Remarks by Tom Donilon, National Security Advisor to the President At the Launch of Columbia University’s Center on Global Energy Policy

Introduction

Thank you, Jason.  During your time at the White House, the President and our team counted on your deep knowledge of energy, climate and national security.   Thank you also to Columbia University.  You chose well in Jason and there could scarcely be a more timely moment for a Center like this one.   Finally, a special thanks to Dan Yergin, who has made an unparalleled contribution to how we understand and talk about energy.  Dan, I look forward to our discussion today.  But, I want to tell you that I think I should be interviewing you.  Congratulations also on hiring David Sandalow, who has been an important part of our team at the Department of Energy for the past four years, as your inaugural fellow. 

It is a bit unusual for a National Security Advisor to address an energy conference like this one.   So let me begin with a straightforward proposition:  energy matters profoundly to U.S. national security and foreign policy.   It matters because the availability of reliable, affordable energy is essential to our economic strength at home, which is the foundation for our leadership in the world.  It matters because scarce resources have driven both commerce and conflict since time immemorial—and still do today.   It matters because energy supplies present strategic leverage and disposable income for countries that have them.  It matters because the challenge of accessing affordable energy is one shared by people and businesses in every country in the world—in young democracies, emerging powers and developing economies; in allies and adversaries alike.  It matters because disruptions in supply anywhere can have economic impacts that are global. 

Energy shapes national interests and relations between nations.  It shapes politics, development and governance within nations.   And it shapes the security and stability of the climate and environment.   For all these reasons and many others, increasing global access to secure, affordable and ever cleaner supplies of energy is a global public good and a national interest of the United States.

Finally, at this moment in history, energy matters to those of us entrusted with U.S. national security because the United States is reaching an inflection point in the story that Dan Yergin has so expertly told.  We are in the midst of two changes that have presented themselves with great speed:  first, the substantial increase in the supply of available, affordable energy inside the United States – which is having important impacts on U.S. economic growth, energy security and geopolitics.  Second, a transformation in the global climate, driven by the world’s use of energy, that is presenting not just a transcendent challenge for the world but a present-day national security threat to the United States.  Both push us toward the same longer-term endpoint: the comprehensive transformation of the world’s energy economy toward cleaner, more sustainable energy solutions.
 
Today, I want to talk first about the changes underway and why they matter for U.S. national security.  Then, I want to explain how we intend to work, domestically and internationally, to seize the opportunities this moment presents and meet its challenges head on.

What We Are Seeing:  A Transformational Moment

Let me begin with a brief discussion of the changing context.   The current optimism about the U.S. and global energy picture is a relatively new development.  

In the 1940s, 50s and 60s, America was largely self-sufficient in oil production.  But in 1970, U.S. oil production peaked at over eleven million barrels per day, unable to keep up with growing U.S. demand.  In his Pulitzer-winning book, The Prize, Dan Yergin tells the story of the day in 1972 when the Texas Railroad Commission ended its decades-long practice of rationing oil supplies.  There was no more surplus oil left to ration.  The United States needed to consume it all.  This was a negative turning point whose implications for U.S. power in the world became painfully clear during the Arab oil embargo the following year.  Suddenly, the United States thought of itself as an energy poor nation, dependent on oil and subject to events beyond our shores.  That mindset held for nearly forty years. 

When President Obama took office, the energy picture looked decidedly different than it does today.  Indeed, forecasters said that the U.S. would need to double its imports of liquefied natural gas (LNG) over the next five years.  There was renewed talk of “peak oil.”  Nearly every prediction about our energy future made five years ago has been turned on its head.  U.S. innovation and technology are allowing us to tap unconventional energy resources.  Total U.S. oil consumption peaked in 2005 and has been declining since—a trend the President’s energy efficiency initiatives, including new fuel efficiency standards and investment in new energy sources, will only deepen.   

To understand just how significantly and quickly the landscape has shifted, consider a few statistics: 

• Domestic oil and natural gas production has increased every year President Obama has been in office. We now produce seven million barrels of oil per day, the highest level in over two decades. 
• The International Energy Agency has projected that the United States could be the world’s largest oil producer by the end of the decade. Of course, we recognize that these are early days and prediction is a risky business.
• In 2005, sixty percent of U.S. oil was imported.  Today the number is forty percent and falling—a dramatic move towards fulfilling the President’s goal of cutting our oil imports in half by 2020. 
• Today the United States is the top natural gas producer in the world. Our natural gas production has grown by one-third since 2005, driven by the increase in shale gas, which now accounts for forty percent of our natural gas output.  
• The domestic price of natural gas has dropped from over $13 per million Btu in 2008 to around $4 today.   Natural gas imports are down almost sixty percent since 2005, and we are exporting more natural gas by pipeline to Mexico and Canada.
•  U.S. energy-related greenhouse gas emissions have fallen to 1994 levels due in large part to our success over the past four years in doubling electricity from renewables, switching from coal to natural gas in power generation, and improving energy efficiency.

