Briefing on the Creation of the Energy Resources Bureau at the State Department

November 16, 2011

MR. TONER: All right. Let’s go ahead and get started. Before I start today’s press briefing, it’s my great pleasure to introduce Ambassador Carlos Pascual. Secretary of State Clinton appointed Ambassador Pascual as the Department of State’s Special Envoy and Coordinator for International Energy Affairs in May. And as part of the Secretary’s Quadrennial Diplomacy and Development Review, one of Ambassador Pascual’s first tasks was to design and establish a new Bureau of Energy Resources so that as to elevate the role of energy diplomacy at the Department of State.

And most recently, Ambassador Pascual served as the U.S. ambassador to Mexico, something you all know. He’s the former vice president of the Brookings Institution, a former U.S. ambassador to Ukraine, and has more than two decades of diplomatic public policy and academic experience in addressing the centrality of energy issues to our national interests and to the conduct of U.S. foreign policy.

So I’d like to now invite Ambassador Pascual to the podium just to answer some of your questions and talk about the new bureau. Thanks so much.

AMBASSADOR PASCUAL: Mark, thank you very much. I’m thrilled to be here. It’s a really exciting day for all of us who have been working on energy diplomacy issues for many years. I’m pleased to be able to announce that we’ve created an Energy Resources Bureau in the Department. I’d like to thank Secretary Clinton for her leadership in getting us to this point.

When she began the Quadrennial Diplomacy and Development review process in 2009, one of the things that she asked people in the Department to do was to look out 25 years and ask the question: What kinds of changes do we need to make in order to protect American national security? And one of the core issues that came back is that we needed to focus greater attention on our capacity to address energy security concerns for the United States because it has become so central to our national security and our economic prosperity.

And so in that context, the decision was taken create an Energy Resources Bureau. We’re now up and running. We have an initial set of personnel of approximately 50 people, a little over 50 people.

We have focused our efforts around three core goals. The first of these is to manage the geopolitics of today’s energy economy through vigorous diplomacy with producers and consumers. This is something that we see as critical to promoting adequate and affordable supplies of energy and to keep energy markets stable. The second is to stimulate market forces for transformational policies and alternative energy, electricity, developmental, and reconstruction programs. This, we believe, is critical to create market demand for green technologies and products where the United States has a competitive advantage globally. And the third objective is to increase access to energy for the world’s poor through commercially viable and environmentally sustainable means. This helps developing countries find commercially and environmentally sustainable paths out of poverty.

In all three of these areas, a common thread has been the role of markets – in the first, market stability; in the second, market drivers for transformation; and the third, market viability, because in the end, if markets cannot drive our policies, if individuals cannot pay for technologies, if the poor cannot pay for the electricity that’s delivered to them, then we don’t have sustainable solutions.

In developing this, we’ve worked very closely with our interagency partners, including the Department of Energy. We feel that we came up together with a very complementary approach, where the State Department has an ability to bring its focus on diplomacy and market-related questions to complement their technical capabilities. We’ve worked very closely with USAID, that has the technical assistance capacity to build on the policy dialogue that we work with. We’ve also, I think, been able to develop strong complementarities with Ex-Im Bank, the Overseas Private Investment Corporation, the Trade and Development Agency, where the market principles that we can help advance can create greater opportunities for U.S. business.

So overall, I think this an exciting day for us that have been working on these questions of energy diplomacy. It’s exciting to be able to work on an aspect of foreign policy that is obviously very central to our national security interests but has such a direct impact on our economic prosperity here at home and the capacity to be able to create jobs here as well.

And I’m happy to take a couple of questions. We’re going to have a call a little bit later today, at two o’clock, but I think we have time for a couple questions now.

MR. TONER: First question.

QUESTION: My question is about --

MR. TONER: Peter – I’m sorry, Peter. Can you give him your --

QUESTION: My name is Peter Cheremushkin and I’m a Russian reporter with Interfax News Agency. What is the difference between your role and the role of your office with the responsibilities and the role of Ambassador Morningstar’s office? That is my first question. And the second question is how much the issues of natural gas in Europe is part of your portfolio.

AMBASSADOR PASCUAL: Secretary Clinton appointed Ambassador Morningstar as the Special Envoy for European and Eurasian Energy. He’s been undertaking that role for the past couple of years. He continues to have that direct reporting relationship with her, and he will continue to play a leadership role on European energy issues. The new Bureau on Energy has overall responsibility for energy policy issues globally, and we will coordinate very closely with Ambassador Morningstar as we continue to move forward.

QUESTION: And on natural gas?

AMBASSADOR PASCUAL: On the issue of gas, again, we work very closely because we have fascinating developments in global gas markets. There’s additional gas that Russia is bringing on to international markets in the coming five to 10 years, huge quantities coming on from Australia in 2016, potentially natural gas that are – that could be exported from countries, including the United States, that have been producing shale gas.

As a result of the changing nature of the global gas market, including the shift from – increasing shift from pipelines to L&G trade, we’re increasingly seeing the emergence of a global type of gas market. And so anything that we do analyzing European gas issues has to be put in a far broader context, because gas questions are no longer delimited by geography. They’ve become global questions, and so in that sense, we’ve worked very closely with Ambassador Morningstar on these issues.

QUESTION: Thank you.

