Energy Policy:

Gingrich outlines plan for cutting gas prices and reducing dependence on foreign oil

In his new book, "Drill Here, Drill Now, Pay Less: A Handbook for Slashing Gas Prices and Solving Our Energy Crisis," former Republican House Speaker Newt Gingrich lays out a plan for tapping the United States' own natural resources, including gas, oil, coal, wind, solar, biofuels and nuclear, to help solve our economic and energy problems. During today's E&ETV Event Coverage, Gingrich, now a senior fellow at the American Enterprise Institute, calls on Congress to unlock the United States' oil reserves, end unnecessary deregulation and put more emphasis on the research and development of new technologies.

Transcript

Arthur Brooks: Ladies and gentlemen, I present to you Newt Gingrich.

Newt Gingrich: Thank you Arthur and I thank all of you. This is actually the first time the new leader of AEI has introduced me anywhere, so I feel like I'm sort of performing under the gun here today. This is a great opportunity.

We're very excited that Arthur is going to join us and considering the extraordinary leadership that Chris DeMuth has given here it is terrific to have somebody of Arthur's talent come along who I think will be able to continue building the momentum and building the new ideas.

And part of the reason that we wanted to show part of the film that Calista and I did, "We Have the Power," is as part of that, I think the AEI transition towards becoming more multimedia and more electronic in communication.

And I really believe deeply that if we're going to succeed in the competition of ideas that we have to learn how to communicate in every media in which our culture communicates.

And that whether it's YouTube or Facebook or a variety of other opportunities, that you have to find ways to communicate and that very often you can use film to get across ideas to entire audiences who might not ever read your book.

But who will, in fact, watch the movie and sometimes on YouTube, you can get a different audience that'll watch the 3 1/2 minute version. Several years ago, as some of you know, I gave a speech and we were standing right here.

And as part of the speech I talked about the concept of the difference in relative productivity between the federal government and the private sector and I used the example of UPS and FedEx.

And the 3 1/2 minute segment of that particular talk was called, "FedEx Versus Federal Bureaucracy," on YouTube, and is now will past 1,500,000 people who have watched it.

Who probably wouldn't have read the text of my speech or even known I even gave the speech. But we were able to reach out with ideas and I think we're at the edge of the same thing.

So I realize that talking about fundamental policy change just a few days before a presidential election may strike some of you as quixotic.

And I want to plead guilty to being a little bit in the tradition of Don Quixote in that I really do think that idealism matters and I really do think that ideas matter. And I'm really quite cheerful about talking about ideas, even in a political cycle.

I would also suggest to you, and this is my personal analysis of where we are based on having lived through the 1964 election and the 1974 election and the 1992 election, that this is not an election about ideology.

This is an election about performance and that the Republicans lost in 2006 as a function of performance because the Congress, in fact, had not behaved the way Republicans thought congresses should behave.

And that we are currently losing this election because of performance and that when you have a president who's at 23 percent approval, it's very hard to have an election in which you're able to convince people to give you another chance.

Far from complaining about the McCain campaign, I would just point out that he is running at least 22 points ahead of the president's approval rating.

And that that is actually an astonishing achievement and he may well run 25 points ahead, in which case he'll be the next president and we will have one of the most extraordinary Wednesday mornings you've ever seen, you know, as people try to explain how they got that one wrong.

But the key to recognize is that under any circumstance next year there is a real world which transcends politics and transcends the news media.

Now, I say that because Jimmy Carter, who won a very important election in 1976, never could quite come to grips with that real world. And by 1980 we had 22 percent interest rates, 13 percent inflation.

People were sick and tired of buying their gasoline on alternating days based on the last number of their license plate and we had long lines at gas stations. We had a 444 day hostage crisis.

And, in that setting, we had a speech that explained that the malaise we felt was our fault because we should give up all of our expectations. The American public didn't feel better about it.

Well, whichever party wins is going to inherit a huge mess and when you get beyond the hysterical news coverage of the present and people start looking at this mess they're going to be very dissatisfied with it.

You can't pour $700 billion into the U.S. Treasury without having a mess. You can't take over the largest insurance company in the world without having a mess. You can't bail out General Motors without having a mess.

You can't give every major bank billions of dollars without having a mess. And what's going to happen is by next spring people are going to start saying, "Why is this such a mess?" And they're going to say, "And what are we going to do about it?"

And this will become an enormous reorganizing argument. And sometime next year we will begin to realize that we are still sending hundreds of billions of dollars overseas to pay for energy.

And because the left may well believe this is an ideological election there's a fair chance they're going to come in and try immediately to reestablish the moratorium on looking for oil offshore.

And they're going to try to establish immediately passing a tax program disguised as cap and trade, but which, in fact, will be a tax program which will raise the cost of electricity, create scarcity of energy, slowdown investments in the United States, weaken the American economy, and accelerate the sending of jobs overseas.

Now, all of these things are likely to be in the middle of a debate by next March or April. And so I thought I would take this moment talking both about our book "Drill Here, Drill Now, Pay Less" and about the movie that we did, "We are the Power" to make a case that, in fact, in the spring of this year, when we were about to see the Boxer-Warner-Lieberman bill pass the Senate.

When everybody on Capitol Hill knew what the American people really wanted was to raise the price of gasoline by a dollar a gallon or more, we launched a little project at American Solutions called "Drill Here, Drill Now, Pay Less."

And within a matter of weeks we had over a million signatures. And John McCain decided he was for drilling offshore and Governor Crist of Florida decided he's for drilling offshore and Senator Obama decided he was sort of for drilling offshore.

And Speaker Pelosi, after announcing that she was trying to save the world, then decided she was trying to save her seat in the House and they found by the end of September they couldn't pass the moratorium.

And this is the first month in 27 years that it's legal to look for oil and gasoline offshore. Now, they've already announced their intention to go back and re-pass the moratorium, but it poses a question.

The American people, by something like 78 percent wanted to go find oil. In the petition drive we did we had 100,000 people who signed up as Democrats for more energy at a lower price.

And so there's a genuine bipartisan majority, it's 78 percent; you have a majority of Democrats, a majority of Republicans, a majority of independents. And it turns out, on energy, that this is true across the board.

On every aspect of energy the American people have a core cultural answer. They would like energy abundance at the lowest possible cost with the minimum environmental disruption and they would like it from American resources.

And their reasoning is not shallow or simplistic. If you look at Ahmadinejad in Iran, you look at Chávez in Venezuela, you look at Putin in Russia, you say to yourself, "Gosh, do I want to be sending them the money so that they have the power?"

And if you'll notice, during the recent Wall Street meltdown, all of the sudden all sorts of American companies were looking to foreign companies to solvent investment funds that were using American money that we had sent overseas to buy energy.