New opportunities are also emerging globally.  The Western Hemisphere is poised to be a major energy supplier in the decades ahead.  The Americas have been responsible for half of the growth in incremental oil supply over the past five years, and BP predicts that the Americas will account for almost two-thirds of the growth in global oil supply between now and 2035.  That also means more supplies from relatively more stable nations with greater commitment to the rule of law and open markets.   When the President travels in early May to Mexico and Central America, energy will be among the issues discussed.  

The nature of global energy demand is also shifting to reflect the changes in global economic growth.  Demand across Asia, the Middle East and Latin America is surging.  This year may well mark the first time in history that oil demand from developing economies surpasses that of developed nations. Last December, Chinese net oil imports exceeded those of the United States for the first time.  China alone has accounted for half the growth in global oil demand since 2000 and became the world’s largest energy consumer by 2009.  Coal met about forty percent of developing economies’ energy demand, but over seventy percent of China’s energy needs in 2011.

We are just beginning to understand and appreciate the geostrategic impacts of these changes to the U.S. and global energy landscape, but let me set out a few that I see:

First, the new U.S. energy posture and outlook will directly strengthen the nation’s economy.  There are not a lot of iron laws of history.  But one is that, as the President has said, a country’s political and military primacy depends on its economic vitality. Our strength at home is critical to our strength in the world, and our energy boom has proven to be an important driver for our economic recovery—boosting jobs, economic activity, and government revenues.  Take the example of North Dakota, where unemployment has dropped to near 3 percent, the lowest in the country, and the state has a $3.8 billion budget surplus, largely due to increased unconventional gas and oil production in the state.   IHS CERA estimates that shale gas supported direct and indirect employment for 600,000 Americans in 2010, a number that could double by 2020. 

America’s natural gas boom is helping to spark a domestic manufacturing revival.  Manufacturers in energy-intensive sectors have announced up to $95 billion investments across the U.S. to take advantage of low-cost natural gas.   The largest investments announced have been in the chemicals sector which uses natural gas as a feedstock, but there have also been major announcements in other industries like steel, plastics, and glass.  For the first time in over sixty years, the United States is exporting more refined petroleum than it is importing.   The reduction in energy imports has a positive impact on our trade balance, helps lower domestic and global energy prices, and allows a greater share of the money Americans spend on energy to remain within the U.S. economy. 

Furthermore, as a result of the Administration’s historic investments in clean energy, tens of thousands of Americans have jobs and America is now home to some of the largest wind and solar farms in the world.

Domestic economic developments like these improve U.S. standing and send a powerful message that the United States has the resources, as well as the resolve, to remain the world’s preeminent power for years to come. 

Second, America’s new energy posture allows us to engage from a position of greater strength.  Increasing U.S. energy supplies act as a cushion that helps reduce our vulnerability to global supply disruptions and price shocks. It also affords us a stronger hand in pursuing and implementing our international security goals.

For example, the United States is engaged in a dual-track strategy that marshals pressure on Iran in pursuit of constructive engagement to address the world’s concerns about Iran’s nuclear program.  As part of the pressure track, the United States engaged in tireless diplomacy to persuade consuming nations to end or significantly reduce their consumption of Iranian oil while emphasizing to suppliers the importance of keeping the world oil market stable and well supplied.   The substantial increase in oil production in the United States and elsewhere meant that international sanctions and U.S. and allied efforts could remove over 1 million barrels per day of Iranian oil while minimizing the burdens on the rest of the world.   And the same dynamic was at work in Libya in 2011 and in Syria today.

Third, the development of a more global natural gas market benefits the U.S. and our allies.  We have a strong interest in a world natural gas market that is well supplied, diverse, and efficiently priced.  Increased U.S. and global natural gas production can enhance diversity of supply, help delink gas prices from expensive oil indexed contracts, weaken control by traditional dominant natural gas suppliers, and encourage fuel switching from oil and coal to natural gas. 

