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Jeb Bush interview transcript

The Fueling Station blog (http://blogs.tampabay.com/energy/) interviewed Gov. Jeb Bush about what makes him an advocate for ethanol and what Florida can do to help solve the energy crisis. Here is a transcript.

THE FUELING STATION:  Governor, what made you into an advocate for ethanol?

JEB BUSH: There were a bunch of different ways that met together. One was the experiences of the last two years with the eight hurricanes really has made me intensely aware of our incredible dependency on non-Florida sources of energy - mostly natural gas and some coal for power generation, but (also) for cars. You know we import gasoline from the Caribbean and from the Gulf coast, and I am the only Governor in the country that could probably tell what inventories are in the ports. We have a monitoring system, and a survey system for our gas stations, because after a storm you have a perfect storm event basically, of spikes upwards in consumption as people fret, and a disruption of supply because it takes a while to get the ports back open. For us to recover we've got to have people being able to go to gas stations that are powered up where they can get their kids to day care, go back to work, I mean ….. for us to continue to progress we need to solve that problem. So alternative sources of energy, home grown sources of energy, I think is part - it's not going to be the ultimate answer - but I think it's part of that answer.

The second way that I have become interested in this is through the Florida FTAA (Free Trade Area of the Americas) and Miami's advocacy, and the state's advocacy, really of going beyond just a trade treaty to strengthen our gateway status. That's what the Florida FTAA in Miami does, and we help fund it, the private sector funds it, it’s a statewide effort. As we discuss a lot of these things from the perspective of what ideas could we advocate that would enhance the ties between Florida and Latin America, this one is just tailor made.

First of all I'd rather be dependant upon Brazilian agriculture than Venezuelan oil. Secondly the agricultural issues are better dealt with in the WTO (World Trade Organization) and Doha round … where Brazil and the United States actually are together, which is hopeful, because I think our alliance will help break through perhaps down the road to have a Free Trade Area of the Americas. This is an area where we have a common interest, because ... once we get past the parochial interests of Mid West corn growers and look at it from an energy perspective, this is a place where there is a convergence of thinking.

And then I would add thirdly, the environmental issues are something that are really important to Floridians. I think it's a core value that we have. In a fast growing state like Florida, despite the fact that we don’t have a lot of industrial pollution, we should be concerned about clean air, just as much as we are about clean water.

TFS: Is that why Florida is way behind the rest of the country in developing alternative fuels? Precisely because we have never had trouble meeting clean air regulations?

JB: Florida and Vermont are the only states east of the Mississippi in compliance with the Clean Air Act. But it's not just our economy that drives that, our geography helps as well clearly. But we also have made arrangements, negotiated arrangements with our utility companies, to take off-line the high pollutant old coal technology plants and replace them with newer capacity that has dramatically reduced knocks and socks emissions (TFS: ‘Knocks and socks’ is a word play on the symbols for sulfur dioxide and nitrogen oxides, SO2 and NOx, respectively.) The ethanol debate, the development of ethanol in the U.S., has really been an agricultural issue, not an energy issue, until the last couple of years. Now there's this ethanol exuberance. It's like Bill Gates is investing millions of dollars in it and you start to know that it's really cool.

TFS: What does it mean when someone like Bill Gates gets involved? How much momentum is there now behind ethanol?

TFS: In order to have alternative sources of energy become more dominant or used more there have to be some disruptive technologies that come into play. When you are subsidizing something you don't necessarily get that kind of accelerated technological advance. Probably the most provocative part of our little concept is the elimination of the tariff (on Brazilian ethanol). We don’t put a tariff on oil. Why would we put a tariff on ethanol? The only reason is to protect an industry in our country that is not the leader technologically. But it could be and it would advance quicker if there was a freer market. I think there is a point … clearly where higher gas prices, higher oil prices, ultimately will make ethanol more viable. Production costs to produce ethanol without the tariff will be lower than the production costs of crude. We (in the US) might not be the low cost producer, but diversifying our supply of energy is vital for our national security.

TFS: How do you see ethanol use evolving in Florida?

JB: It has tremendous potential to have rapid advancement of the use of it. So, from a consumption point of view I think Florida will be catching up pretty quick. The number of stores that will be selling ethanol will grow. From a production point of view we've got quite a few companies that are looking at it in Florida. There's one under construction in Tampa (US EnviroFuels), and one in Jacksonville (Gate Ethanol) and more have come to our office to look at the options. So I think there will be interest there. The agricultural community is warming up to the idea.

 Interestingly, I don't think sugar has embraced it. Although I think they are happy that the Brazilians are finding new markets. But they are not .... exuberant (laughs). But it benefits the sugar interest because of price. If you have more demand for the product it will stabilize price. Frankly, I think Florida agriculture is more productive, whether it's biomass or actually sugar getting interested. I think we are more productive that the corn guys, simply because we have more than one crop, more than one season, so the yields per acre are going to be significant. But I doubt that we will be able to compete, at the beginning at least, with the Brazilians, or the Colombians or the Guatemalans or other entities. But, the fact that we may not be the low cost producer shouldn't stop us from recognizing that diversifying our source of energy is essential for our national security.

TFS: Does than mean that there would need to be some kind of tax incentives to make it competitive in Florida?