So that they are now rich enough to buy our company with our money because we have had, literally since the early 70s, an absolute total policy failure in Washington. Now, I want to thank Princella Smith who found this today and sent it to me.

This is the Associated Press. It came out today, perfectly timed for this and I confess, I'm a little bit like Reagan in that a fair amount of my research comes off of the newspapers, although, as they are declining it gets harder and harder to do it that way.

So, I'm starting to get it just out of the Internet. But the Associated Press sent out the following. Here is a series of quotes, quote; "Let us set our national goal that by the end of this decade we will have developed the potential to meet our own energy needs without depending on any foreign energy sources.

"Let us pledge that by 1980, under Project Independence, we shall be able to meet America's energy needs from America's own energy resources." Richard Nixon responding to the Arab oil embargo, November 7, 1973.

Now, you say, well, that was Nixon. It was 35 years ago. Quote, "I am recommending a plan to make us invulnerable to cut offs of foreign oil. It will require sacrifice, but it, and this is most important, it will work." Gerald Ford, State of the Union, January 15, 1975.

Quote, "This intolerable dependence on foreign oil threatens our economic independence and the very security of our nation.

Beginning this moment, this nation will never use more foreign oil than we did in 1977, never." Jimmy Carter in a television address on July 15, 1979, in which he announced temporary oil import quotas.

Quote, "We must take steps to better protect ourselves from potential oil supply interruptions and increase our energy and national security." Ronald Reagan in an energy security message to Congress on May 6, 1987, in which he raised concerns about, quote, "our increasing dependence on imported oil."

Quote, "Conservation efforts are essential to keep our energy needs as low as possible and we must then take advantage of our energy sources across the board, coal, natural gas, hydro and nuclear."

"Our failure to do these things has made us more dependent on foreign oil than ever before." George H. W. Bush in an address to Congress on September 11, 1990 in the run-up to the Gulf War.

Quote, "The nation's growing reliance on imports of crude oil and refined products threatens the nation's security because they make us more vulnerable to oil supply disruption." Bill Clinton in an energy security statement on February 16, 1995.

Quote, "We can promote alternative energy sources and conservation and America must become more energy independent and we will." George W. Bush, State of the Union address, February 7, 2001.

Now, have you noticed the one continuing reality of all six presidential statements? They didn't happen. They didn't happen because of politics. They didn't happen because of ideology.

They didn't happen because there was no coherent and consistent strategy. And so we have, in the last few weeks, as Arthur pointed out, had a decline in the price of oil. A decline brought about in large part for two reasons.

First, the world is entering a recession and, therefore, there is dramatically less demand and, it turns out as what is a shock to many of our friends, that supply and demand works. One technique to bring price down is to increase supply.

Another technique is to reduce demand. Well, the recession is reducing demand. And as it reduced demand, whatever the speculators margin, also collapsed, because all of the sudden it no longer worked to count on oil getting more expensive.

Oil may, in fact, drop as low as $45 a barrel or $40 a barrel. I mean the truth is nobody knows. But as the dollar strengthens oil will come down. We had a weak dollar policy; with a weak dollar oil gets more expensive.

But here's what we do know. Barring a catastrophe, China will continue to develop, India will continue to develop, all of the other Third World countries will continue to develop.

And, as people are better off, they like being mobile and in order to be mobile they like cars. It is almost universal outside of some newspaper editorial booths and the result is they will buy cars and the long-run demand for oil will go up.

But it's a lot more than oil. Modern civilization, I mean just look at this room, somewhere between the heat, the air-conditioning, the electric lights, the televisions, the audio, modern civilization requires energy. And a large part of that energy is also electricity.

So China today is opening up one coal burning electric plant a week, every week, and has no plan to slow down. India is opening up at a slower rate, but is opening up a fair number.

And here is the core dilemma, and I want to bring two different things together so people can understand what's at stake and why we felt it was so important to talk about creating a new energy strategy and to both write a book and create a movie to try to start a conversation which frankly we had going pretty well in September until Wall Street melted down.

And we actually were beginning, I think, to get a grip with the country, beginning to really have a conversation about this. There are two practical parallel things going on, both of which imperil us.

The first is that we have a genuine challenge of creating enough energy in an acceptable form to be able to sustain a high civilization with a growing economy. Now, people shouldn't kid themselves.

If we raise dramatically the cost of energy or we lower dramatically the availability of energy, we will increase the likelihood of a severe, long recession. There is no objective reason this recession has to last very long.

But if we have bad enough government policies it can. And sending hundreds of billions of dollars a year outside the country to buy energy when, in fact, we have the largest supply of energy in the world is really stunningly bad public policy.

The second challenge you have is that there's an ideological imperative to be anti-energy largely by very successful and very wealthy people who will experience none of the side effects.

And so they can advocate and there's a grave danger that the new administration and the new Congress will advocate programs that will dramatically raise the cost of energy. Now, that has several side effects.

One is it reduces investment in new energy. Another is that it makes it far more expensive for average Americans and for small businesses to buy the gasoline or to buy the electricity they need. But there's a further secondary factor.

If you artificially raise the cost of energy only in the United States you increase the net value of moving factories overseas. And what you actually do, if you measure the environment on a worldwide basis, is you increase the amount of pollution worldwide.

You don't decrease it, because you move factories from a country that has very high standards and enforces them to countries that have very low standards and don't enforce them.

And so there's a very grave danger that the Europeans and the Americans will collude to create a process by which they feel virtuous as they export all of their energy using systems overseas.

But, in fact, their actual effect on the worldwide ecosystem will be to make it worse, not to make it better. Now, I take those facts and I propose a fundamentally different strategy.

A strategy which we first began discussing in a book that came out last year called, "Contract with the Earth," where we began to describe a green conservatism in which we made the argument which, by the way, overwhelmingly the American people agree with, that science and technology is the key to a better economic future and a better environmental future.

That entrepreneurs are better than bureaucrats at solving environmental problems, a position that in one survey we did at American Solutions, by 70 to 24 the American people believe that entrepreneurs are better than bureaucrats at solving environmental problems.

And we believe that incentives are a major asset and we believe that for some major breakthroughs it is useful to actually establish large prizes. Again, a position about 79 percent of the American people agree with.

So if you want to get to, for example, very dramatic breakthroughs in clean coal or very dramatic breakthroughs in a hydrogen car, establishing large prizes may be the fastest way to maximize the number of people who are busy trying to apply science and technology to develop working systems.

And you only pay for working systems. You don't pay for the process. You don't pay for a long, complex application period. You don't limit it to people who can fill out 60 copies of a 300 page form.

You just allow the Wright Brothers to leave their bicycle shop, go to Kitty Hawk, and invent flight. And then you reward the flight. And if they don't fly you don't reward them.