A decade ago, market analysts forecast that the U.S. would need to import large volumes of natural gas by pipeline and LNG. Since then, domestic production has reached historic highs and domestic natural gas reserves have almost doubled. Gas supplies originally destined for the United States are being redirected to other countries.   

Many of our allies have expressed interest in the potential of the United States as a global natural gas supplier. The Department of Energy is currently reviewing at least seventeen applications to export U.S. LNG to non-Free Trade Agreement countries. It will conduct a comprehensive review of all relevant factors to determine whether each non-FTA LNG export project is deemed to be consistent with the public interest.

Global demand for natural gas is projected to rise by one-fifth over the coming decade. Burning natural gas is about one-half as carbon-intensive as coal—which makes it a critical “bridge fuel” as the world transitions to even cleaner sources of energy.

Fourth, reduced energy imports do not mean the United States can or should disengage from the Middle East or the world.   Global energy markets are part of a deeply interdependent world economy.  The United States continues to have an enduring interest in stable supplies of energy and the free flow of commerce everywhere.   

We have a set of enduring national security interests in the Middle East, including our unshakeable commitment to Israel’s security; our global nonproliferation objectives, including our commitment to prevent Iran from acquiring a nuclear weapon; our ongoing national interest in fighting terrorism that threatens our personnel, interests and our homeland; our strong national interest in pursuit of Middle East peace; our historic stabilizing role in protecting regional allies and  partners and deterring aggression; and our interest in ensuring the democratic transitions in Yemen, North Africa and ultimately in Syria succeed. 

Which brings me to my fifth point: though it is typically discussed in terms of its energy, environmental or economic implications, the changes to our climate that we are seeing are also a national security challenge.  

The national security impacts of climate change stem from the increasingly severe environmental impacts it is having on countries and people around the world. Last year, the lower 48 U.S. states endured the warmest year on record.   At one point, two-thirds of the contiguous United States was in a state of drought, and almost 10 million acres of the West were charred from wildfires. And while no single weather event can be directly attributed to climate change, we know that climate change is fueling more frequent extreme weather events. Last year alone, we endured 11 weather-related disasters that inflicted a $1 billion or more in damages – including Hurricane Sandy. 

Internationally, we have seen the same: the first twelve years of this century are all among the fourteen warmest years on record.  Last year, Brazil experienced its worst drought in five decades; floods in Pakistan affected over five million people and damaged or destroyed over 460,000 homes; severe flooding across western Africa and the Sahel impacted three million people across fifteen countries--to give just a few examples among many. 

The fact that the environmental impacts of climate change present a national security challenge has been clear to this Administration from the outset. The President’s National Security Strategy recognizes in no uncertain terms that “the danger from climate change is real, urgent, and severe.  The change wrought by a warming planet will lead to new conflicts over refugees and resources; new suffering from drought and famine; catastrophic natural disasters; and the degradation of land across the globe.”

The Department of Defense’s 2010 Quadrennial Defense Review, issued by Secretary Robert Gates, warned not only that climate change “may act as an accelerant of instability or conflict, placing a burden to respond on civilian institutions and militaries around the world” but also of the potential impacts of climate change on our operating environment, and on our military installations at home and around the world. A National Intelligence Assessment in 2008, multiple Worldwide Threat Assessments produced by the Director of National Intelligence, and numerous expert analyses have reached similar conclusions.  This underscores the need – for the sake of our national security -- to reduce the greenhouse gas emissions that drive climate change and to ensure that we are as prepared as possible for the impacts of climate change.

U.S. Policy

These are a few of the changes we are seeing and what they mean for U.S. national security.  Let me now turn to what we are doing about it. 

First and foremost, the United States is leading at home, which is where our energy and climate policy begins.  The United States is pursuing an “all of the above approach” to develop new sources of energy, expand oil and gas production, boost renewable power generation, support growth in nuclear power and increase energy efficiency, while also working to reduce reliance on imported oil. 

I do not believe that the dramatic and fast-paced energy changes we have seen in the United States in recent years were as likely to have begun elsewhere first.  It is not just that the U.S. has a substantial unconventional resource base.  Many other countries have promising shale deposits.  The reason that development has succeeded in the U.S. is because we have the right balance of an open investment climate, innovative entrepreneurial spirit, environmental safeguards, infrastructure and skilled service companies.  The U.S. shale experience demonstrates the powerful results that a complex resource base, combined with open markets, wise early government investments in key technologies, a vibrant private sector, access to capital, a predictable investment climate, and responsible regulatory structure can deliver.