JB: I think ethanol mixed (E10/E85) is now viable, whereas before when the price of gas was lower, it wasn't. So then the question is how much supply can be brought to market? And it's not a limited amount, there's a great potential. If we got to 15 billion barrels of ethanol it would be a dramatic increase. So I think there's room for both Latin American ethanol production as well as a growing domestic sector. I don't think it's a zero-sum game because they are both competing for an even higher cost alternative.

The people who write about this will say that the Brazilians had an industrial policy because at the beginning they did require subsidies, whereas in the United States we are not big on those massive mandates. But prices are a lot higher now and I think markets can work. But if there was a place for us to provide incentives, I think it would be in the environmental side. There's a market to trade air emissions for industrial users at least. There's a cost to the tons of nitrous oxide and sulphur oxide that's in the air. If you could through the use of ethanol in our cars reduce that by a certain amount, there is an economic value to that. If that value somehow could be securitized or monetarized on behalf of the producers of ethanol, that would be a legitimate way to reward it.

TFS: How do you envisage getting there? You sent a team to Brazil last week after Florida FTAA prepared a position paper on the virtues of ethanol. It was written by Mario Fernandez (former sugar trader) Apparently he was very impressed by your quick response to his idea. (Fernandez says he was inspired after reading about president Bush's visit last year to the Summit of the Americas in Mar del Plata, Argentina where he greeted by hostile crowds being led on by Venezuelan president Hugo Chavez.)

JB: Mario's been the kind of originator of this thought. What hasn't been written about much is where the president went after Mar del Plata. (He visited Brazil's president Luis Inacio da Silva). It didn't get a lot of fanfare because it was much more dramatic having the bully (Chavez) out there doing his deal.

   They discussed this, not in a specific way that I am aware of. First, of all there's a strong personal tie between Lula and George. I believe they had a meeting in St Petersburg, Russia recently as well. And I think that this topic came up. They were talking about WTO at the G8 meeting. That didn't get a lot of attention either because of the Hizbollah, Hamas, Israel thing.

TFS: You propose a hemisphere-wide free trade in ethanol. What about the US corn growers. How are they going to react? There are 11 corn-producing states and they have political clout.

JB: I was with (Iowa Governor) Tom Vilsack before Easter when we went to Iraq and Afghanistan to visit our National Guard troops. I told him about this idea. And he said, "Well that proves you are not running for president."(Laughs). I don't know why there was even any conjecture about it.

 You know there's probably another way to subsidize corn for agriculture purposes. We have bigger problem right now, which is that we are dependant on sources of oil that are completely vulnerable to the whims of dictators and politicians and climate.

When Chavez goes on his world tour and goes to see Putin and gets his AK-47 (rifle) factory and buys the Russians (Sukhoi) jets, even though there's no security threat to the national interest ... you begin to think well ...There's no justification for those jets other than an act or provocation and the fact that he's got money.

A decline in production of a small amount will have a dramatic impact on price. The world is changing. There is huge consumption increases in China and India and other places. Production capacity has not grown, refining capacity in the United States has not grown, we are more vulnerable now. Our energy consumption and supply is really, in effect, it's just-in-time inventory. There's very little reserve capacity to deal with all this uncertainty. That to me is a heck of a lot more important than whether or not the corn guy in Des Moines is protected so that we continue to consume foreign sources of oil. It makes no sense. I mean there's always a political consequences to any ideas, and this one has that.

TFS: How do you envisage the negotiations with the Brazilians going? Are these just exploratory talks at this stage?

JB: You've got elections in Brazil (Oct). You've got our mid-term elections (Nov). You have the political consequences of this in both places that need to be looked at. You need to be sensitive to it. So my guess is a concerted effort won't happen till after November. At least my hope is there'll be a lot of interest. Then there's the geo-political side of this as well. You can dump the center-left and center-right countries that respect democracy; put aside their ideological differences you can lump them together. It's a sizeable number of countries in Latin America that have shared values. And then you have Bolivia and Venezuela (on the left) and Argentina in between.

The more that we can have common issues to advocate where there's mutual benefit, the better it is to isolate the Castro-Chavez neo-populist whatever you call it - I think we need a new name for it.

TFS: The Florida ethanol industry is in its infancy and is tied to corn. They worry that to make it a strong industry they need more time in order to grow. The warn that if the 54 cent tariff on Brazilian ethanol is lifted that will stymie future investment in new plants. If that happens we could end up being just as dependent on another foreign source of energy. Would it be possible to phase in lifting the tariff?

JB: I think that is possible. The Brazilians are very agile as it relates to agriculture, but it takes time to expand capacity. They have their own market which is growing. Brazil has a growing energy need. So, whether it's the Colombians, or a combination of Colombia, the Dominican Republic, Brazil ... it takes time to build the capacity up. The increase in production is being stymied by the 54 cents right now. So, what comes first? There's probably a way to phase it in so as to bring some certainty for the investors here - and there.

TFS: You are leaving office soon and you likely won't get to see the fruits of this. Would you like to stay involved in the alternative fuels debate?

JB: I've got a lot of fruit hanging on the trees right now. I don't know what I'm going to do. This one was one of those light bulb deals for me. It was a eureka idea. I'm a strong advocate for a stronger relationship with Latin America. This is something that I think would be of great benefit to Florida and great benefit to the region. So I hope I am involved somehow, I don't know how.