, so you can plug them in and then go for several miles with the existing battery, that's about 6 miles, with the lithium batteries that'll come along soon, that'll maybe be 20 miles, before you get into the hybrid gasoline electric use. So if you're running entirely on power that you have, for say a few miles, that you've plugged in at night in the garage and charged the batteries with, you are at nighttime rates in a lot of parts of the country that's 2 to 4 cents per kilowatt hour. That's the equivalent of 12 to 25 cents a gallon gasoline. Once consumers understand that they can drive half of their driving or so, on the equivalent of 12 to 25 cents per gallon gasoline, I think people are going to be knocking down the door --
Brian Stempeck: That's a pretty far out option as well. I mean you say hydrogen cars are far out, I mean there's no carmaker right now that's making a plug-in hybrid. You see an automaker like Toyota with their hybrid, they advertise saying, you don't have to plug it in.
Jim Woolsey: Well, it's about as stupid a set of advertising as the advertising for always having hotter cars, but if people don't want to advertise for hybrids by saying that they're fuel-efficient, they can say that they have higher horsepower because we found, on the commission, that every hybrid that has a counterpart, there were four of them when we wrote, it has a counterpart in the regular engine department, the hybrid not only is much more fuel efficient, it also has higher horsepower. Now as far as not having plug-in hybrids are concerned, front-page story Saturday in the business section of The New York Times talks about how people are making this change in their garages. This is not rocket science. These batteries will take a charge. Now, I'm not handy enough to do that, but there's companies starting up that are changing the regular hybrids to being a plug-in hybrid. This is not rocket science.
Colin Sullivan: Well why is the U.S. auto industry so opposed? What's the problem there?
Jim Woolsey: I don't know that they're fundamentally opposed, but they have just gotten so used to selling cars because they're bigger and heavier and hotter and faster, that to even advertise the fuel efficiency seems to be something of a wrench for them. Don't ask me why, I really don't know.
Colin Sullivan: OK, if we can turn back to energy infrastructure, the former NASA security adviser Robert McFarland, recently said, "A single attack on certain Saudi oil facilities could take 6 million barrels per day off the world market." How vulnerable, as a former director of the CIA, how vulnerable do you think facilities in Saudi Arabia are versus domestic facilities in the United States?
Jim Woolsey: Well, they're vulnerable because they're close to where more terrorists are and they're vulnerable because so much oil production is concentrated in the Middle East. The scenario Bud is talking about is one that former CIA officer Bob Baer has in the opening pages of his book, "Sleeping with the Devil," which is for terrorists to fly a 747 into the sulfur cleaning towers up near Ras Tanura, in northeastern Saudi Arabia, since Saudi crude is very sulfur heavy those towers are essential and knocking those down would take about a year to get them back and that takes 6 million or so barrels a day out of production and that send the world's economies into an absolute tailspin. What Bud has said on a couple of occasions, is that he's an old Marine artillery man and he thinks he could do it from three miles away with a medium sized mortar, so one might not even need to hijack a 747. The only reason we use that scenario is it's one that's been out there a lot as a result of Bob Baer's book. But there's certainly other vulnerabilities to the energy infrastructure, in the Middle East and the U.S. I mean virtually all of our refineries are in the Gulf Coast area and just a few cities. The pipelines are concentrated. The trans-Alaska pipeline, as I said earlier, is very vulnerable to sabotage. We really need to get into the business of producing our fuel for vehicles in a distributed fashion, just the way we need to get into that for electricity generation and cellulosic ethanol and biodiesel let you do that. You don't have to concentrate the production either in the Middle East or in just a few refineries and so forth in the U.S.
Colin Sullivan: Are you surprised we haven't seen that kind of attack? Is it imminent?
Jim Woolsey: Well, I honestly believe that the administration dealt a very heavy blow to al-Qaida with the war in Afghanistan and they're dealing a blow to some al-Qaida folks along with the Ba'athists in the Sunni triangle now. But al-Qaida has sort of metastasized. It's in a lot of countries. I think a lot of these cells are not real well coordinated. They may not have access to really sharp engineering talent, such as Khalid Sheikh Mohammed, who was the No. 3 head of operations for al-Qaida and was captured. But they're still virulent, they're still able to undertake terrorist attacks, and I think they will. It may take them some time and we may have a bit of time if we use it to move to things like plug in hybrids and cellulosic ethanol and biodiesel.