But you can open up the system to an enormous level of competitive opportunity and of people developing a better future. The case we tried to make and I think it's very defendable and I would be quite happy to debate almost anybody on the left who wanted to counter this.

The case we wanted to make in both "Drill Here, Drill Now, Pay Less" and in "We are the Power" is very simple. The United States has more energy than any other country in the world. The reason that is true is that our coal supply is so much larger than Russia.

We have 27 percent of all the coal in the world. We are much bigger in coal than Saudi Arabia is in oil. In addition, we have three times the Saudi supply of oil in the Rocky Mountains alone in oil shale, three times the supply.

We have enormous opportunities in natural gas. In fact, there are recent estimates that new discoveries in the technology that enable us to go after natural gas that is embedded in shale at a fairly deep level may mean that the U.S. has a 1200 year supply of natural gas in the United States.

So you can go through item after item like this and you suddenly begin to realize that from solar power to wind power to hydrogen power to clean coal to nuclear power to petroleum that there's an endless opportunity.

I recently had the chance to see the beginning of the future by going to San Jose and driving a Tesla, T-e-s-l-a. Tesla is an all-electric sports car that has a very ingeniously developed battery system that's relatively inexpensive. And it has a Lotus body.

The actual electric engine weighs 75 pounds and it goes from zero to 60 and 3.8 seconds. It is faster than any internal combustion car in the world except the most expensive Ferrari. And it's an example of the future.

But notice, an electric car requires electricity. So, if you actually could magically wave a wand tomorrow and shift 40 percent of the American fleet to electricity, you'd have to have a dramatically bigger power grid producing dramatically more electricity.

And so you have this challenge that the people who don't like coal and don't like nuclear and don't like petroleum and don't like natural gas come up with a solution of a terrifically interesting, exciting electric car which won't go anywhere without electricity.

And then you say, well, where are you going to produce electricity? And what we tried to prove pretty conclusively was the suite of technologies available.

And I'm frankly wide open whether it's going to be next-generation cellulosic biofuel, whether it's going to be clean coal, whether it's going to be nuclear power, whether it's going to be breakthroughs and conservation capability.

If you look at one of the most interesting developments in carbon, the challenge of coal is that coal produces a lot of carbon as a byproduct.

And so if you're going to deal with massive quantities of coal, which the Chinese are now doing, you had better make a very big investment in clean coal technology, because coal is inevitably a significant part of the electricity production of the world.

Well, there are two basic ways to use the carbon without it going in the atmosphere, both of which have fascinating potential. The first is to actually turn the carbon into building material.

Carbon dioxide, after all, is the base of limestone and so you can actually create all sorts of building materials out of the byproducts of burning coal or gasification of coal.

And, interestingly, Florida State now has a project under way where they have discovered a particular carbon molecule that has 50 carbon atoms that turns that turns out to look approximately like Buckminster Fuller's idea of a geodesic dome, which is theoretically the strongest possible structure.

And they are now making, on an experimental basis, what they call buckypaper. And buckypaper, which is pure carbon, is dramatically stronger than steel and dramatically lighter than steel.

And begins to create the potential for airplanes and automobiles to get massively better mileage because they are so stunningly light and yet they are actually stronger and safer than traditional building materials.

Now, this is at the cutting edge of science. It's not going to be manufactured next Tuesday. But it creates all sorts of opportunities that represent a different future.

The other great breakthrough is to take the carbon dioxide and inject it into very deep wells and we suddenly discover that, in fact, there are no oil fields which have been depleted.

There are oil fields which currently have produced as much oil at the current pressure as they can produce economically given current technology.

But if you inject carbon dioxide, which they do routinely in West Texas, they do it there from natural sources, you increase the pressure underground, which pushes the oil up.

And there is an estimate that the U.S. has as much as 100 billion barrels of oil that is recoverable by taking the carbon dioxide from clean coal and injecting it into the natural reservoirs, which leads me to one of the great myths of the last 20 years, which is the concept of peak oil.

I feel this particularly because I used to teach environmental studies at West Georgia University. And when I was teaching in the early '70s one of the most popular environmental books was a book called "The Limits to Growth."

And the "The Limits to Growth" was done by the Club of Rome, so if you were teaching at a State College in Georgia it all sounded very sophisticated and very international. And so a millionaire left-winger had paid for this study.

And it turned out magically if you put in certain numbers and you ran them through a computer they came out in a predictable way. So they basically said we will be out of oil by 1986, because they put this set of numbers in at the beginning, the computer crunched them.

And so I have now been driving around for 22 years, when clearly that's impossible because "The Limits to Growth" said it wouldn't happen and they said we would run out of food.

And this was all reinforced by Paul Ehrlich who was the great advocate of catastrophes of the 1970s, who said for example Britain would be starving to death by the mid-90s.

Now, any of you have been to Britain know that it may be expensive enough in London you think you're going to starve to death, but, in fact, there's no objective evidence that Britain is on the edge of starvation.

But what they were doing is they were saying if you assume the following things, and then they would get this result. So let's talk about peak oil for a second.

Peak oil was an idea developed by one particular geologist who used fairly sound logic for the Permian basin of West Texas, which it turns out has now produced three times as much oil as he projected was possible.

Now, nobody who talks about peak oil, and you'll hear this all the time on the left, nobody who talks about peak oil ever mentions that he was only off by a least 300 percent because then it wouldn't be true.

And so on the left you'll hear people say, A, you're not going to be able to drill very fast, so that none of this will work any time soon and you're not going to be able to build nuclear power plants and you're not going to be able to get clean coal.

So the only thing we can really do is feel miserable. And, B, there's not enough left and, therefore, drilling won't get anything because we all know there's not enough left.

Well, I want to make two points with this. It is true that if you keep the current litigation regulation system it is very hard to get anything done.

We won the Second World War in three years and eight months; 44 months we defeated Nazi Germany, Fascist Italy, and imperial Japan, 44 months. It recently took 23 years to add a runway to the Atlanta airport.

So it's true, if you keep the current litigation regulation system you can cripple yourself enough that Putin and Ahmadinejad and Chávez will be grateful.

And that would lead me to say that we ought to pass an energy strategy that included substantial regulatory reform and substantial litigation reform as part of the energy strategy.

The second point I want to make though, they're just factually, totally wrong about peak oil. And they're factually, totally wrong about how much energy America has.

The current estimates of the U.S. government are based on surveys in the Atlantic, Pacific, Caribbean, Gulf of Mexico and off Alaska. The last survey was 1984. In the last 24 years we have an entire new generation of technologies for looking for oil. None of them have been used offshore, not a one.

