CNN's John King interviews Vice President Dick Cheney

KING: We thank you for joining us this morning, sir. Your task force is finished its work. The president will unveil the report next week and the administration tries to sell a new long-term energy strategy for this country. Let's focus first on the short term. Consumers pulling their car up to the pump today are paying as much as $2.00 or more, $2.64 I just saw one consumer saying she paid in California over the weekend. Anything the administration can do in the short term to help those people, the American people as they prepare for spring and summer vacation, as they drive to work every day?

CHENEY: Well, you have to ask your self how it is we got to this state, John. Why do we have rapidly rising gasoline prices today? And a lot of that has to do with the fact that we have not had coherent national energy policy for many years. We don't have the refineries, for example. We have not built a new refinery in this country for over 20 years. So the market is very, very tight for gasoline. And we've added a lot of requirements because we want clean air. The combination of those things is what in fact is leading the price spikes this summer for gasoline.

The solution for us is to try to deal with these issues on a long-term basis so that we get more supply. That's the key to having the adequate prices as well.

KING: One way to get more supply obviously is more domestic exploration and production. We'll discuss that in a minute.

During the presidential campaign, yourself and then-Governor Bush were quite critical of the prior administration. I want to read you a quote from then-Governor Bush, January, 2000. "What I think the president ought to do," President Clinton in that case, "what I think the president ought to do, is he ought to get on the phone with the OPEC cartel and say we expect you to open your spigots." OPEC has actually cut production during this administration, citing the downturn in the world economy.

CHENEY: Yes.

KING: Are you learning, 100-plus days, that it's easier during a campaign to say some things than to actually do them when you're in the government?

CHENEY: Well, no, we've worked with OPEC. I met with the Saudi oil minister just last week, as a matter of fact, he came through town, Mr. Ali Nuaimi. The fact is today we can't blame the problem on OPEC in terms of current gasoline prices. Their production levels and the price of oil through the spring has been fairly stable.

In fact, the biggest problem comes back to this refinery capacity. Yet, by our own choice, we have not built new refineries in this country for over 25 years. And the net result of that is no matter what happens to the international oil price, it's the lack of refining capacity that drives those gasoline prices higher, not what happens in terms of the price fluctuations for crude.

KING: Well, let's talk about that infrastructure. It's a difficult word. You say we need to add 1,300 to 1,900 refineries in this country, power plants -- I'm sorry -- on the electricity side and then a number of refineries, well over a 20-year strategy. How do you get local governments to do that? And there's a term that's used often, NIMBY, an acronym in Washington, not in my backyard.

How you going to convince state and local governments to do this? And will this report call for, essentially, the power of eminent domain? When the state wants to build a highway, it says, "We're taking your house." When the state wants to build a new factory, it says, "We're taking your house." Is the federal government prepared to say, "We will take your house, because we need to build new power transmission lines and new gas pipelines."

CHENEY: Well, the federal government already has the authority, eminent domain authority, with respect to gas pipelines; FERC has that authority. The issue is whether or not we should have the same authority on electrical transmission lines, that's never been granted previously. That's one of the issues we've looked at. We'll have a recommendation when we release the report next week.

KING: You have seem to hint that you think you need that authority to get this done. And you have met with a number of people who have said, "How can we do this back home? We need your help. You need to cover us if we are to do this."

CHENEY: John, what I'm trying to do here is be forthcoming as I can, but save some of the specific recommendations for when we actually release the report.

But let's talk about a couple of those subjects you've touched on there. You know, we're going to get a lot from conservation. We've got a great track record, for example, on conservation and increased efficiency over the years.

If you go back to 1973, our economy has increased five times over, 126 percent. Our energy use increased 26 percent. We've gotten to be much, much more efficient consumers of energy than ever before. Our technology's gotten better, and will get even better in the future. We'll get a lot of savings going forward from conservation and increased efficiency.

Bottom line, though, is, we can't close the gap all the way to expect (ph) the demand, unless we provide additional supplies. And that means additional supplies of electric power, because we think we will need a minimum of 1,300 new power plants over the next 20 years. We'll need more natural gas. While those plants will be gas-fired, we're going to need more coal. We're going to need, possibly, to go back to nuclear again, that's 20 percent of our electric capacity today. And we're going to find ways to get more gasoline for our transportation industry. So we need that combinations of things.

And what our report does, it focuses on conservation and efficiency and additional supplies that are required, at the same time trying to protect the environment.

KING: You've been in this town quite a bit. You understand this is not just a policy debate, but a political debate as well.

CHENEY: Political debate, that's right.

KING: And you received some criticism after your speech to the Associated Press meeting in Toronto where you said, quote, "Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy."

