“Cyber Attack Is a Real Threat to the U.S. Grid” Energy Secretary Abraham

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Transcript:

Future Money Trends: Greetings and thank you for joining us at FutureMoneyTrends.com. I’m here with a very special guest today, the former U.S. Energy Secretary, Spencer Abraham. He’s also a former U.S. Senator. He’s currently the chairman and CEO of the Abraham Group as well as the Chairman of Uranium Energy Corp’s Advisory Board. Thank you for being with us sir.

Spencer Abraham: Thank you, good to be with you.

Future Money Trends: Mr. Secretary, I want to start off with the conflict in Russia. A lot of people have seen what’s going on over there and it’s a potential great concern because the U.S. is sending military ships in the region. Do you think that a physical conflict between the U.S. and Russia could ever be on the table?

Spencer Abraham: I really don’t… I don’t see that as a possibility. We have a lot of things that are going on between the two countries on the international front where we don’t see eye to eye, but I don’t see any of that leading in the direction of any kind of armed conflict. But I do think that it will affect the relationships between the two countries in terms of their economic relationships and diplomatic relationships, and that there’ll be a continued set of things that we don’t have agreement on. On the other hand I expect that in these situations that a lot of posturing goes on than anything else. And we’re seeing a certain amount of that, I think, from the Russian side, that I do think. At the end of the day, I don’t foresee any kind of physical conflict.

Future Money Trends: We hear a lot about how important Russia is to Europe with their natural gas exports. Does the U.S. have any energy exposure risks that are directly tied to Russia?

Spencer Abraham: Well it’s interesting, over recent years, as you know, we’ve had a tremendous renaissance and resurgence in our oil and gas sectors, and because of that we’re now producing as much as any country on the planet. And as a consequence of that, we’re much more self-sufficient, and at much better position really, to provide ourselves with the energy we need in terms of oil and gas. But one area that does present a challenge actually relates to our fleet of nuclear power plants. We have 104 power plants, the most of any country in the world; they consume a huge percentage of the world’s uranium, which is then converted into enriched uranium as fuel for the reactors. And interestingly, because things have changed over time, the United States has really diminished the amount of domestic uranium production and fuel enrichment that we do, and in fact have come to depend very heavily on the Russian government supplying this kind of fuel, and/or the uranium, to manufacture this fuel to U.S. utilities. And it is, I think, a subject of some energy security concern. Because to the extent that we have diminished our own activity in this area, we put ourselves much more in a dependent position. Not just on Russia and the countries from the former Soviet Union, but really on uranium suppliers all over the planet. And I don’t think that, given that 20% of our electricity grid is powered by nuclear power plants, that this is a very wise position in which to find ourselves.

Future Money Trends: Every time uranium comes up, thorium comes up in my inbox. Sometimes this comes by a few hundred members. The market has clearly chosen uranium over thorium, but I wanted to ask you, during your years in government, did you ever look at thorium as a source of clean energy?

Spencer Abraham: Certainly it was one of the things that the department did research on during my tenure, and has done it both before and since my tenure. I don’t think anybody has felt that it was ready to be a substitute, but I think it’s always important to encourage research on new and potential energy sources and I’m sure it will continue. But yes, we did engage in exploration of that, as have other administrations over the years.

Future Money Trends: I think it’s fair to say that any energy company on earth would want and desire to have you on their team. This leads me to ask, what made you decide to partner with Uranium Energy Corp, UEC, as their Chairman of their advisory board?

Spencer Abraham: Well first of all I’ve already expressed my concern about the extent to which the U.S. has been diminishing its activity in the uranium production area. And I think this is a potential source of energy security challenge to this country. Accordingly, given the opportunity to try to support and help and work with companies who want to develop uranium in the United States and in other places as well, I was attracted by the prospect of helping UEC. Because one of their main operations really is in Tex  as, and that’s a fruitful potential source of uranium for America. I think they have a very good team, in particular I’ve worked very closely with their CEO, Amir Adnani, and I think Amir is a very bright young CEO who’s had good vision in terms of the direction that energy policy should go and has done a good job of developing the company, and getting it on track. And I think it’s an opportunity really, one of the best opportunities we have, to really expand America’s domestic uranium production.