So off Brazil, where they don't have the U.S. Congress crippling them they have, in the last two years, found enough new oil supply to go from 10 billion barrels of estimated reserve to 90 billion barrels in the Atlantic where we're not allowed to look, although this month we briefly can.

Second, in the Bakken formation in North Dakota, to show you how these things happen and the speed, we submitted to Regnery "Drill Here, Drill Now, Pay Less" on August 9 and it came out on, I think, September 22, which is a very fast turnaround for a book.

During the period it was at the printer, the U.S. Geological Survey announced that they had re-estimated the Bakken formation in North Dakota. And there was actually 25 times, not 25 percent, 2500 percent more oil in the Bakken formation than they thought it was.

And I cite this because we have a history of hundreds of years of science and technology responding to market opportunities by inventing better techniques and better approaches and creating greater opportunities.

And anybody who gives you a static model of our energy availability is denying everything we know historically about how we respond to these circumstances. "The Limits to Growth" was fundamentally flawed in the 1970s.

The argument that we have an adequate energy today is fundamentally flawed. What we have is inadequate and dangerously destructive policies.

And so part of what I wanted to outline and the reason I wrote the book was to create a handbook for the average American, that allows any American who wants to, to start realizing you should talk to your Congressman, you should talk to your senator.

You should demand a national strategy that really only has a couple of core ideas. One, we want to maximize the domestic American production of energy so that we are, for all practical purposes, never reliant on foreign dictators and we are not primary subsidizers of foreign dictators income.

Two, we want to do it across the board because we don't know which specific breakthroughs over the next 20 years are going to be the most dynamic.

And, therefore, we want to maximize the rate of evolutionary development, which means we ought to have a permanent R&D tax credit. We ought to have a series of prizes to accelerate breakthroughs.

We should be committed to change by incentive, which is my third point. I believe the history of America is you get things very fast when you incentivize them.

When we wanted to build the transcontinental railroad Lincoln did not propose a federal department of railroad bureaucrats to build the railroad. Nor did Lincoln propose that we punish the stagecoaches.

I mean if we had the current model of tax and destroy, which is what cap and trade really is, and we had had this model in 1859, you would have had politicians saying, "If only we tax the stagecoaches enough, that will force them to build a railroad."

It wasn't true. You just would have bankrupted the stagecoaches. You would have raised the cost of travel for every citizen. But you would have created nothing to create railroads, because railroads didn't grow in response to the stagecoaches.

Railroads created a totally new regime in which you had a totally new style of transportation, in which you could carry freight in ways that were inconceivable with stagecoaches. And so what Lincoln said was suddenly very different.

If you're prepared to build a transcontinental railroad we will give you a large subsidy per mile and we'll give you a square mile of land for every mile you build. Now, it was a very, very lavish thing because it was done during a war and it was designed to unify the country.

And, guess what, by 1869 we had built the transcontinental railroad and it worked. And throughout the late 19th century we became the most productive society in the world with the strongest domestic transportation system.

And, as a result, we became rapidly wealthier per capita than any other country in the world. And so I would argue you want to have an American focus on production of energy. Your goal is to have ample energy at a reasonable price with minimum environmental problems.

You want to do it in a way which maximizes our national security and maximizes our economic growth. And you want to do it through incentives rather than through punishment.

One last point about this whole approach, you can see key bottlenecks. We really need a hydrogen car in a pilot project, which is why I would be for a prize.

We really need badly to get major breakthroughs in clean coal, which is why I would favor, much like the Manhattan Project in World War II, where we undertook several projects in parallel, that we develop four or five clean coal projects in parallel.

I think, frankly, if you did it by saying that truly clean coal would count as an alternative fuel much like wind or solar, you could find a way to do it with no federal bureaucracy.

I would also argue we should fundamentally overhaul the federal government's bureaucratic structure.

It is clear it doesn't work today. It's not coordinated.

You have a whole series of different, separate operations and the bureaucracy of the Department of Energy is stunningly incompetent.

If you look at the promise in 2003, that we would open our first clean coal plant in 2008, and the announcement in 2008 that we would open it in 2016. And you realize the Chinese are probably going to open their first clean coal plant next year.

So the technology that will be licensed around the world for clean coal for the next decade will be Chinese, not American because we asked a bureaucracy to do something it can't do.

I don't think you ask bureaucracies to develop new technologies and new programs. I don't think it works and I think we have proof after proof it doesn't work.

They become slow, cumbersome, underfunded, spend too much time on planning, too much time on regulatory red tape, too much time on oversight, and too little time actually building anything.

And so I think you've got to fundamentally rethink how we've approached a national strategy and how we're going to actually implement that strategy. And it can't be done through a federal bureaucratic system.

I suspect in the very short-run what I'm saying will not happen. I suspect in the medium-run it may well happen for the following reason.

The American people, over the last few years, have begun to realize that sending this volume of money overseas is inherently destructive. It means that the great building boom is in Dubai, it's not in St. Louis.

It means that the growth of sovereign wealth funds are in countries that we have sent our money to so they can come back and buy our companies.

It means that we are vulnerable to a foreign dictator blackmailing us or, as the Russians are trying to do now in natural gas, to a new cartel emerging designed to weaken us and blackmail us and limit our freedom.

And so I think the average American, as a function of a better environment, a better economy, and better national security, wants to see some kind of energy strategy.

Our hope with "Drill Here, Drill Now, Pay Less" is that we begin to lay out that you can go through the book and see the beginning of an absolute national strategy that would be comprehensive. It would be all the major components.

It would be designed to accelerate very dramatically and it would be designed to actually create economic growth by having the investments here at home and having the development here at home.

And my closing point about economic growth is really simple, if you bring the money home, if you have people investing here, if you are creating the factories here, you are inherently increasing the wealth of America.

Whether you're talking about ethanol, which is raising actually the property tax values in the upper Midwest, you're talking about hydrogen power, you're talking about clean coal, you're talking about producing natural gas and oil, again and again you're talking about developing a dramatically greater strategy here.

Calista and I had the opportunity to go and see an example of these new technologies. We were in Abilene, Texas, at the largest wind farm in the world, which is actually run by Florida Power and Light.

As an example of what our failure to have an effective national strategy is like, virtually every American wind producing company has now been bought by European companies, because we've had no coherent, continuous strategy of encouraging the development of wind power in the U.S.

And both in Denmark and in Spain there's been an enormous effort to move in this direction. Denmark today, for all practical purposes, imports no energy, which I would have thought 20 years ago was theoretically impossible.

And does so as a very high quality of life, very effective economy that is very competitive in the world market. But they've had a strategy for 20 years and it's been a strategy of consistently moving in a direction of having more energy on the terms that they want it.

So, I look forward to your questions. I just wanted to lay out the notion that we're in the middle of a mess. As we start to come out of this mess, we have to have strategic direction for this country.