The governor of California said just last night on CNN he thinks you're missing the boat; that you don't understand the value and the potential of conservation.

As you answer the question, or respond to the governor, if you will, what specifically will this plan do, and does this administration want to do, in terms of conservation? And what kind of new money are we talking about?

CHENEY: Well, you'll find that most of the financial incentives that we recommend in the report go for conservation or renewables, for increased efficiencies. Now, we don't have a lot of new financial incentives in here to go out and produce more oil and gas, for example, so, we believe in conservation, we believe in renewables, we believe in wind and solar and all of those other technologies.

But the bottom line is, the so-called renewables only provide about 2 percent of our electric generating capacity today. If we triple that over the next 20 years, it will only be 6 percent. Conservation's important; we've got a major emphasis on conservation in our report.

But what's happened in California, I would argue is, they've taken the route of saying, "Well, we can conserve our way out of the problem. All we have to do is conserve; we don't have to produce any more power." So they haven't built any electric power plants in the last 10 years in California, and today they've got rolling blackouts, because they don't have enough electricity; they've got rising prices; they've got a whole complex of problems that are caused by relying only on conservation and not doing anything about the supply side of the equation.

KING: One way to conserve is to make cars more efficient. When now-Secretary of Energy Abraham was in the Senate from the state of Michigan, he was known as a friend of the auto industry -- makes sense, they're obviously a major force economically in his state. The White House Chief of Staff Andy Card was once a lobbyist as well in this field, and one of the big questions is, will this report, or if not this report, will this administration, come July when the National Academy of Sciences makes new recommendations on what's called CAFE standards, fuel economy standards, is this administration prepared to say to Detroit, "You must improve the efficiency of your vehicles?"

KING: And it's that, again, a policy and a political question. Many of the people who go to the polls and vote like their big SUVs.

CHENEY: Sure, well, the important thing to recognize here is all of these are tough political issues -- whether or not to drill in the Alaska National Wildlife Refuge and whether or not we ought to go nuclear on some of our power plants. These are difficult issues -- whether or not we ought to have a comprehensive energy policy.

If it was easy, the Clinton administration would have done it. They ducked it for eight years.

With respect to the CAFE standards, we think they have made a significant contribution over the years, improved the efficiency, if you will, the mileage of our automobiles.

Right now, there is legislative language that prohibits the Department of Transportation from going in and addressing the question of changing the standards for light trucks, SUVs among others.

There is a study underway by the National Academy of Sciences, will be completed this summer. What we'll recommend is taking a look at the results of that study and deciding whether or not we want to go forward with some change in the CAFE standards as well.

KING: So wait for the study, make no decision right now?

CHENEY: That's right. There will be -- As I say, it's a thorough study. It's done by one of the best institutions around, and we think it will give us useful information and lay the groundwork for whatever policy recommendation we want to make after that.

KING: Let me follow on that point something that Ari Fleischer, the White House press secretary, said yesterday that was quite interesting. He said, "One of the goals here is to make this country more efficient, to find new sources of energy, but in no way to put a cramp on the American way of life," that Americans are entitled to their SUVs. Americans are entitled to high computer use, going online. Balance that for you -- there's no sacrifice to be made here?

The country has what you would term an energy crisis or near crisis. There's no sacrifice to be made by the American people?

CHENEY: There are, clearly, places short term. For example, efforts are underway in California to try to reduce power consumption this summer. The president has ordered to the federal agencies out there to cut back at least 10 percent to try to provide some relief for the folks in California.

CHENEY: But long term, what we're talking about is meeting the needs of a growing economy for adequate supplies of energy; providing the kind of continued hope and optimism that the American people have that they'll be able to better themselves and their families and improve the circumstances of their children in the years ahead; that they can start a new business and succeed or take a new job and succeed or build a house they want.

The American lifestyle, basically, we think is very important. With technology, there's no reason why we can't do that or we can't build houses that are more energy efficient than ever before. We're learning how to do that all the time. The automobiles, for example, we drive today with all those silicon chips in them that, in effect, retune the engine between every firing of a spark plug.

There are lots of ways we can use technology to get better, more efficient, conserve more, get more mileage, if you will, out of our energy resources, without saying to the American people, you've got to live in the dark, turn out all the lights, don't enjoy the things that our modern society brings you. That shouldn't be necessary.

KING: OK. On that note, we're going to take a quick break. We'll be back in just a couple of minutes with more Vice President Dick Cheney on the emerging Bush administration energy policy and other issues as well.

KING: Welcome back. For those of you just joining us, we are in the ceremonial office of the vice president, in the Eisenhower Executive Office Building, just across the path from the White House, with the vice president of the United States, Dick Cheney.