Brian Stempeck: Beyond the potential for terrorist attacks, another really key driver in oil prices right now, is demand from China and India and other developing countries. How do you see that affecting U.S. foreign policy as China gets bigger and starts making ties with a lot of countries like Sudan, like Venezuela, some places we get our oil and some places we don't want to get our oil?
Jim Woolsey: Well to a first approximation there's one worldwide oil market and what's important is that China and, less aggressively, India are out there in the market vigorously because their economies are booming and they're so huge. That is one of the things that's going to drive demand up and we think, on the commission, drive the cost of petroleum up in the years to come, even absent terrorist attacks. A lot of the world's fields, and you can get some disagreement on this, have probably hit their so-called King Hubbard peaks and once a field hits its peak production costs start to up sharply. The Saudi fields, some of them, may or may not have hit those peaks, but nonetheless production is so cheap in the gulf, more and more it will be the case that we will all become more and more dependent on the gulf as production costs, you know going from say $15 a barrel in Russia up to $20 or $30, become evident. So I think the gulf is going to be dominant and it's going to be especially dominant because of this increased demand from China and India as well as economic growth in the U.S. and Western Europe.
Brian Stempeck: China is also strengthening its ties with Iran. It's also stationed troops in Sudan. So I mean these are countries that have major foreign policy implications as well.
Jim Woolsey: Oh sure.
Brian Stempeck: Does that set up, I've heard some experts say that they think that sets up a potential of violent conflict with us and China.
Jim Woolsey: It could occur. I think the conflict with China, if it occurs, is far more likely to be over Taiwan and in the Taiwan Straits than it is over oil. But China is, you're right, very aggressively moving to tie up long-term contracts with Venezuela and Russia, about a million, million-and-a-half barrels a day from each of those that came to us before will probably get diverted toward China. Now that means we'll have to buy from other places and it will drive up the price of oil. It doesn't mean we will lose totally the 3 million barrels, but we are seeing, because of China's and India's growth, more and more stress on the demand side and I think we will in the years to come. That's what the commission found.
Brian Stempeck: What should the White House be doing about that? I mean is there any reaction that we can take in terms of foreign policy or jawboning OPEC or things like that or is there really nothing to be done about this?
Jim Woolsey: I think it's largely a waste of time. We can try to get some long-term contracts ourselves, but the key thing is to move to use a lot less oil and that means with say a 50 mile a gallon hybrid, that becomes a plug in so you, let's say you're getting half your vehicle miles on electricity from the grid, and as I said at 12-and-a-half to 25 cents per gallon gasoline equivalent. You've got about a 100 mile per gallon of gasoline car. Now you make that a flexible fuel vehicle, which is just a few, different kind of plastic in the fuel line and a slightly differently programmed computer chip, we've got millions of flexible fuel vehicles, a lot of Ford Taurus' and so forth on the road now. And use 85 percent cellulosic ethanol you now have something in the ballpark of a 400 mile per gallon gasoline car. Now ethanol in a corn form, in a starch form, takes a lot of energy to produce, about seven barrels of oil to get eight barrels of ethanol. But Senator Lugar, Richard Lugar and I wrote a piece in Foreign Affairs six years ago and went through the numbers on this, cellulosic ethanol takes about one barrel of oil to produce seven barrels of ethanol, because basically all you're doing is collecting agricultural waste or mowing prairie grass. We could cutback very heavily with that come with biodiesel, new biodiesel now coming from turkey carcasses at ConAgra and some other companies that are operating at a turkey processing plant out in Missouri. We could, by using waste generated biodiesel, agricultural residue generated ethanol and hybrids and plug-in hybrids, the multiplicity of effect of doing all those things together with existing technologies, we're not talking about a Marshall Plan, I mean a Manhattan Project to invent some new technology here. These technologies are all here and either right at the edge of coming on the market or in the market. Once we're doing that we really are, in principle, moving toward multi-hundred mile per gallon of gasoline vehicles and that's the way, I think, to move decisively against what's happening with China and elsewhere, not by jawboning.
Colin Sullivan: OK. We're out of time. Mr. Jim Woolsey, thanks for being here.
Jim Woolsey: Good to be with you.
Colin Sullivan: Hope you come back.
Jim Woolsey: Thanks.
Colin Sullivan: Join us tomorrow for another edition of OnPoint. Until then I'm Colin Sullivan for E&ETV.
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