American Enterprise Institute

October 31, 2008

[Edited transcript from audio tapes]

2:45 p.m.	Registration
3:00	Introduction:	Arthur C. Brooks, AEI
	Presenter:	Newt Gingrich, AEI
4:30	Adjournment

Proceedings:

Arthur C. Brooks:  Thank you for coming to today’s forum.  I’m delighted to see you all here.  We’re honored, as always, to have a good audience to hear what we believe will be a set of ideas that will change the way that you think and that will have an impact on American public policy.  My name is Arthur Brooks.  I’m a visiting scholar at the American Enterprise Institute and I’m the incoming president of the institute starting January 1st.

Six months ago, I was putting gas in my car in Syracuse, New York, where I lived at the time, and I was paying $4.50 a gallon.  I had the same conversation I had every time I put gas in my car with the person at the next pump, who said, “Something’s got to be done about this.  This just isn’t right.”  And I agreed, of course, and if you pursued the line of conversation, it would have something to do with oil prices, where we’re getting our oil, what it means for our prosperity, what it means for our national security, and on and on and on.  You’ve had that conversation too.

Well, yesterday, I put gas in my car and it cost a lot less than that and I didn’t have that conversation and nobody ever says, “This is an outrage,” anymore, and the reason is pretty clear, oil was $145 a barrel then and it’s $65 a barrel today.  Suddenly, that seems to have calmed the ardor for change, but I think that we all agree that it shouldn’t and that somebody has to make sure that it doesn’t calm the ardor for change.  If it was important six months ago, it’s important today.

That’s the animating belief behind all of the research here at the American Enterprise Institute.  We believe that we need to think about armed conflict in times of peace, even though it’s inconvenient to do so.  We believe here that we should think about the consequences of economic recession, even during times of prosperity because during times of prosperity, we can come up with the best solutions.  We can do so not in a climate of desperation but rather with a climate of opportunity.  We can come up with our best solutions.  And today’s book forum adds to that kind of conversation that we believe is so critically important for good policy analysis.

The book we’re going to discuss here today is entitled Drill Here, Drill Now, Pay Less: A Handbook for Slashing Gas Prices and Solving Our Energy Crisis.  It makes the case for domestic energy production, exploration and research.  And we’re talking about energy of all types, doing it here and doing it now.  The case is for better American and world prosperity, for a more secure national security that’s not based on desperation about energy and making sure that our energy needs do not eviscerate our national ideals by enriching our enemies, by increasing our dependence on others and impoverishing our working families.

Our speaker today is no stranger to any of you.  He’s one of the most creative minds in American political and intellectual life today, somebody that we’re so proud to have in the AEI family and who has been associated with AEI, in one form or another, since the late 1970’s and most seriously and intensively since 1999.  This, of course, is Newt Gingrich.  Mr. Gingrich served as the Speaker of the House of Representatives from 1995 to 1999; during which time, he was the principal architect of the famous Contract with America, which changed the way that we understand political mobilization and progress in public policy in the United States.  He’s a senior fellow here at AEI and a distinguished visiting fellow at the Hoover Institution.  He’s the chairman of the Gingrich Group.  He’s the general chairman of the American Solutions for Winning the Future, the founder of the Center for Health Transformation, the list goes on and on of leadership positions and visionary ideas that he has been behind.

Newt Gingrich is the bestselling author of an astonishing ten books out of his last 18 books on the New York Times bestseller list, an amazing feat.  He is a commentator on television, and on the radio.  We hear from him nearly constantly, much to the greater good of the policy debate in the United States.  He’s truly an intellectual entrepreneur and somebody that we’re so proud to be associated with here at the American Enterprise Institute.  So 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 new ideas.

And part of the reason that we want to show part of the film that Callista and I did, We Have the Power, is a part of 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 medium in which our culture communicates and 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 will watch the three-and-a-half-minute version.

Several years ago, as some of you know, we did -- I gave a speech.  I was 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 examples of UPS and FedEx.  And the three-and-a-half-minute segment of that particular talk ended up being -- it was called “FedEx versus Federal Bureaucracy” and is now well past 1,500,000 who have watched it, who probably wouldn’t have read the text of my speech, who even know I ever 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 and 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 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 Congress 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, 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 President and people started 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’ll 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, slow down 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 that 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 in 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 a 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, 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 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 Chavez 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 a sudden, all sorts of American companies were looking to foreign companies, to sovereign investment funds that were using American money that we had sent overseas to buy energy so that they’re now rich enough to buy our company with our money because we have had, for the last, 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 that 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 sorry to get this just out of the Internet.  But the Associated Press sent out the following.  Here’s a series of quotes: “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 7th 1973.  Now you say, “Well, that was Nixon.  That was 35 years ago.”