Future Money Trends: Outside of politics, and the front page of the Times, do you think Japan is going to once again become a major buyer of uranium, and a nation powered by nuclear energy?

Spencer Abraham: Well I think their Prime Minister (Shinzō) Abe has indicated that that is his hope and desire. Obviously the Japanese are still recovering from the tragedy of Fukushima. As a consequence of that set of events, they’ve shut down most of their nuclear fleet and are only bringing it back slowly, because they’re obviously deeply concerned about safety as they should be. But Japan does have the dilemma that it doesn’t have a lot of domestic resources to tap for energy production. Nuclear power is something that can truly be, for them, a major source of supply which would require very minimal importation of resources. And so it makes sense to them, and I think they will pursue, in a safe way, the restarting of as many of their reactors as they can. And I would expect that in the future they would be expanding their fleet to compensate for some that will not come back online.

Future Money Trends: What kind of risk is there for this event, the Fukushima disaster, to happen again, either somewhere else or specifically in the U.S.? My thought is, and of course I’m not an expert in energy, but I do live in Southern California, and I’ve always wondered what would happen if the San Andreas Fault has an 8.5 earthquake. What things are in place to prevent another situation like Fukushima?

Spencer Abraham: Well I think, first of all, the U.S., since Fukushima. has re-doubled its efforts, both from the standpoint of the federal regulatory approach through the nuclear regulatory commission, but certainly all of the companies who operate nuclear facilities, to try to make them as safe as possible. And I think that is what we have done. I think we have an outstanding track record as a country in terms of the protection of our nuclear fleet. People always can imagine a scenario of something that could happen, and do their best to do that. But you never, at the end of the day, you never can anticipate everything. But I think that our fleet is very safe and secure. The one thing I have argued for, for some time, has been the building of new nuclear plants to replace some of these older reactors. Because the ones in Japan were ones that were older generation nuclear reactors, and we have a lot of those operating in the United States. Whereas the new designs of reactors are ones that would most certainly withstand the kind of challenges posed to Fukushima. And it makes sense to me to build new reactors that are safer, more efficient, and modern. And I think it’s been frustrating to hear some of the anti-nuclear critics argue that we shouldn’t be building new nuclear reactors, but maintaining simply the ones we have. So it’s kind of an unusual position, because even though they claim to be concerned about safety, they would prefer to keep the older reactors online instead of building the newer, safer, versions. And I’m in favor of keeping the older ones as long as we can, but being careful about it, and at the same time building some new reactors so that we can modernize the fleet over time.

Future Money Trends: Mr. Secretary, on April 16th of 2013, which was literally about a year ago. Six men attacked a power station in California with Ak-47′s. These men were not caught. I want to ask you, how vulnerable is our energy grid? Could this attack been some type of dry run?

Spencer Abraham: I’m not terribly exorcised by this. I mean you have a lot of folks who can get worked up about everything from their power bills to the fact that some of these transmission lines come too close to their neighborhood. Who knows what their motivation was? But I believe that the biggest threat to worry about is not the physical security of transmission hubs or things like that, I think it’s really the potential of cyber threats. Because the grid is very much an information technology marvel, which makes it vulnerable to cyber-attack. I’m not saying I think that it could be successful. I just think that the area we need constant vigilance, and need to particularly be concerned about. I think most utility company executives would say that the thing that keeps them up most at night would be the threat of a cyber-attack. But I think in terms of the physical security of the grid, I think most of the companies are very vigilant and can react pretty quickly to any kind of attack like that one, which took place last year.

Future Money Trends: I want to move on to oil. Is the cheap oil gone? Even with new innovations like fracking, has the world experienced not peak oil, but peak cheap oil?