Under President Obama, the United States has also made unprecedented investments in clean energy, research and development, and renewable fuels.  The President put in place historic new fuel standards for cars and light-duty trucks that will nearly double the efficiency of our fleet; doubled the amount of power produced by wind, solar, and geothermal; and boosted the efficiency of buildings and our industrial sector.   He has also called for the creation of an Energy Security Trust that will support new research and development of cost-effective advanced transportation technologies, and he is leading domestic and international efforts to support the safe use of nuclear power.
It is important to note that America has achieved a significant reduction in our greenhouse gas emissions.  Last year energy-related U.S. emissions fell to their lowest levels since 1994—a remarkable twelve percent below where we stood in 2005.  Even as our economy recovers, we are determined to keep moving toward our target for 2020: to bring greenhouse gas emissions approximately seventeen percent below 2005 levels.

In that spirit, the President will not hesitate to use existing tools and authorities to further reduce greenhouse gas emissions, increase the preparedness and resiliency of our communities to climate change, and accelerate clean energy deployment. 

Second, we are working to manage potential causes of energy-related conflict.

For example, the promise of offshore energy resources is contributing to tensions in the South and East China Seas that will test East Asia’s political and security architecture.  While the United States has no territorial claims there, and does not take a position on the claims of others, the United States firmly opposes coercion or the use of force to advance territorial claims.  We have consistently made clear our position that only peaceful, collaborative and diplomatic efforts, consistent with international law, can bring about lasting solutions that will serve the interests of all claimants and all countries in this vital region. 

The Arctic is another place where the potential for new supplies of energy and new shipping routes could lead to rising tensions.  So far, that has not been the case and the United States looks forward to meeting with our partners in the eight-country Arctic Council next month, which we value as a forum for open and collaborative dialogue among littoral states on a range of Arctic issues.  The United States will promote productive dialogue to address international disputes in the region as they arise on issues from transportation to resource claims.  As ice caps melt, shipping routes open and energy supplies are made more accessible, the United States will work to ensure open access and transit, rules-based resolution of territorial disputes and adherence to the highest environmental standards.

To put ourselves on the strongest possible footing to prevent energy-related conflict, the United States must take the long overdue step of ratifying the Law of the Sea Treaty.  Every businessperson I speak with, every military leader, the Joint Chiefs of Staff and many, many others all come to the same conclusion:  ratifying the treaty will only strengthen America’s hand economically, diplomatically, and in terms of our security. 

Another example is Iraq.  After the U.S. has invested significant blood and treasure, we have a strong interest in seeing a peaceful and prosperous country emerge.  Key to that will be the successful development of Iraq’s energy resources.  This is a good example of where energy diplomacy matters.  Iraq’s energy sector has the potential to deepen internal and regional divisions, but it can also help unify the country.  And so we are working to help Iraq expand its oil production, build out its export infrastructure, and diversify its energy transportation routes.

Over the past two years, Iraq’s crude oil production has grown 25 percent to three million barrels per day, surpassing Iranian output and reaching levels not seen in over two decades.  We envision Iraq fulfilling its tremendous oil supply potential, with multiple existing and potential export routes, including from Basra to Ceyhan.  Getting there will require active diplomatic engagement and an agreement among Iraqis to share export revenues equitably, as set forth in their constitution, so that all Iraqi citizens benefit from their natural resources.  It is a long-term vision, but one that is essential for Iraqi stability, our own national security, and the future stability of global energy markets. And the United States will support this vision as a central priority in our partnership with Iraq.

Third, we are building on the unique diplomatic, regulatory and technical capacity of the United States to help other nations increase energy supply, build capacity and strengthen the institutions that enable international cooperation.  We are working to help develop supplies across the Western Hemisphere, where the use of conventional and new technologies in the United States, Canada and Brazil and Colombia is making an essential contribution to growing global energy supplies. 

Through bilateral and multilateral initiatives, technical and regulatory exchanges and trade and investment, the United States is helping countries accelerate this trend responsibly.  Last year, for example, the United States signed an important Transboundary Hydrocarbons Agreement with Mexico to develop our shared oil and gas resources in the Gulf of Mexico in an environmentally safe and responsible way.   

We have actively engaged countries such as Poland, Ukraine, Jordan, China, Colombia, Chile and Mexico to exchange lessons on developing unconventional energy resources.  We are sharing best practices on issues such as water management, air quality, permitting, contracting, and pricing—because countries and companies have seen from the U.S. experience that creating the right policy and investment environment is critical to successful development.  We are also working with countries in Africa, such as Mozambique and Tanzania, to help them establish responsible, sustainable ways to develop and manage their newfound energy resources.  