“I am recommending a plan to make us invulnerable to cutoffs of foreign oil.  It will require sacrifice but it, and this is most important, it will work,” Gerald Ford, State of the Union, January 15th 1975.

“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 15th 1979, in which he announced temporary oil import quotas.

"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 6th 1987, in which he raised concerns about "our increasing dependence on imported oil.”

"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 11th 1990, in the run-up to the Gulf War.

"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 disruptions,"-- Bill Clinton, in an energy security statement on February 16th 1995.

"We can promote alternative energy sources and conservation, and we must.  America must become more energy independent, and we will," George W. Bush, State of the Union address, February 7th 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, and 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 a sudden, it no longer worked to count on oil getting more expensive.  Oil may, in fact, drop as low as $45.00 a barrel or $40.00 a barrel.  I mean, the truth is nobody knows that as the dollar strengthens, oil will come down.  We had a weak dollar policy.  With a weak dollar, oil gets more expensive.

Now here’s what we do know.  Barring a catastrophe, China will continue to develop.  India will continue to develop.  All 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 boards.  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 getting to really have a conversation about this. 

There are two practical parallel things going on, both of which are perilous.  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 and 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’s 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 a 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 thing.  If you are to officially 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 problem’s opposition; that at 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 try to make -- and I think it’s very defendable and I’d 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 and, 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 on a fairly deep level may mean that the U.S. has a 1,200-year supply of natural gas in the United States.  And 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.  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 in 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 and exciting electric car, which won’t go anywhere without electricity.

And then you say, “Well, where are you going to produce the electricity?”  And what we tried to prove pretty conclusively was the range, the suite of technologies is available, and I’m frankly wide open, whether it’s going to be a 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 in 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 in the world.

Well, there are two basic ways to use the carbon without it going into 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 coal, out of the byproducts of burning coal or gasification of coal. 

And interestingly, Florida State now has a project underway, where they have discovered a particular carbon molecule that has 50 carbon atoms, that turns out to look approximately like Buckminster Fuller’s idea of a geodesic dome, which is, theoretically, the strongest possible structure.  And they’re 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 that get massively better mileage because they are so stunningly light and yet, they’re 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 environmentalist books was a book called The Limits to Growth.  And The Limits to Growth was done by The Club of Rome, so if you’re teaching in a state college in Georgia, it all sounded very sophisticated and very international.  And so a millionaire, a 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’ll 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’d run out of food and this was all reinforced by Paul Ehrlich, who was the great advocate of catastrophes of the 1970’s, who said, for example, “Britain would be starving to death by the mid-’90s.”  Now any of you who 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 you 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 in 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 at least 300 percent because then, it wouldn’t be true.  And so on the left, you will 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 and regulation system, it is very hard to get anything done.  We won the Second World War in three years and eight months.  Forty-four months, we defeated Nazi Germany, Fascist Italy, and Imperial Japan.  Forty-four months.  It recently took 23 years to add a runway to the Atlanta airport.  So it’s true, if you keep the current litigation and regulation system, you can cripple yourself enough, that Putin and Ahmadinejad and Chavez 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, 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, which were done in 1980 -- 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 ten 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, in the last ten weeks, to show you how these things happen at a speed, we submitted to Regnery Drill Here, Drill Now, Pay Less on August 9th and it came out on, I think, September 22nd, 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, 2,500 percent more oil in the Bakken Formation than they thought there 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 1970’s.  The argument that we have inadequate 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’d had this model in 1859, we’d have had politicians saying, “If only we tax the stagecoaches enough, that will force them to build a railroad,” which wasn’t true.  You would have just 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 stagecoach.  Railroads created a totally new regime, in which you had a totally new style of transportation and which you could carry freight in ways that were inconceivable with stagecoaches.

And so what Lincoln said was something 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.  That 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 a transcontinental railroad and it worked.  And then 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 and a pilot project, which is why I’d 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 major 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 at 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.  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 have to fundamentally rethink how we have 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 that 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 of 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 began the layout, 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.  That means 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.

Callista 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 has 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 wanted.

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, right here in the middle table.

Frank Fletcher [phonetic]:  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.  I mean, 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 derivative of building tanker planes.  I think -- 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’d 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 engaged 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 of a p.r. claim.  You’re talking about genuine breakthroughs in carbon sequestration and in using the carbon effectively for something else.  Yes, sir?