And if we're going to have genuine economic growth over the next 20 years and an effective national security strategy, it has to include a strong energy component or it will not, in fact, in the long run be successful.

So let me, if I might, just toss it open for questions. Yes sir, I think he's going to bring you a microphone. It's right here on the middle table.

Question: Thank you Mr. Speaker. Frank Fletcher, my question is you mentioned a Manhattan Project for clean coal technology. Would that be direct, government-sponsored like the Manhattan Project? And what do you see as the proper mix of government R&D spending in addition to tax incentives?

Newt Gingrich: Well, my goal would be to have the government fund it but not do it. Take for example the rise of the modern jet aircraft, which are all derivative of the Air Force and the Navy building first jet fighters and then jet bombers and so forth.

And actually, the earliest air transport jet passenger planes were a derivative of building tanker planes. Or look at the rise of the Internet. I think there is a place for the government to say we need this so badly we should fund it.

But I would externalize all the contracting. I would have none of it done internally and, ideally, I wouldn't even have contracts. I would have tax incentives.

And in this sense I'm like Alexander Hamilton in that I think it's perfectly legitimate for the government to shape the economy. This is also a point that Adam Smith makes.

But I think it's very bad to have bureaucracies engage directly in doing things because they don't do them very well. They very rapidly become politicized and they ultimately tend to become corrupted.

Whereas, as long as you have a marketplace competition I think it's worth doing and we've been talking with both electricity companies and with coal companies.

And we believe there are strategies for clean coal that would make it, in effect, a direct form of alternative fuel that would fit the tax code and you would immediately liberate private capital under private management to go and build it.

But I think you do want to define, very strictly, that you're talking about genuine breakthroughs, you're not just talking a PR claim. You're talking about genuine breakthroughs in carbon sequestration and in using the carbon effectively for something else. Yes, sir?

Question: Hi, I'm Stephen Lee. I have a question concerning your comments about the ideological struggle that we have over the past several years. We have been through this. We have some people with very strong intentions from the list that you read.

This involved the last 30 years and we have many, many presidents with very good intentions, but nothing got done. And it seems like it's something that will continue in the next couple of months if not years. And so how do we kind of break this impasse?

There seems to be a continuing desire to engage in debate, but not to anything. And so we can continue to debate about this and what is good to do and we continue to basically let this opportunity slip by.

And then we wait for the next shot, then we debate again and we kind of continue again. We just need to do something. So what are the actions that really can be done, can be taken to really effect real change is?

Newt Gingrich: Well, I think that there are a couple of things that have to happen. First of all, I think, as well as working, prior to the Wall Street meltdown, you've got to make energy a central topic that people are aware of and that you talk about with enough clarity.

I mean the purpose of both our book and our movie is to start creating a clarity where people can actually talk about it. Because people are not going to carry a topic that is so complicated they can't describe it. They can't get it.

The second has to be something we're going to be working on, which is to develop an actual action program. Because, again, you can get up and say we need an energy strategy. Fine, well, what is it?

Well, we outline, in the book, a whole series of steps really designed in the World War II tradition of doing it all in parallel. We're not suggesting pick one or the other.

I don't think we're smart enough to know today which of these technologies is going to evolve more rapidly or which is going to produce more energy at a lower cost or in a better way.

And so I want to see us have a maximum opportunity to develop that. And you see there is, by the way, with oil shale, where most of the concerns about oil shale are based on 20-year-old technology.

And then people tell you what they're worried about with oil shale and you look at the brand-new system that Shell has developed for retorting oil by heating it in place, heating the rock so that the oil literally comes out as kerogen, which is a waxy substance that you can then process, it's a totally different model than existed 20 years ago.

And so I think you want to encourage an across-the-board evolutionary process that will produce more energy at lower cost and that will accelerate the application of science.

That's one reason I advocate that one thing to force Congress to do is to pass long-term tax credits. If you pass a tax credit for one or two years at a time, you get minimal capital investment, because there's no stability to what it's going to cost two years from now.

And that's what happened to the wind industry in this country, is that the people would almost start a project, the tax credit would run out, the politicians would play around for nine months or a year.

In the meantime, the Europeans had stability. I mean it is a case study in de-industrialization and in having a policy that was guaranteed not to work.

And I know certainly at basic science levels in terms of a permanent R&D tax credit, that if you want us to compete in the world in the next 50 years, we have to have a continuous effort in science and technology.

Because we're going to see four to seven times as much new science in the next quarter-century. And if we're not investing in that basic research, we're going to literally just all behind the rest of the world with remarkable speed in a way we don't understand.

The other point I would make is that historically presidents have not made energy central to discussing the economy and central to discussing national security. So the secretary of Defense over here talks about national security, but doesn't mention energy.

And the secretary of the Treasury over here talks about getting the economy moving, but doesn't discuss energy. And so you can pass a national security bill and an economic bill and somehow energy was sitting out here not being talked about.

I think it's essential to insist that energy be integral to our future economic development and that any talk about how we come out of this recession include how we're going to substantially invest in the energy at home as opposed to sending the money overseas. Yes sir?

Question: Yes, Roger Seger with Resources for the Future. You've talked about carbon in passing, but not very directly. I mean it seems to me that almost any fossil fuel energy operation is going to be cheaper if you don't worry about the emissions than if you do.

So, obviously, there has to be some sort of incentives in the system by the government through carbon taxes, cap and trade, or what have you in order to deal with that.

You made a disparaging remark about cap and trade, but are you, in principle, in favor in some sort of a carbon tax? Or how would you handle that from ...

Newt Gingrich: I want you to notice the way you just, I'm not trying to pick a fight with you. But I want you to notice the way you just used the words. We need an incentive like a carbon tax. A carbon tax is not an incentive. A carbon tax is a punishment.

Question: Well, we need an incentive to reduce carbon. That's what the idea.

Newt Gingrich: Yes, we do.

Question: It is an incentive to reduce carbon.

Newt Gingrich: You tell me the size difference you want and I would get it by having a tax credit to bring it down, to make it worth while to get the new thing, not to have a punishment for the old thing.

Question: OK, we ...

Newt Gingrich: Because my interest is to accelerate the rise of the new, not to punish the maintenance of the old.

Question: I won't quibble about carrot versus stick, but essentially anything ...

Newt Gingrich: No, but it's central! We built the transcontinental railroad. For example, we built passenger airlines by subsidizing airmail in the 1920s and the 1930s in a way that got us experience with domestic flight that we would never have gotten by punishing the railroads for delivering the mail.

I mean I'm suggesting to you finding ways to incentivize entrepreneurs to go out and have this idea that they will do better by doing something that is new and that fits your values is a dramatically faster way to accelerate the economy than punishing people for doing something that is an inherited policy of the past.

