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USDA Program Provides Consumers More Choices at the Pump with Flex-Fuel Options

Press Conference

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MODERATOR: Hello, everyone. I'm Susan Carter, and thank you for joining us for today's media briefing. I'll be moderating. Agriculture Secretary Tom Vilsack will be talking about a renewable energy announcement that he's planning to make. If you would like to ask questions of him once he has made that announcement, please let us know by pressing Star/1 on your touchtone pad. And with that, I turn it over to Secretary Vilsack who is on the phone.

SECRETARY VILSACK: Susan, thank you very much, and I appreciate everyone being on the phone and apologize for being a few minutes late.

Last week, as everyone knows, the President gave a speech that outlined the work of our administration to ensure a cleaner, safer, and more secure energy future, and he outlined a vision that he believes and I believe will set us on a path that ultimately breaks our dependence on foreign oil and moves the nation towards a clean energy economy. This plan and this path will help to create jobs and keep America very competitive.

The President set some ambitious goals, but they're achievable. Among them, by 2025 we're going to reduce our net imports of oil by one-third from foreign countries. My view is, and the President shares this, that biofuels holds a tremendous promise to replace foreign oil. At the same time, it also has the capacity to help create hundreds of thousands of jobs across the rural parts of this country, and that's why at USDA, we set out on a comprehensive strategy for how we will work with our sister Federal agencies and departments, as well as other States and private businesses to build a national renewable biofuels industry.

We established five regional research centers working on science necessary to ensure profitable biofuels can be produced from a diverse range of feedstocks. An example of that would have been something I could have pointed out had I traveled to North Carolina today. At North Carolina State University, we have funded researchers who are looking at the possibility of advanced cellulosic ethanol from engineered biomass, such as fast-growing poplar trees.

We're also investing in the construction of biofuel production facilities. The President has instructed us to at least break ground on four of those facilities within the next 18 months, and we're helping to build out the infrastructure that's necessary to get biofuel to Americans' gas tanks across the country.

Today, there are more than 8 million so-called "flexible fuel vehicles," cars and trucks that run on a mixture of gas and 85 percent ethanol. Many folks who own these vehicles may have a difficult time accessing the necessary fuel, and that's why we want to make an announcement today that is designed to over time reduce the lack of access to the fuel itself.

There are over 110,000 gas stations in the country today, but only 2,300 of them provide E85 pumping and distribution systems. The President has directed us to work hard over the next several years to try to increase the number of flexible fuel pumps nationwide by at least 10,000. This will give consumers a choice in the fuel they're using. So today, I'm announcing that USDA is taking steps to make it easier for service station owners to finance flexible fuel pumps. We believe that this will help Americans use E85 or other variations of ethanol in their gas tanks.

What we're doing is we're making an important clarification to our REAP program, the Renewable Energy for America Program, that's going to allow us at USDA to provide grants and loan guarantees for the first time to folks at convenience stores, gas stations, petroleum marketers who are wishing to install flexible fuel pumps. This announcement is going to help expand the national biofuels industry and help to create jobs across the country.

Over the course of the last three years under the REAP program, we have provided assistance to over 4,400 projects involving several hundred million dollars. Our hope is that a portion of those grant monies in the future can be directed towards providing assistance and help as well as guaranteed loan amounts to the providers of gasoline, so that we can make flexible fuel more readily available, E85 more readily available. We believe that this will help address the President's directive and goal of expanding 10,000 flexible fuel pumps nationwide within the next several years, so this is a continuation of our effort to build out this industry, and we look forward to working with the private sector to make that happen.

Susan, with that, I'll be glad to answer questions.

MODERATOR: All right. Reporters, if you'd like to ask a question of Secretary Vilsack on the announcement that he made regarding renewable energy, please let us know by pressing Star/1 on your touchtone pad. It looks like we do have callers that are on the line. Let's start off with Christopher Doering with Reuters. Good morning.