During the break, we were having a little conversation. And you were saying one of the most difficult things that you try to sell a very controversial new energy policy, a number of very controversial items, is that this is an emotional debate, that the parties involved don't trust each other. Explain what you mean by that?

CHENEY: Well, there is a lot of history to some of these issues, of course. But it's almost as though nobody hears the other person on opposite sides of the argument. People hear what they want to hear. People deal with each other on the basis of stereotypes. Oh, you have got a background in the energy industry, that's all you care about. Or you're an environmentalist. Oh, you're a tree hugger. All you care about is preserving the environment and you don't want to meet people's legitimate needs for energy.

Somehow we've got to sort through all of that and get people to sit down and listen, because one of the things that I'm struck by continually as I dig through this is that technology often provides the answer for us; that we can in fact both have adequate supplies of energy and protect the environment; that we've got a great track record over the last several decades as a society in terms of doing a better job, using less energy, preserving the environment.

And in fact, even as our consumption of energy has arisen by some 47 percent over the last few years, the amount of pollution going into the atmosphere is down by 31 percent. So we are doing both. We are protecting the environment and producing more at the same time.

KING: You mentioned the emotions and the politics of this. Forgive me, but to play devil's advocate, in this town, if you wanted to be a political opponent of what you're about to do this is t-ball, excuse the metaphor. You do come from the energy industry yourself.

CHENEY: Right.

KING: The president before he was governor, owner of a baseball team was in the energy industry. A number of people throughout the administration have been involved either in the energy industry directly or relations with the automobile industry. From a political standpoint, pretty easy target, is it not? And how do you address that?

CHENEY: Well, address it first of all, we've got a lot of experienced people in the business. I think it's useful to have somebody who knows something about the energy business involved in the effort. But those aren't the only backgrounds that are represented. Christie Todd Whitman, who has had a major role, as the administrator of the Environmental Protection Agency -- governor, good strong environmental record as a governor. So when we sit down around the table to argue and debate over policy, all views are represented.

And the other thing is that just because somebody comes out of the energy industry doesn't necessarily make them quote, "anti- environment." I think what you'll find, what I found during my experience in the business is that the industry is rather split on nearly every issue. One of the leading environmental firms in the world today is British Petroleum, headed by John Browne, who spends a lot of time in energy on these kinds of concerns. We have a great many good folks in the energy industry who care a lot about the environment.

So again, the old stereotypes kind of need to be set aside and we need to calm down a little bit, get everybody down off the ceiling, and sit down and have an informed and intelligent debate over where we ought to go with energy policy.

KING: OK, we've had a lot of talk about the politics. Let's get in, move quickly through, some of the policy items. Coal, you say it's a great resource, the United States obviously has a great supply of coal; the environmentalists say it's a dirty source of energy, if you will, contributes to global warming.

One of the issues before your commission is will you go back to the prior interpretation of what the Environmental Protection Agency calls New Source Review, a term unknown to most Americans, but essentially a new standard put in place that if a coal plant modernized, it would become subject to new environmental standards.

Many in the industry believe in the latter years of the Clinton administration, they went too far, and that if you would go back simply to the old interpretation, you could fire up some new coal plants as much as 40,000 megawatts. That would be the equivalent of 40 new power plants.

Will you go back to the old interpretation? And then, if you could follow on with that, what specifically are you prepared to do to encourage more use of coal?

CHENEY: Well, on coal, it is very important. It provides 52 percent of our electricity today. You know, we've gotten a lot better at burning it cleanly and taking out the pollutants. We've got $2 billion in the budget for clean coal technology.

The question of New Source Review really flows out of the 1990 amendments to the Clean Air Act. And there, if you have a significant modification or upgrade on an existing plant, then you have to go through New Source Review, and you're required to put on the latest scrubber technology. If, on the other hand, it is sort of routine maintenance and upkeep and not a significant upgrade, then you don't have to go through that process.

The debate has arisen because in the last couple of years at EPA, they have toughened their enforcement standard. They haven't really changed the regulations, but there are a lot more cases pending where it's alleged people need to make the more comprehensive investment. A tough call, we're asking Christie Todd Whitman, the administrator of the EPA, to go review all of that, to draw on some of the other resources within the administration and to take a look at this charge that has been made that somehow it's being enforced now in a way that fundamentally inhibits the capacity of plants to make necessary upgrades and do routine maintenance. We don't have enough facts yet to be able to say it should or shouldn't be changed, but we are asking her to go back and review it.

KING: The critics say this is an administration that wants to burn more coal.