Stephen Lee [phonetic]:  Hi, I’m Stephen Lee, and I have a question concerning your comments about the ideological struggle that we have over these past several years, that we have been through this, we have some people who faced strong tensions 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 going to be as something that will continue in the next couple of months or at least, 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 do anything.  And so we can continue to debate about this and what is good to do and we can continue basically letting these opportunities slip by and then we wait for the next shock and 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 or can be taken to really effect real changes?

Newt Gingrich:  Well, I think that there are a couple of things that have to happen.  First of all, I think, as it was working prior to the Wall Street meltdown, you’ve got to make energy a central topic that people are aware of and that they understand 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 this.  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, what is it?  Well, we outlined in the book a whole series of steps really designed in the World War II tradition of doing it all in parallel.  But 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 lower cost or in a better way.

And so I want to see us have a maximum opportunity to develop that.  And you see this, by the way, with oil shale, where most of the concerns about oil shale are based on 20-year-old technology.  And when people tell you what they’re worried about with oil shale and you look at the brand new system that 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 that 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 we pass -- one of the things 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 people can’t say there is no stability to what is going to cost two years from now.  And that’s what happened to the wind industry in this country, is that the people got so -- they 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 it’s certainly at basic science levels in terms of permanent R&D 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 fall behind the rest of the world with remarkable speed in the way we don’t understand.

The other point I’d 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 and 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 energy at home, as opposed to sending the money overseas.  Yes, sir?

Roger Sedjo:  Yes, Roger Sedjo 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 of some sort of a carbon tax?  Or how would you handle that -- [cross-talking]?

Newt Gingrich:  Well, I wanted you to notice the way you -- see, 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.

Roger Sedjo:  But we need an incentive to reduce carbon.  That’s the idea.

Newt Gingrich:  Yes, we do.

Roger Sedjo:  It is an incentive to reduce carbon.

Newt Gingrich:  And I would prefer to get -- 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 worthwhile to get the new thing, not to have a punishment for the old thing, because my interest is to accelerate the rise of the new, not to punish the maintenance of the old.

Roger Sedjo:  I won’t quibble about carrot versus stick, but essentially, you need to have something.

Newt Gingrich:  No, but it’s central.  We built the transcontinental railroad.  For example, we built passenger airlines by subsidizing air mail in the 1920’s and 1930’s in a way that got us experienced 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 this specific example, we have 240 million -- this is why I oppose the high cost of gasoline -- we have 240 million vehicles.  Now, I mean, 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.”  The Boxer-Lieberman-Warner's cap-and-trade amendment would have made gas a dollar a gallon.  So we’re saying to this person who 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.”

Roger Sedjo:  But what do you give a tax credit for then with respect to, let’s say, coal-powered operations?  You’d really give the tax credits to the development -- [cross-talking].

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

Arthur C. Brooks:  -- of low-carbon emission systems -- [cross-talking].

Newt Gingrich:  Right, you would say, “If you can reach the following standard on carbon emissions, you would then qualify for a very substantial tax credit.”

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

Newt Gingrich:  Sure.  And I think it’s fair that the government -- but I’m using the standard to get to an incentive because I think that accelerates invention.

Roger Sedjo:  Well, I’m an economist so we view this as sort of symmetrical, but -- [cross-talking]

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.  But I want to say one other thing, by the way.  Before anybody talks to be about the whole problem of balancing the budget, which I once helped do for four straight years, you just had this government add a $1.2 dollars to the spending this year in a nine-month period.  And if you can throw away $182 billion on this stimulus package, if you’d 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 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 had an investment program than to just write ourselves checks for $600, which, in the end, did nothing particularly useful to anybody.  Yes, sir, right over here.

Andy Paterson:  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 1990’s 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 a discussion a little while ago on the future focus of 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.  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.  And we beat the Axis powers, in part, by the sheer weight of our productivity in a way that 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, which is -- the bureaucracy is incompetent and the tax code is destructive and both are likely to get worse in the next few years.

Andy Patterson:  But if Congress reacts that they couldn’t just print the money and incur debt to finance deficits or additional -- [cross-talking]

Newt Gingrich:  Well, I lived through that once.  Now the question he just asked was how Congress would react if you couldn’t just print money.  In 1979, Paul Volcker, as Chairman of the Federal Reserve, came back from a meeting; I believe 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 re-election almost impossible because 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 had just done.  I look at the idea of adding a $1.2 trillion 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 the point that hopefully, we start to recover and watch the feds start to raise interest rates in response to what would be unbelievable signals of inflationary pressure.

Let’s see, the gentleman right there and then the lady next to him.