Spencer Abraham: Well I’ve suggested that in things I’ve said and written before, because I do think we’re finding now that we have a lot of crude, it’s just not as easy to get to. People that aren’t close to the industry sort of know… what they know about oil tends to be what they’ve seen in movies where somebody puts a derrick in to the ground and immediately oil’s spurting all over the place. And that’s kind of the way it might have been at the beginning back at the turn of the century or something. But it’s changed, and now oil is in more difficult to reach locations, and requires a fair amount of extraction, or pre-extraction activity, from horizontal drilling, to fracking, to flooding reservoirs with the various things, including CO2 I might add. And so those things are costly. And a lot of the oil which is extracted isn’t perfect and ready to go to a refinery down the street, it requires further processing. So I do think the process of producing oil, extracting it and developing it, is becoming more expensive, that’s the bad news. The good news is because of these new technologies, we’re finding more and more of it here in the United States, which has helped us to dramatically reduce our dependence on imported oil. And that’s a good thing.

Future Money Trends: In 100 years is the U.S. still a petroleum based economy?

Spencer Abraham: Well it’s pretty hard to prophesize that far in to the future. I do not foresee the United States (stuck on oil). In this point based on the development of new energy technologies, I don’t think we’re going to be only using oil. At the same time I don’t see a world where we aren’t using oil in some fashion. But innovations and technological advances are moving at great pace. And so one should never say never on these kinds of issues, because we have brilliant minds working in laboratories and research facilities all over the planet. And there’s no telling what kind of exciting things will be coming over the course of 100 years. But certainly in the shorter term, we should assume that petroleum will continue to play a major role.

Future Money Trends: I’ve seen these different things from where India may have a car that runs on air to President Carter talk about a car that ran on ocean water. When you were the Secretary of Energy and through the different research you’ve done, have you ever come across anything like this that hasn’t been advanced?

Spencer Abraham: Well there are a great deal of research that’s going in to fusion, nuclear fusion, at this point, which would be a very clean way, and much safer if it ever were a perfected way of power generation. But everybody now is just, if it will work we aren’t going to know it for a long time, and it’s a long way off. But there are things on the drawing boards that are out there. It’s just that most of them are very complicated to develop and don’t, on a per-dollar basis, provide the kind of energy that the world either has come to expect or needs going forward. When we realize that a large part of the world remains without electricity, that we have in developing countries very few people who are able to afford the kinds of personal items that require electricity, but they will as those countries develop; the growth in energy demand is going to continue. And it would be great if we could magically discover something new. Hopefully we can develop a lot of these kinds of more esoteric energy sources. But it’s doubtful that any of them are going to instantaneously be game changers. But collectively we hope that they can all contribute to the overall world demand.

Future Money Trends: Final question: Are any of our trading partners, specifically in the Middle East, concerned about the value of the dollar in regards to the overwhelming debt burden the U.S. has placed on itself and Q.E. from the FED. Is anyone worried about the petrodollar as a medium of exchange, that it might lose (reserve status) one day?

Spencer Abraham: Well from time to time, you hear people sort of rattling the saber about moving away from the dollar. You had this happening a few years ago, people talking about the Euro instead, but then all of a sudden the European economic situation changed and you haven’t heard much of that talk lately. But the dollar enjoys the confidence of everybody on the planet, and anyone who’s travelled abroad knows exactly what I’m talking about. So I think that while you may have, for political reasons, people making allusions to finding an alternative international currency to depend on, and so on,  that a lot of it is just talk. And at least at the moment I don’t see anything that’s serious at all out there that suggests that type of change. But that doesn’t mean people won’t from time to time, for political reasons or other reasons, want to speculate. But again, just say that anybody who’s travelled internationally, it’s pretty consistent wherever you go. The dollar is regarded with confidence and seen as a secure currency. And I think that’s the reason it remains, and will continue to remain, as the principle mechanism by which energy exchanges are judged.

Future Money Trends: Secretary Abraham, Chairman and CEO of the Abraham Group, as well as the Chairman of Uranium Energy Corp’s Advisory board, thank you so much for joining us today sir.

Spencer Abraham: Thanks. Good to be with you, and I appreciate it. Thank you.

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