KING: They say it's a follow-up to the administration saying it would not support the Kyoto Treaty on global warming. They, of course, believe coal burning contributes to greenhouse gases and global warming. And they would say this, that the president, then governor in the campaign, promised to limit CO2 emissions from power plants. Then he goes to the state of West Virginia, absent those four electoral votes -- I'm talking to Joe Lieberman today. The president goes to the state of West Virginia and he says he wants to convince many in the country who don't believe we can have a clean air policy and burn coal at the same time. Then shortly thereafter, he says he will not go ahead with that campaign pledge.

Again, politically, that's a pretty easy way to say this is about politics. This is not about policy.

CHENEY: Well, I think the mistake was the campaign pledge. Nobody paid much attention to it at the time. You guys didn't notice it, the press and, frankly, many of us in the campaign didn't either. It was a mistake, because we aren't in a position today to be able to do that in terms of sort of capping emissions, CO2 emissions. We can do a lot of work to clean up coal technologies, so we deal with other kinds of pollutants and he's committed to that; in the same speech made reference to controlling mercury and SO2 and nox (ph), for example, emissions and we will go forward with the legislation in those areas.

One of the great ways to deal with greenhouse gases is nuclear power plants. And if we go forward in developing these 1,300 new plants we think we'll need over the next 20 years, some of those probably ought to be nuclear. We get 20 percent of our electricity today for nuclear power. There's no reason why we can't increase that. It is a safe technology and it doesn't emit any carbon dioxide at all. So assuming that we can go forward on that, that helps us with an environmental problem the same time that we meet our energy needs.

KING: Nineteen seventy-three since anyone in the industry has proposed a new nuclear power plant. My understanding is the report will promise to beef up the permitting staff so you can get through the applications faster. Anything else the administration is prepared to do to encourage the nuclear industry? And do you seriously believe that in the current political environment that the industry will step forward and say, let's build more nuclear plants in this country?

CHENEY: Well, I think the environment's changed for a couple of reasons. First of all, I find, as I get out and talking to people and also with members of Congress who are pretty sensitive politically, that there's much greater willingness today than there was a few years ago to look at the question of nuclear power as potential source for us for electricity.

CHENEY: The problems, up to now, have been driven in part by economics. All of the controversy that surrounded nuclear power in the past discouraged many utilities from making that investment. Now, with the gas prices rising as dramatically as they have, nuclear power looks like a pretty good alternative from an economic standpoint, if the permitting process is manageable and if we find a way to deal with the waste question.

KING: I was just going to raise that. The last administration had a very tough time; the state of Nevada and others trying to deal with the was working on as we go forward from this point. But just making the decision that we think nuclear power deserves another look, that it may offer us significant potential for the future, that does, in fact, then entail us going back and addressing the waste question.

And there have been steps taken. There have been sites studied. There's a lot of work that's been done here. There's more that needs to be done if we're actually going to resolve it.

Right now we've got waste piling up at reactors all over the country. Eventually, there ought to be a permanent repository. The French do this very successfully and very safely in an environmentally sound, sane (ph) manner. We need to be able to do the same thing.

KING: Another lightning rod in your report will be exploring for oil and natural gas on federal lands -- the Arctic National Wildlife Refuge, the Lewis and Clark Forest and others. And your critics will say, "It's really not that much there if you look at the context of what we need for energy and you're going to put these pristine environments and endangered species at risk."

I know one of your experiences with the Halliburton Company is you believe there's the technology available to do this in an environmentally-friendly way. How so?

CHENEY: Well, if you look at our oil requirements, transportation sector is 100 percent dependent -- nearly 100 percent dependent today on oil. That's not likely to change in the next 20 years. There are interesting possibilities coming along -- hybrids, for example, that I think we're going to encourage and support in our recommendations; eventually, maybe fuel cells. But for the foreseeable future, it's going to be a gasoline- and diesel-powered transportation system. That means oil.

Over the last several years, since the 1970s, when we imported 36 percent of our oil, the amount of oil we get from overseas has steadily crept up until, we estimate in 20 years hence it'll be two- thirds of all our oil will be imported from overseas.

CHENEY: Now we do need to develop resources here at home. We're never going to be totally independent of those foreign sources, probably shouldn't try, but to the extent that we are dependent on those foreign sources, it's easy for a regime, such as Saddam Hussein and Iraq to hold us hostage, because they produce an important part of the world's oil reserves.

We think ANWR can be developed safely. ANWR is an area of 19 million acres in northern Alaska. We only need to disturb an area of about 2,000 acres on the surface in order to be able to drill the oil that we think is there. It's only a portion of the refuge that's of interest.