Male voice:  You didn’t mention ANWR at all, and I’m 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 and then maybe they won’t be opposed to it?

Newt Gingrich:  Well, you just made Vince Haley’s day.  Vince helped write the Drill Here, Drill Now, Pay Less and is an adamant advocate that we always mention ANWR because he believes that it is -- 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 and mud holes as a hellhole.  I mean, 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 amuck 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 ten billion barrels of known reserve sitting in an area a 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 reason.  It’s a theological fight between those who have decided that if they chant “No” long enough that they would 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 in the ground are that it would have virtually no impact.

We had the same experience in both our book and in our movie.  If you go down, and I was down there with Governor Jim Doyle last week in Baton Rouge, and 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.”  I used to take my children, when I was a graduate student at Tulane, I would take my children to Avery Island where the Audubon Society owned a bird reserve, with some of the largest rookeries in the United States, which had a pumping system on the island that had no effect.  I think they actually -- they closed 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 oil production or the natural gas production was happy, it was all fine.  It just didn’t fit theologically.  Let’s see, yes, this lady right here.

Kate Sheppard:  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.  They had, long ago, decided that wind technology is going to be big and that the government had heavily subsidized getting that energy in order and getting that in line.  But then you also mentioned this Manhattan Project for Clean Coal.  I guess, first of all, I guess 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 -- like, what’s the role of the government then in picking or looking at funding renewables -- wind, solar, tidal, any of these things?

Newt Gingrich:  Sure, yes.  And that 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.

What I don’t want to pick -- so I’m clearly biasing in the system and you could say, “Boy, if we can just build an old-fashioned coal plant with nothing to take out the sulfuric acid, nothing to take out any of the pollutants, nothing to take out any carbons, and a lot cheaper”, that’s true.  I mean, so if you pick no winners, you could argue for all sorts of things that might work.   They just would cause side effects you’re not willing to tolerate.

Once you define 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 or 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 that the Wright flyer is there, but it took 35 years for the Smithsonian to convince the Wright Brothers to quit being mad at them.

So we’ve always had, and I know for some of my libertarian friends this is hard to swallow, we have always had a bias in favor of investing in science and technology that 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 someone to do that; Jefferson, who had a similar pattern of an 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 first, Report on Manufacturers and first report on the debt to understand that you can do it without getting involved in bureaucracy and without picking specific companies or picking specific winners.  One or two last questions, just up here.

Bob Hershey:  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.  Callista and I went up to Three Mile Island, which is actually -- you can see it 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’s record for a continuous production.  And we filmed at Three Mile Island.  It turns out, after 30 years of looking or 28-29 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 has 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 the 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 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 produce 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’d be that big 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 them 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 just to bankrupt you by artificially raising the price.  Yes, sir?

Jim Lucier:  Hi, Newt, Jim Lucier.  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 a stroke of a 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 in the subject could focus on that really shouldn’t require congressional approval, it 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 re-impose 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 re-impose the moratorium.  So the first step, 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 make sure that your congressman and your senator won’t vote to re-impose the moratorium.  It’s that straightforward because if they can re-impose that, we’re back to where we were last summer.

The second thing, I really like your idea, and 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 is about three weeks before it ended, the President could have called every major company, and on October 1st, they could have been going out during seismic evaluation.  And you’re exactly right, if instead of trying to do a U.S. geological survey, a 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 their 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’s a fair amount of oil that people could bid on and gas that people could bid on, I think, very quickly.

One or two more.  Yes, sir?

Charles Chen [phonetic]:  Charles Chen, a freelance correspondent.  I would like to [indiscernible] very big resources to get gasoline other than drill is coal liquefication.  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 coal liquefication boost efficiency and economy?

Newt Gingrich:  Well, I think if oil stays above $60.00 a barrel, I think you will see coal liquefication 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, et cetera.  Whereas if you find ways to produce liquids and 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., you know 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 $60.00 a barrel, I’m told, to make that a practical thing.  Way over there in the corner, yes ma’am?  She’s going to come to you.  Yes?

Female voice:  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, it 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 of 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’re in the right part of the equator to produce a great deal of ethanol based on cane sugar, although the fact is the Brazilians are doing 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., we’re going to get a next-generation cellulosic technology which uses everything from woodchips to corn husks 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 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 and natural gas, or I look at what the transfer of wealth to Chavez and Ahmadinejad and Putin and frankly, to the Saudis who have been the largest funders of the Wahhabist 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, and 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 the chance to share ideas.  I think this is what the American Enterprise Institute is all about and I appreciate all of you taking the time this afternoon to come and be part of it.  Thank you very much. 

[Applause]

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