QUESTIONER (Reuters): Thank you, Mr. Secretary, for taking my call. I was wondering if you could quantity like how much some of these loans and grants could be, and if you have an overall estimate in terms of a dollar amount, in terms of how much would go toward these 10,000 pumps over the 5-year period?

SECRETARY VILSACK: Well, a distribution system that includes a pumping system as well as a tank would require roughly somewhere in the neighborhood of $120,000 by the gas station or service station owner. So what we are encouraging folks is to consider how they might be able to use the REAP program to reduce that overall cost and/or to receive, if they were borrowing money for the installation of such a system, that they'd be able to reduce their interest rate or reduce the bank's reluctance to provide them resources by providing a guaranteed loan.

It's difficult to quantify precisely how many folks will take advantage of this opportunity. Our hope is that given the fact that we do several thousand of these REAP grants a year, that a good number of them will be interested in this and will take advantage of it.

We'll continue to look for additional ways in which we can provide assistance and incentives. As you know, there's a conversation taking place in the Congress today about whether or not the incentives that are currently directed toward the industry need to be discontinued or perhaps redirected in a different direction, and certainly, one of the different directions could be additional resources provided to supplement what we're doing with REAP.

Again, our goal is to try to get to that 10,000 number as quickly as possible, and this is one vehicle but perhaps not the only vehicle that we'll be able to use.

MODERATOR: Next on the line, we have Kris Bevill with Ethanol Producer Magazine. Kris?

QUESTIONER (Ethanol Producer Magazine): Hi. Thank you. Thanks for having the call. I was wondering if you can tell me how this fits with your announcement last fall to assist in installing 10,000 blender pumps in the next 5 years. Can this funding be used for installations of blender pumps as well as the 85 dispensers?

SECRETARY VILSACK: Yes, it can be, and it is consistent with that announcement, and it is one of the strategies that we've identified to make good on that promise.

We see this as an opportunity, hopefully, to create a series of incentives in which consumers can go in, and if they have an E10, E15, E85, E20 vehicle, whatever they might have, that they are able to easily and conveniently access the fuel they need. Our theory is that if we can build out the distribution system more effectively, that will increase the demand for the product, which in turn will encourage Detroit and other auto manufacturers to continue to produce flexible fuel vehicles and perhaps to look for ways in which they can add the 100-to-150-dollar part that would make virtually every new vehicle a flexible fuel vehicle, and that in turn creates the momentum to reach the 36-billion-gallon standard that Congress has set in the renewable fuel standard, which in turn will give us the opportunity to create what we believe are hundreds of thousands of jobs in Rural America.

MODERATOR: We continue on the line with Cindy Zimmerman with DomesticFuel.com.

QUESTIONER (DomesticFuel.com): Good morning, Mr. Secretary. You said that you didn't make it to North Carolina. You were supposed to be at the Gilbarco company there. Could you talk a little bit about the availability of these types of pumps that companies like Gilbarco that are making them and how, you know, USDA will be able to work with them in getting more of them out there?

SECRETARY VILSACK: Well, I apologized to company officials earlier today for my inability to get down to the plant, but given the discussions that are taking place here at the Nation's Capital and the impact it will have on the 121,000 folks that I have responsibility for at USDA, I felt that it was more appropriate for me to continue to monitor the circumstances in the Nation's Capital and be able to be in a position to let our workers know precisely where this all stands at the end of the day.

Having said that, we did have a brief but a good conversation about their belief, my belief, that they as well as other companies will be in a position to respond to increased demand as word gets out of various incentives and programs that are designed to provide help and assistance.

I think that this is really what the President was talking about when he talked about out-innovating the rest of the world. As we develop these systems, we're going to create better efficiencies and better ways to not only produce this biofuel but also to distribute it, and those technologies can then be transferrable not just across this country but across the world. And that is, I think, the hope of the companies that are in this business and in this industry.

I continue to have great confidence in the capacity of American farmers and ranchers to produce the feedstocks necessary to fuel this industry, and I have a great deal of confidence in our ability to manufacture whatever distribution systems are necessary and whatever quantity the market creates.