And today's modern technology, that would let you, for example, drill a well here at the White House -- one well -- and develop oil resources any place under the District of Columbia, offers the prospect of being able to go into a place like ANWR, develop the resource and leave an absolute minimal footprint behind. It does not require us to go to spoil 19 million acres of Alaska wilderness in order to get at that resource.

KING: One more on energy, and then I want to close on a few other issues quickly. The White House has ruled out any temporary cut in gas taxes to ease the burden at the pump right now. But if, as you send these proposal Capitol Hill, if the reaction back is, "Well, we need a compromise here to get some of this through, and we'll give you most of what you want here and most of what you want there, but we're up next year. You're not up until 2004. We have to face the voters in 2002," the members of Congress, if they say, "Let's suspend for a year, say, $.05 of the federal gas tax to help people at the pump," even if it's viewed as largely a symbolic gesture, would the administration be open to something like that if it were part of a larger comprehensive plan that were acceptable?

CHENEY: I haven't talked to the president about that, John. He'll have to make that call and decision if that were to come up, and I wouldn't want to signal one way or the other today.

The gas tax is going to build highways. Those are important considerations as well, too. So you'd have to balance off those competing demands to see whether or not it made sense.

KING: You're wrapping up work on this task force. The administration will announce later today that you are going to take the lead in yet another task force. This one: How should the United States reconfigure, if at all, how the federal government deals with the threat of domestic terrorism?

There have been some recommendations of creating a new agency to do so. For now, the administration is saying, "No, we'll create a new office in FEMA, the emergency management agency," and that you will take a look at this.

What is the goal of that task force, and what do you view as the principal threat?

CHENEY: Well, the concern here is that one of our biggest threats as a nation is no longer, sort of, the conventional military attack against the United States but, rather, that it might come from other quarters. It could be domestic terrorism, but it may also be a terrorist organization overseas or even another state using weapons of mass destruction against the U.S., a hand-carried nuclear weapon or biological or chemical agents.

CHENEY: The threat to the continental United States and our infrastructure is changing and evolving. And we need to look at this whole area, oftentimes referred to as homeland defense.

The president's asked me to take on the responsibility of overseeing all of that, reviewing the plans that are out there today. Joe Allbaugh and the folks at FEMA specifically have the responsibility, and we're working very closely with them to figure out how we'd best respond to that kind of disaster of major proportion that in effect would be manmade or man-caused.

All of this will be pulled together recommendations and legislation that we want to make to the Congress to make sure we're teed up, if you will, and organized in a way to effectively deal with this new threat.

KING: Another issue facing the administration, the defense secretary, a position you once held, your friend Don Rumsfeld now conducting a review to decide top to bottom how to change military spending. But among the issues, should the Pentagon abandon the strategy it has had for some time, essentially to be prepared to fight two wars at once.

From your experience now as vice president and the lessons of the Persian Gulf War, during which you were the defense secretary, what is your take there? Should the United States abandon that posture? And what specifically do you see coming out of this review?

CHENEY: We got to the two war scenario, really, at the end of the Cold War. It was something that Colin Powell and I developed as we reconfigured our forces as the Soviet Union collapsed. And it was a way for us to size the force, to decide how many divisions we needed; how many ships and so forth, and I think it's stood in pretty good stead up to now.

It may need to be changed. And Don is charged with the responsibility of looking at all of that. We've really got to decide whether we want a threat-based force, the kind of force, for example, we had during the Cold War, where we really looked at the Soviet Union, said, "That's the threat," and built a force to defend against it; whether you want a capabilities-based force, sit down and decide you need certain kinds of capabilities, that the world out there is pretty unpredictable at this point. It's not possible to specify the kind of threats you'll face in the future, so instead you focus rather on the kinds of forces you build and don't be quite that worried about the scenario.

All of these options are being considered. All of this will come to the president. He'll have to make basic, fundamental decisions. It's a very, very big decision as we sort of lay out our military forces and defense strategy for the 21st century, and the president is heavily involved in that. Don's been reporting in almost on a weekly basis on the progress of those studies, and we'll have some decision shortly, I'm sure.

KING: When the administration took office, there were a lot of signals sent from yourself, the president, and others that perhaps the economy was teetering on the edge of recession. Conflicting evidence in recent days, some first quarter reports show growth OK, some think that would be revised downward; Dell Computer, big layoffs yesterday, other layoffs throughout the economy. Are we still at risk of recession?

CHENEY: I think we are. We don't know yet. The basic answer is, we don't know whether we're going to tip over into negative territory or whether we've sort of hit bottom here and we'll level out and begin to climb again. I think the long-term outlook for the economy is very good.

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