The United States does not view our energy security in zero-sum terms, and we are working with our partners around the world to ensure that they do not either.  For example, China will be increasingly reliant on imported oil and natural gas through this decade and beyond.   That means secure, affordable and cleaner supplies of energy is a goal we share with Beijing—and one we are working to fulfill through regulatory, technical, and industry exchanges led by the Departments of Commerce, Energy, and State.

As emerging economies consume an ever greater share of global energy, the International Energy Agency and other institutions will have to modernize to reflect evolving energy market realities. As major consumers, China, India and Brazil have a common interest in healthy and more transparent markets that function efficiently and effectively. It is critical that these countries are brought closer to the IEA and participate in coordinated responses to energy supply disruptions and reporting on energy markets.

But we should think about the modernization of the IEA more broadly.  When the IEA was established in the 1970s, oil was not a globally traded commodity. There was no financial market in oil.  Gasoline prices were heavily regulated.  Disruptions in supplies tended to show up as physical disruptions with long lines at gas stations. The global energy market has changed dramatically since then:  oil is now traded globally. There is a financial market that dwarfs the size of the physical market.  Gasoline prices are deregulated.  And disruptions in supply are more likely to show as price spikes than physical shortages.  The policies and practices of an IEA for the 21st century should reflect these changes as well.

Fourth and finally, we are working with other nations to reduce global greenhouse gas emissions, prepare for the climate impacts it is too late to avoid, and bring about a global conversion to cleaner sources of energy. 

When it comes to climate change, action at home is necessary but insufficient.  We have to galvanize action from others.  Here, too, there is progress to report.  In Copenhagen in 2009, President Obama and other world leaders negotiated a climate agreement that for the first time included international emission reduction commitments from each of the world’s largest greenhouse gas emitters.  Under the agreement reached at Durban in 2011, we are working to negotiate a robust new international climate agreement by the end of 2015 that would take effect in 2020 and commit all of the major carbon polluting countries to take ambitious action. 

Alongside global talks, the Administration has looked for creative ways to convene key stakeholders to take concrete actions together.   Through the Major Economies Forum, we launched a new Clean Energy Ministerial where a group of nations representing more than three-quarters of global GHG emissions collaborate on deploying clean energy technologies and enhancing energy efficiency.  By the same token, the United States led in assembling the Climate and Clean Air Coalition of nations working to achieve targeted reductions in short-lived climate pollutants that account for over thirty percent of current global warming.   And we have worked to address climate change by leading global efforts to encourage countries to phase out harmful fossil fuel subsidies.

As we look forward, we are fortunate to welcome into the Obama Administration one of the most experienced and impassioned climate diplomats America has ever had: John Kerry, who already has launched a new process to ensure that climate change will be a central part of our Strategic and Economic Dialogue with China later this year.

Even as we work through all available channels to mitigate climate change, we are also working to prepare for the climate impacts it is already too late to avoid.  The United States is building greater climate resilience at home and helping developing nations withstand the impacts as well.  The U.S. intelligence community continues to study where and how climate-fueled security challenges may emerge.  The Defense Department is funding research projects and factoring climate change into analysis and planning, recognizing the challenge it presents for mission-critical infrastructure and military installations, capabilities, and readiness.

Conclusion

Energy and climate are critical elements of U.S. national security.  These issues have risen to the top of U.S. diplomatic agendas around the world: with Europeans considering their energy future; with China and other emerging powers addressing their growing needs; and with major energy consumers and producers, old and new.  How the United States manages these changes to our energy economy and to our climate will be an important measure of U.S. leadership for many years to come. 

There is a vigorous debate underway among international relations experts and commentators about so called “declinism” – the notion that America is a power on the wane. It is a proposition that I reject in the strongest terms.  In his most recent book, Strategic Vision, one of my predecessors, Zbig Brzezinski, presents what he calls “America’s Balance Sheet,” where he tallies America’s strategic assets and liabilities.  Many of our assets are well known:  economic and military strength, an unrivaled network of alliances spanning two oceans, favorable demographics and geography and unparalleled innovators and educators – all that ensures that the United States remains a global leader into the 21st century. 

When President Obama took office, America’s energy future would have been typically listed among the liabilities – and let’s be clear: an essential transition to cleaner sources of fuel still lies ahead.  But after years of talking about it, we are poised to control our own energy future. Under President Obama’s leadership, we are moving the U.S. energy position from a liability we manage into an asset that secures U.S. strength at home and leadership in the world.