MODERATOR: We continue on the line with Matt Kaye with Berns Bureau.

QUESTIONER (Berns Bureau): Yes, Mr. Secretary. Since you've brought up the issue, can you tell us at all what contingencies are now in place? The deal was the service is demand power that USDA provides in the event that there is a shutdown, things like meat inspectors, things like inspectors at the borders who protect the nation's food supply, the Foreign Service Agency and the services they provide to growers, all of these kinds of things, as well as your nutrition programs, WIC and food stamps and school lunches. What can folks now expect in the way of preparations if it becomes necessary?

SECRETARY VILSACK: We are governed in connection with a government shutdown by the Antideficiency Act, which basically gives us the framework from which and within which we have to work in making decisions about who must work and who cannot.

As a general proposition, to the extent that employees are basically paid for through a series of fees, the Antideficiency Act provides the opportunity to continue many of those people. So, as a result, a number of our APHIS workers, for example, will still be able to work because of the user fees.

To the extent that folks are engaged in activities that are very important and relevant and significant to the safety of people and property, they too will be accepted employees and allowed to continue their efforts. That would include meat and poultry and egg inspection services that are important. It would include grain and other commodity inspections, weighing and grading services that are funded by user fees. It would include inspections for import and export activities to make sure that we don't have an introduction or dissemination of pests that could do damage it American agricultural interests. It would include some law enforcement and fire suppression efforts that we have under way, and it would also include our ability to continue at least for a period of time the nutrition programs, specifically the Women, Infant and Children and child nutrition programs as well as Supplemental Nutrition Assistance Program.

Because of the constraints and framework of that Act and of the law, it would not include such things as the activities and services that are very, very important to farmers and ranchers that are provided to the Farm Service Agency offices around the country.

It would not likely include those who are involved in rural development who are in the process of trying to put people to work, to provide grants for housing or community facilities or utilities or businesses, and that's one of the sad realities, if you will, of a shutdown. That important work, perhaps not absolutely vital to safety, but important work will not be able o be done on a timely basis. That's not to say that farmers won't eventually get their loans, but they obviously won't get them on a timely basis, which obviously will impact a lot of their decisions relative to planning.

And a lot of these projects that could people to work immediately will be delayed, and that's unfortunate because we've obviously trying to keep the momentum going in the economy and the private sector. We've had 13 months of private sector job growth. Our sincere hope is that whatever happens, should we not be able to reach a consensus today, doesn't slow that process down. That's the risk that's run in shutting the government down.

MODERATOR: All right. We continue on the line. We go with the Energy Daily with John Rickman.

QUESTIONER (Energy Daily): Thanks for the call today. I just had a question about concerns raised about legislation introduced by Harkin, Senator Harkin this week, that would build out E85 blender pumps or promotes incentives that would, but the Chairman of the Senate Energy and Natural Resources Committee expressed concern about it. He expressed concern that it might promote current ethanol over cellulosic ethanol, and he noted that USDA and DOE have put in a lot of money, a lot of grants to help boost cellulosic ethanol. And he's worried about this initiative might crowd out some of those fuels. How do you respond to that?

SECRETARY VILSACK: I have a great deal of respect for the Chairman, and I think it's a process by which we have to reassure him and the Congress that we're not going to let up the gas, so to speak, on our capacity to develop and identify cellulosic and advanced biofuels.

The law is fairly clear. The renewable fuel standard is very clear in terms of what the responsibilities are. Fifteen billion gallons of this fuel can be corn-based ethanol, if you will, but 21 billion of the 36 billion gallons has got to be cellulosic or advanced biofuels, and we are certainly committed to that. That's why we have the five regional research centers looking at alternative feedstocks. It's one of the reasons why the President directed us to fund the construction of biorefineries that would advance cellulosic and advanced biofuels, and so we see this as complementary and not contradictory to our efforts to expand alternative opportunities in biofuels, so that we continue to ratchet down our overreliance on imported oil.