And I'll give you a specific example. We have 240 million, this is why I posed the high cost of gasoline. We have 240 million vehicles. Now, you can't change this fleet overnight.

So, you're saying to somebody who lives in rural Nebraska we're going to make your life dramatically more expensive. And the Boxer memo would have added a dollar a gallon.

So we're saying to this person that lives in rural Nebraska, we're going to punish you for buying the vehicle that we've told you for 50 years you ought to buy.

Now, I'm perfectly happy if you want to come in and say let's have a substantial tax credit for hybrids or let's have a tax credit for electric cars or let's find ways to accelerate people to migrate to the new vehicles.

Question: Well, what do you give a tax credit for then with respect to let's say coal-powered operations? You'd give a tax credit for the development ...

Newt Gingrich: Well, if you have truly clean coal ...

Question: ... of low carbon emission systems?

Newt Gingrich: Yeah, right, you would say if you can reach the following standard on carbon emissions you would then qualify for a very substantial tax credit.

Question: But, in any event, somebody, the government is determining what sort of standards you need to shoot for.

Newt Gingrich: Sure.

Question: All right.

Newt Gingrich: And I think it's fair to have the government, but I'm using a standard to get to an incentive because I think that accelerates invention.

Question: Well, I'm an economist, so we view these as sort of symmetrical, but ...

Newt Gingrich: No, they are symmetrical, but they're not symmetrical in capital allocation. I think you would agree with that as an economist. I can attract more capital to an incentive than I can indirectly attract to the new thing by punishing the old.

Furthermore, my model actually puts the money in the private sector and I have a hunch that they're going to try to put the money in the government, which I am deeply opposed to. I want to say one other thing by the way.

Before anybody talks to me about that, the whole problem of balancing the budget, which I once helped do for four straight years, you just had this government add a trillion $200 billion to spending this year in a nine-month period.

And if you can throw away $182 billion on a stimulus package, if you had taken the same amount of money and put it into an energy strategy, we would be radically better off than sending out $600 checks to ourselves.

And, by the way, we'd took a survey on this at American Solutions with Doug Schoen, who was Clinton's pollster in 1996, and by 63 to 21, the American people agreed we'd have been far better off to have an investment program than to just write ourselves checks for $600, which in the end did nothing particularly useful to anybody. Yes sir, way over here.

Question: Andy Patterson with Econergy. I wanted to build on your comment toward the end there, Newt, about sending too much money overseas, but take it a step further.

And that is the real threat to national sovereignty is having energy policy imposed on us by the international bond market.

In other words, instead of taking our paper currency for interest payments, they start insisting that we pay for the funding of our federal deficit in carbon reductions, coal resources, oil that we have.

They do what happened to Brazil in the 1990s when it was heavily privatized. They had to have a garage sale. So we might be at the precipice where foreign investors insist on an energy policy that we don't like, but it's imposed on us to deal with the problem of printing this massive amount of currency that you referred to.

This is being talked about under climate bonds by Yvo de Boer and others very quietly. But it's a threat to national security by threatening our currency.

Newt Gingrich: Well, I think, in fact, we were just having the discussion a little while ago in the future focus of the AEI, and I think that the whole issue of the financial solvency of the country across the board is a key part of our national security.

We desperately need to remember that our original national security model wasn't how many aircraft did you buy or how many aircraft carriers there are.

Our original national security model was how strong was your economy, how strong was your education system, how strong was your science and technology, how strong was your financial structure?

I mean the British beat Napoleon on their financial system that enabled them to sustain the royal navy in a way that the French couldn't match. Now, we beat the axis powers in part by the sheer weight of our productivity in a way that was phenomenal.

And I think none of us fully appreciate yet how much those core, underlying patterns of national security are now being endangered by a bureaucratic system and a tax code. The bureaucracy is incompetent and the tax code is destructive and both are likely to get worse in the next few years.

Question: But how would Congress react if they couldn't just print money and offer debts to finance the deficit? There were additional ...

Newt Gingrich: Well, I lived through that once. Now, the question you just asked was how would Congress react if you couldn't just print money?

In 1979 Paul Volcker, as chairman of the Federal Reserve, came back from a meeting, I believed it was in Belgrade, where he had been told by the other bankers that they would no longer support the dollar.

And he had to report to President Carter that he literally had no choice except to kill the inflationary spiral. And it was that moment, it wasn't a voluntary domestic decision by the Carter administration.

It was that literally Chairman Volcker had a gun at his head and they were going to crush the dollar as a currency unless we got our act together.

And that's what led to the extraordinary rise in interest rates in 1980, which, in a way, made Carter's reelection almost impossible. I mean you had the wheels coming off in the economy. And I think that there is a danger of that.

Again, I want to go back to what we've just done. I look at the idea of adding a trillion $200 billion in authorization this year to a $3.1 trillion already existing budget.

I mean if that is not an invitation to inflation, I don't understand how anybody can imagine you're not going to get an inflationary spiral out of this. And that's going to pose a whole new wave of challenges.

Just about at the point that hopefully we start to recover, watch the feds start to raise interest rates in response to what will be unbelievable signals of inflationary pressure. Let's see, that gentleman right there and then the lady next to him.

Question: You didn't mention ANWR at all and I'm kind of curious about that. The opponents of drilling in ANWR basically claim it to be a pristine wilderness that we can't touch.

But Jonah Goldberg of National Review actually went there and found it more to be a hellhole of mud and mosquitoes and I'm wondering, why don't we challenge opponents of drilling in ANWR to actually go there and see what it is? Then maybe they won't be opposed to it.

Newt Gingrich: Well, you just made Vince Haley's day. Vince helped write "Drill Here, Drill Now, Pay Less" and is an adamant advocate that we always mention ANWR because he believes that, when you look at the facts, the opponents look so silly that it makes you wonder how we've been hung up on this.

But this is really a theological issue. I mean, first of all, it's a sign that you're not really into the environment that you regard having mosquitoes in mud holes as a hellhole. The fact is, for the mosquitoes, it is an extraordinarily nice place.

They like when the caribou come through. They infest them so much that some caribou actually run amok because they're in so much pain from the mosquitoes.

And the mosquitoes would, I think, probably rightfully resent what you said and try to sue for slander if they were eligible. And I'm sure there will presently be a trial lawyer proposing a bill to make them eligible as an injured party in this kind of conversation.

The fact is, when you look at the new technology and when you look at the part of the Alaskan wilderness that we would use for finding oil is so small, that somebody once said it was like a postage stamp on the front page of the New York Times.

And it is an area where you would have such relatively small intrusion and it's right next to the production area at Prudhoe Bay. So it actually requires even less involvement. And, if you don't drill there, they are presently going to close down the pipeline.