MR. TONER: Jill.

QUESTION: I just have two. One is a little follow-up from what Peter was talking about. There are a lot of parts of the State Department that deal with the energy portfolio. Robert Hormats deals with part of it; there are a lot of people. Why create another entity that will deal with it?

And then also, more specifically on the Keystone pipeline, which has come up, it’s an international issue for the United States because it is Canada. I’m not asking you to get into the nitty-gritty, but is this fight over whether or not it should be built damaging relations with another country? And how important is it to actually, in your estimation, to build that pipeline?

AMBASSADOR PASCUAL: I’m recused at this time from answering anything on Keystone, and the press office can get back to you on anything specific that you might have on that, if you haven’t already engaged on those questions.

On the first question, what we have done is to actually aggregate rather than disaggregate. In creating this bureau, we’ve been able to work on bringing many different parts of the State Department, including in the old Economics, Energy, and Business Affairs Bureau, one person coming from OES, the previous staff that existed in my office, in the Office of Coordinator for International Energy Affairs, together as part of a bureau, including additional personnel. It gives us the capacity to have a number of people that allow for sustained engagement on issues around the questions of geopolitics, market transformation, and energy access. It helps us move from having individual dialogues on energy questions with countries that might be once every six months or once a year, depending on the country, to, in fact, being able to sustain attention and focus on those questions and have a greater impact.

In the creation of the Energy Resources Bureau, it’s part of several other changes that will eventually be brought together and announced in – on the State Department. But I will be reporting through Bob Hormats, and that will allow us to continue to combine very effectively the economics issues and the energy issues. I’m also very – working very closely with our colleagues that work on climate change and environmental questions, Todd Stern and Kerry Ann Jones.

And so, in a sense, I think what we’ve done is actually created a stronger team that is knitting these issues much more effectively together. And by having additional personnel focused around these questions, it allows us to really sustain much deeper attention, and I think be able to have a greater impact.

MR. TONER: (Inaudible) question?

QUESTION: Hi. (Inaudible) with Platts. I’m wondering if you could explain why you’re recused from talking about Keystone. But then also, I’m trying to get a better sense of how this office would work with Department of Energy. Using a concrete example, the decision this summer to open the strategic oil stockpile in response to Libya, how would this office play a role in that sort of a discussion or consideration? And also, going forward, do you think that that should be an open question, whether there is enough supply in the market?

AMBASSADOR PASCUAL: On the recusal from Keystone, there is a team that has been working on it. I have not gotten involved in that issue and have recused myself from the outset because it’s important that there’s a consistent set of actors that stay engaged on this question.

On the question of the strategic reserves and global oil markets, the underlying question is of ultimate centrality to the United States, to our economy, to global economic stability. What we saw over the course of the past year and a half is that small changes in global markets can actually result in very large swings in prices. And the reason for that is that the amounts of spare capacity that exist on global oil markets are extremely small. They’re concentrated principally in the Middle East, and principally in one country, Saudi Arabia.

And so, when one looks at one and a half million barrels being removed from the market, for example, as we saw in Libya, it’s not against that market of 89 million barrels a day, which is the total market; it’s against a much smaller market of less than 5 million barrels a day. And I’m not going to go into the debates of whether the spare capacity is five, three, or two, but against a much smaller capacity – spare capacity. And so our ability to be able to stay engaged with consumers on effective use of oil and energy resources, with producers to understand the expectations and the prospects and work very closely with the International Energy Agency, which plays an absolutely central role in coordinating a dialogue of producers and consumers, is very much key because we have to have the instruments and the tools to be able to prevent disruptions as we can, and if there are situations where those disruptions might occur, to be able to inject ourselves and inject resources into those markets to help bring them stable, because as we’ve seen, it could have a very direct impact on global economic growth and on U.S. economic growth in particular.

MR. TONER: Last question.

QUESTION: One quick question. Not being an expert in energy policy, I’ll preface it, but I’ve been talking with some energy people who are very much pushing the idea that the United States, if it were to work with Canada and Mexico, would relatively quickly be able to become energy independent. That’s kind of, maybe, an overstatement, but that seems to be the direction. Is it in the United States’ interest to become energy independent completely from the Middle East?

AMBASSADOR PASCUAL: It’s in the interest of the United States to ensure that there is as much available of globally traded commodities as possible because we’re operating – we always have to remember we’re operating in global markets. And so the supplies, even though we may have adequate supplies in the United States, the prices are driven by a global marketplace. And so you have other countries where there is increasing demand, for example, and increasingly that demand increase is coming out of the non-OECD countries, China and India in particular. And as they are putting greater pressure on those global markets, it can allow – it could cause prices to, in fact, increase. And that could still have an impact on the United States.

And so, while the – while it’s important for the United States to look at the sustainable and environmentally sustainable development of our resources, both oil and gas, and we have been doing that very seriously, and in fact there have been increases of production in both oil and gas in the United States, we can’t delink ourselves from these global markets. We have to recognize that growing demand from other countries is still going to affect prices, and we need to continue the kind of diplomacy with producers – key producers like Saudi Arabia and Russia, because they will always keep affecting those markets, even if we have greater supplies here in the United States.

QUESTION: Thank you.

MR. TONER: Thank you so much, Ambassador. Appreciate it.