When we get to 36 billion gallons, that's going to be mean that we will be importing 350 million barrels fewer of imported oil, which means that the wealth that we are currently transferring into those countries that don't necessarily agree with us and are from an unstable part of the world can be redirected into creating rural opportunities and jobs, and I think that's what the President wants. That's what I wanted. I'm sure that's what Congress will want.

MODERATOR: Our next caller on the line is Bill Tomson with Dow Jones.

QUESTIONER (Dow Jones): Mr. Secretary, how does this fit in with the EPA's new decision on E15? Will this spur more cars that use it? How does that figure in?

SECRETARY VILSACK: Bill, I think what it does is as that ruling basically, ultimately is allowed to take root, so to speak, and as there's a recognition on the part of consumers that they can use a higher blend of ethanol, the question will be whether or not that higher blend is readily available and easily available, and that's what these pumping systems and distribution systems are really all about.

The blender pumps basically provide consumers the capacity to dial up whatever percentage of mix they need for the car that they have, and that's what this is about. It's about making more of those units available and convenient.

QUESTIONER (Dow Jones): Thank you.

MODERATOR: Up next on the line, Stewart Doan with Agri-Pulse.

QUESTIONER (Agri-Pulse): Good afternoon, Susan. Mr. Secretary, thank you for holding the call. In some of the post-USDA report commentary today, I heard one market analyst indicate some concern on the trading floors that the volumetric ethanol excise tax credit could be one of the issues that play in this Budget Summit for the FY11 budget. Do you have any information to that effect, sir?

SECRETARY VILSACK: Stewart, I'm not in the negotiations specifically, but I would be surprised if this topic was part of those discussions.

I think, as you well know, Congress extended that credit through the end of the calendar year of 2011, and I think the question that will have to be answered, perhaps not in the context of the 2011 budget but in the context of the 2012 budget and beyond, is what extension Congress would be willing to consider and where those resources will be directed in the future. So I don't think that that's part of what's being discussed right now. I think it's very far away, unfortunately, from that topic.

MODERATOR: From POLITICO, we have Darius Dixon.

QUESTIONER (POLITICO): Mr. Secretary, thank you for your time. I actually had my question answered by a few other people, so I guess I'll pass. Thank you.

MODERATOR: All right. Our final question comes from Tiffany Stecker with Climatewire. Tiffany?

QUESTIONER (Climatewire): Thanks for taking my call, Secretary Vilsack. I was wondering, what are the concurrent programs that ensure that modifications to existing vehicles will be able to run on biofuels, and how does that fit in with these, this time?

SECRETARY VILSACK: Well, this announcement doesn't specifically relate to that. I think it's more in the line of what EPA has essentially done through its testing in determining what engines and what model vehicles are appropriate for E10, E15, and it also wraps into the conversation of what kind of incentives will be available for this industry in the future, whether we'll continue to have a blender's tax credit as we currently have or whether those incentives could be redirected more effectively in building out the distribution system and encouraging the purchase of vehicles that are appropriately equipped to take up to E85.

Again, as I've been advised by Secretary Chu, it's 100-to-150-dollar part, and the question would be whether or not we could increase the number of flexible fuel vehicles beyond the 8 million that are on the road today out of roughly 230 million vehicles, could we incent automakers to put more of those parts on more cars, could we provide some kind of consumer incentive that would encourage consumers to consider purchasing those cars.

But simultaneously with building demand for the product, I think we also have to recognize that when you have 110,000 gas stations and only 2,300 of them have E85 available, that we still have a great deal of work to do to essentially prime that pump to make sure that folks more conveniently get the gas that they need for the vehicle they have, and we obviously want to make sure that folks understand what's the most appropriate fuel for their car.

I think I'm right about this. I could be corrected, but I think EPA has indicated their testing reflects 2001-and-later vehicles can appropriately take up E15. There's obviously questions about older vehicles.

MODERATOR: All right. With that, we are going to end today's media briefing. We have been talking about the national renewable energy, some items that have come up that Secretary Vilsack has announced, and if you'd like more information, please just check our website at www.USDA.gov. Everyone, thank you for joining us.


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