I mean 50 years from now or 100 years from now historians are going to look back and think we were just insane. We have over 10 billion barrels of known reserve sitting in an area of few miles from a known production facility.

It would clearly have a substantial impact on the American economy. It would keep the money in the U.S. It would lower at the margin the price of oil and we can't do it. And we can't do it. And there is zero practical reasons.

It's a theological fight between those who have decided that if they chant no long enough that they will have won a big fight about the nature of the future. But it has nothing to do with the actual facts on the ground.

Because the facts on the ground or that we have virtually no impact. We had the same experience in both our book and in our movie. I was down with Governor Jindal last week in Baton Rouge talking to the people who deal with wildlife and conservation in Louisiana.

The sports fishing industry in Louisiana uses the derricks of the offshore wells because they become reefs. And so they actually have more game fish around the oil wells. And I think we have one film.

I don't think we used it in the movie, but we have one film of a whale cavorting around an oil rig in the Gulf of Mexico. But, again, people will tell you, oh, you can't do that.

When I was a graduate student at Tulane, I would take my children to Avery Island where the Audubon Society owned a bird reserve which was one of the largest rookeries in the United States, which had a pumping system on the island that had no effect there.

I think they actually did close it down because it was ideologically, not because it was doing any damage, but they felt so ideologically deviant actually producing oil and gas to pay for their reserve that they closed it because it somehow made it a violation of whatever their moral code is.

But it had nothing to do with facts; the fact was the birds were happy, the natural gas production was happy, it was all fine. It just didn't fit theologically. This lady right here.

Question: Thanks. Hi, my name is Kate Sheppard. I'm with Grist magazine. You mentioned the idea of government not picking winners and you mentioned Denmark and the wind technology there.

That they long ago decided that when technology is going to be big and the government had heavily subsidized getting that energy in order and getting that in line. But then you also mentioned this Manhattan Project for a clean coal.

First of all, I ask what's the role of government in choosing technologies, if they're going to say, yes, clean coal is what we want to fund, and then how does that look? What is the role of the government then in picking or looking at funding renewables, wind, solar, tidal, any of these things?

Newt Gingrich: Sure, this is a very, very good question and let me draw the distinction. I'm prepared to make the moral judgment that we are better off to find sources of energy that are, A, American and, B, have less impact on the environment.

So I'm setting a standard and I want to do so at the lowest possible cost to maximize the availability for every American. So those are my goals, so I'm clearly biasing the system.

And you can say, boy, if we could just build an old-fashioned coal plant with nothing to take out the sulfur or acid, nothing to take out any of the pollutants, nothing to take out any carbon, it's a lot cheaper. That's true.

So if you pick no winners you could argue for all sorts of things that might work. They just recall the side effects you're not willing to tolerate.

Once you have defined though the framework of what you're trying to accomplish, I think you are much better off to set it up as a market competition in which any of the technologies can compete to achieve the standard that you're trying to get.

Because, the truth is, you don't know today which breakthroughs over the next 20 or 25 years are going to be the most decisive. And that's why what I don't want to have is a government bureaucracy which looks at applications, decides they're going to pick company A over company B or they're going to pick technology Z over technology A.

But I am willing to say, if you're in this class of technologies we're going to encourage your development. And that's something we've done for virtually all of American history.

Remember, the first telegraph line in the world was built between Baltimore and Washington with a congressional grant. As an example, by the way, of not quite getting the right winner, the Congress passed $50,000 in aid to the Smithsonian to build the first airplane.

They had the wrong model and their plane went into the Potomac and the Wright brothers, who got no money, actually invented how to fly the same year, which made the Smithsonian really angry and they had a really bad relationship.

So, if you get a chance to go to the Air and Space Museum you will see the Wright fliers there, but it took 35 years for the Smithsonian to convince the Wright brothers to quit being mad at them.

We've always had, and I know for some of my libertarian friends this is hard to swallow, but we have always had a bias in favor of investing in science and technology.

It goes back to Washington who raised animals and was continuously tinkering and imported, for example, a new breed of sheep from Spain and saw himself as something to do with that.

Jefferson, who had a similar pattern of invention. Franklin, who, of course, was one of the greatest inventors in the world and was recognized worldwide as a scientist.

These folks all believed in knowledge and they all believed in a bias in favor of knowledge in general, which is why I urge conservatives to read Hamilton's first report on manufacturers and first report on the debt, to understand that you can do it with out getting involved in bureaucracy and without picking specific companies or picking specific winners. One or two last questions. Yes sir, up here.

Question: I'm Bob Hershey. I'm a consulting engineer in energy. What can be done in getting rid of some of the harmful regulations?

Newt Gingrich: Well, I think you have to define the end result you want. I mean the best example I can give you is nuclear power. Calista and I went up to Three Mile Island, which actually you can see from where my grandmother's house was in Royalton, Pennsylvania.

And we had a mistake at Three Mile Island in 1979, which, unfortunately, occurred at about the same time as a totally misleading movie called the "China Syndrome," which basically had a model of what happens with nuclear power.

It was just totally false, but very, very brilliantly acted and it frightened people. The second reactor at Three Mile Island came back online in 1983 and actually holds the world record for continuous production and we filmed at Three Mile Island.

It turns out after 30 years of looking, or 28 or 29 years of looking at this, there is zero indication of any public health effect from Three Mile Island.

And, in fact, the average person got the equivalent of a set of chest X-rays in total additional radiation if you lived within 20 miles of the island.

That was the total side effect and there's been zero evidence in public health surveys which have been fairly exhaustive. And, in fact, 59 percent of the people in the area are in favor of more nuclear power plants.

I mean it's just the opposite of the kind of attitude you sometimes get from some of our elites.

But we have so many litigation problems, so many regulation problems, and the Nuclear Regulatory Commission has adopted such an arcane model of approval that you actually have to go out, fight your way through everything, put up all of your capital, build the entire plant and then hope it gets approved at the end.

Whereas, the Japanese have a very standardized approach, as long as you are doing exactly what you say you're going to do and as long as you're following a basic system of engineering, they can build a plant in five years.

Well, you can check with anybody in the nuclear industry, if you could build nuclear power plants in five years they would be stunningly competitive with any other form of energy.

And, if you're going to go to an electric car model, as many of our friends would like to, you had better plan on having nuclear power, which also has the side benefit that nuclear power is a steady-state process.

So, at night, when the electric grid doesn't need as much power, you can actually use the nuclear power to generate hydrogen, which becomes a major step towards having a hydrogen economy. So there are a lot of good reasons to go to nuclear power.

I remind friends who are worried about carbon loading of the atmosphere that if we produced the same amount of electricity from nuclear power as France, which is around 71 percent, that we would take 2,100,000,000 tons of carbon dioxide a year out of the atmosphere.

It would be that big of a difference. So I'm hoping you're going to see us adopt a bill on nuclear power, which, in fact, cuts through a lot of the regulatory stuff you're talking about.

But the same thing has to be done, I think, in terms of other energy systems and it's not just regulation, it's also litigation.

When Shell Oil did every single thing right in Alaska, and this is in our book, when they did every single thing right in Alaska 80 percent of the leases they were granted automatically had lawsuits filed just as a harassment device to drag it out and raise the cost of doing it.

And I think that should be totally unacceptable as a strategy and should lead to some kind of loser pay rules or to just literally making it not practical.

If you do everything you're supposed to do and you've met every government regulation, it strikes me as fundamentally unfair that somebody can then deliberately step in to bankrupt you by artificially raising the price. So, yes sir?

Question: Hi Newt, Jim Luciere. Just getting back to that theme of simple, quick, easy things the government could do, say the first thing a presidential administration could do to dramatically change the public's perception of what resources we have.

How about letting private companies, with their own money, pay to do the seismic testing that has not been done since 1982? That's the way it's supposed to be done under the Outer Continental Shelf Lands Act.

That's something a president could do literally with the stroke of the pen. Perhaps revaluing or recalibrating our reserve calculations so that we look at the total amount of oil and gas in place rather than trying to guess how much of it would be recoverable using 70s technology, talking about methane hydrates as a 15,000 year supply of natural gas.

What are the three or four things your checklist would be for issues that people who want to be activists on the subject could focus on that really shouldn't require congressional approval, that shouldn't require litigation, but would dramatically move us away from our current policy which is don't ask don't tell as far as offshore resources are concerned to something that would change the whole framework of the debate?

Newt Gingrich: Well, I think the first and most immediate challenge is for everybody to say to their congressmen and their senators don't reimpose the moratorium.

I mean we've already had Democratic majority leader Steny Hoyer in the House say that as soon as they get through the election he wants to come back and reoppose the moratorium.

And that's, by the way, against the wishes of about 78 or 79 percent of the American people. So, I think the first thing to do is to make sure that your congressman and your senator won't vote to reimpose the moratorium.

It's that straightforward, because if they can reimpose that you're back to where we were last summer. The second thing, I really like your idea. In fact, I wish I had thought of it a couple of months ago.

Because if this administration had been organized and aggressive, the minute that it was announced that they couldn't continue the moratorium, which has about three weeks before it ended, the president could have called every major company. And on October 1 they could have been going out doing seismic evaluation.

And you're exactly right, if instead of trying to do a U.S. geological survey five-year process of eventually someday doing something, if they would simply go and say we're going to open this up so that companies can go out and do the surveys as long as they make them public.

You'd have a terrific amount of research done pretty rapidly and you would find that there was a fair amount of oil people could bid on and gas people could bid on I think very quickly. One or two more. Yes sir?

Question: Cho Chin, Fredence correspondent. I would like to have you say one thing more. A very big resource to get gasoline, other than drill, is coal liquefaction. Both U.S. and China have lots of coal and have lots of demand for gasoline. How about this U.S. and China have a competition in making a coal liquefaction both efficient and economic?

Newt Gingrich: Well, I think if oil stays above $60 a barrel I think you will see coal liquefaction and coal gasification in the U.S. There's a new generation of technology which is pretty clearly going to produce a lot more energy per ton of coal and do so in a way that is actually very, very compatible with the modern automobile.

And one of the challenges, when you're trying to get these kinds of breakthroughs, is to minimize the scale of the infrastructure you have to rebuild. I mean I'm a big fan, in the long run, of hydrogen cars for example.

But it is a long way from here to having enough distribution systems, enough hydrogen stations, etc. Whereas, if you find ways to produce liquids in forms that are compatible with current car engines, that can be distributed inside the current infrastructure.

So, I do think you're going to see a substantial amount of effort moving in that direction in both countries, for the reason you pointed out.

I mean if you're China or the U.S. and you have the scale of our coal reserves, we're fairly foolish to be sending money to the Middle East when you could, in fact, be using your reserves.

But it takes around $60 a barrel to make that a practical thing. Way over there in the corner, yes ma'am? He's going to come to you, yes?

Question: I have a question about your focus on self-sufficiency. I completely agree that technology is going to be the key to American development, but I wonder, with the idea of comparative advantage if self-sufficiency is the right thing to focus on.

And I'm thinking of the example of Brazil and ethanol. And the biomass that Brazil uses to produce ethanol is extremely efficient and much more efficient than corn is, which is what we are encouraging in the U.S.

So I'm wondering what your opinion is on the U.S. continuing to encourage the technology producing ethanol based on corn when, really, it seems almost wasteful when you look at how Brazil is doing it and how much more efficient it is.

Newt Gingrich: Well, I think the Brazilian model is a very powerful model and they are in the right part of the equator to produce a great deal of ethanol based on cane sugar.

Although, the fact is that Brazilians do a number of things that make them self-sufficient. And they were very eager to go out and find this 90 billion barrels of additional oil reserve. They didn't say, gosh, we don't need it.

They were glad to have it. I believe, in the U.S., you're going to get a next-generation cellulosic technology which uses everything from wood chips to corn husk as a fundamentally different model.

And I think you may get a third-generation technology which is being experimented with both at Texas A&M and at MIT where you actually have the microbial transformation of the product without using heat and chemicals in the traditional model.

But my hunch, and I'm an outlier on this because I have such faith in science, my hunch is that biofuels, in fact, will have a significant piece to play in the future.

And, again, I wouldn't try to prescribe them, but I would say that that's an area where you'd want to have the continued development of those technologies.

And, I have to say, Adam Smith makes the point that there are times you want to deliberately distort markets. And one of his grounds for doing so in "The Wealth of Nations" is national security.

And when I look at Russia's potential grip over Western Europe in natural gas, or I look at what the transfer of wealth to Chávez and Ahmadinejad and Putin and, frankly, to the Saudis who have been the largest funders out of the Wahabbist effort around the world.

I have to wonder whether or not we haven't been foolish as a matter of national security to not want to have a deliberate strategy of dramatically less expensive oil simply to limit the resources of our competitors and minimize their ability to do things that are damaging.

And I think, in that sense, in my mind, energy is fully as much a national security issue as it is an economic issue because of what it does to empower.

Very expensive, $140 a barrel oil is stunningly dangerous for us in terms of empowering Russia, Iran, Saudi Arabia, and Venezuela. And I think we have to think of it in those terms as well as in economic terms.

Anyway, I appreciate very much this chance to share ideas. I think this is what the American Enterprise Institute is all about and I appreciate all of you taking time this afternoon to come and be part of it. Thank you very much.

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