In the past decade no other issue or chain of events has have more impact on minnesotans and on the state's economy that has energy while inflation and unemployment dominate the seen much of the economy's poor condition can be traced to events which began in 1973 with the Arab Oil Embargo. And while we have adjusted a great deal to energy conservation. We continue to face Rising natural gas prices and incomes have grown far more slowly than have energy costs. The dominant features in Rising prices as shown through monthly consumer price in Decatur's have been heating fuel and transportation energy price increases What I'd like to cover in this presentation are some of the critical impact we have felt some of the alternative courses of action. We have the benefits of a changed course of action and energy for Minnesota and square based on the work of the energy division. We should focus public policy in the next few years. Mindful, we are of the need to both resolve near-term problems and a set in motion those efforts which we can to provide for improved energy and economic conditions and opportunities for the longer term as well. In 1980 we spent about 18% of the state's primary income on energy as you can see 60% of those dollars leave the state permanently and are not available for reinvestment in new jobs in an economic improvements without major changes in this worsening condition. We can only expect poor economic performance in the future in but a decade this problem as you can see she has more than double. If we look for a moment actual economic performance higher energy prices of cause the Gross State product to grow by about three billion dollars less than it would have between 1978 and 82 without those higher energy prices. Where you creases are shown by the dotted line on the graph reflects. When the real price of petroleum fuels was declining. But a 1979-1980 in 1981 when real petroleum prices were Rising rapidly. The state's economy. Poorly with economic recovery. We can expect petroleum prices again to rise in real terms and we will again have to look for other ways to improve the economy to offset potential losses resulting from a new round of higher energy prices. Employment to has suffered in the face of higher energy prices without Rising prices during 1979 and 1980 dollars paid for employment would be about sixty million higher annually ordering 1982 than they actually were again. We see the decline beginning about the time of the Iranian Revolution 1979 coincident with the last huge jump in World oil prices one way to avoid employment losses relative to energy used to stimulate those jobs and those businesses which gimbal save energy and produce energy in Minnesota. Some minnesotans have been worse hurt far more worse than others households with median incomes $26,000 per year paid about 9% of their total income for energy just to heat and cool their homes. And just adjust 60% of median income, which is about $15,000 per year many minnesotans. Cannot keep Pace with Rising Energy prices. A number of them has had to turn the federal fuel assistance payments a program operated by the Department of Economic Security these payments merely helped those minnesotans not to fall further in-depth yet their homes remain as inefficient as ever because of the insufficient amount of weatherization funds available in the state of Minnesota. Even worse is the situation for minnesotans who live at the poverty level about $9,300 per year income their household energy cost consume about 20% of their total annual in this group of minnesotans has access to some weatherization funds but the total amount available is insufficient to address all the needs and the amount which can be spent on each household by federal rules is about 1/2 that needed to do the thorough job of weatherization in their homes. This next chart shows our projections for fuel assistance requirements for low income people based upon projections for Rising energy costs in 1982 Economic Security paid out about 57 million dollars in fuel assistance. This amount could more than double by 1990 if major Investments are not made in weatherization. What we have here is a classic case of having to continually spend money when the solution actually requires permanent investments in the state's future while we need and I stress need to maintain fuel assistance at current levels. So people don't fall further behind at least we must also markedly increase the dollars available federal and state for weatherization. There was no real return on fuel assistance. There can be through weatherization. In order to evaluate which energy alternatives are most cost-effective. We need to look at the relative costs per million BTUs as this chart shows natural gas Remains. The least costly traditional fuel source has cost is escalating rapidly through phase natural gas deregulation at the federal level in the past two years. We have seen annual price increases. Well in excess of 20% per year. They just announced Federal order will raise group prices at least by that amount in 1983 deregulation is expected to be completed by 1985 barring further congressional action and future increases should begin to more parallel inflation. Comparing alternative fuels you can see that those alternate is widely considered for use here in Minnesota continue to be more costly than traditional fuels this will change. However, as we gain success in both resource and Technology improvements many of which have been supported by the general fund and by the Legislative Commission on Minnesota's resources in recent years passive solar and solar domestic hot water or gaining competitive and Pete as a boiler fuel to replace pull is nearing competitive levels both wind and hydro in some applications can replace traditional ways to supply electricity. Are 1980 biennial energy policy and conservation report? I'm sorry, 1982 copies of which were made available to the legislature in late December describe some scenarios under which Minnesota can make substantial strides and change into the mix of energy supplies and uses and to improve the state's economy. As you can see from this chart if we overcome major barriers caused by lack of information poor financial incentives complicated government regulations and more. We will see major changes in the 1980s. We can expect solar District Heating and wind to make major games by the turn of the century. We should see even more wind energy, but we also should see substantial gains in production in the use of biomass fuels would crops Pete special energy crops and perhaps methanol a fuel with much versatility and as a commodity with many Alternatives in the petrochemical industry Throughout his two-decade. Conservation Remains The Key Energy strategy for the state. In fact, it does no good to use alternative fuels unless we first met car using systems as efficient as possible. Simply put you don't put solar systems in the poorly built or poorly insulated home. Looking at the two more Progressive futuristic scenarios in our biennial report. We can see that a bigger a Statewide energy program in both conservation and Alternative Energy development can contribute to increased employ energy conservation and most all alternative energy production efforts are labor-intensive. They create local jobs for local people. We can our analyses show expect to see new businesses created to supply conservation technology materials and installation services. All of these will be or at least begin as small businesses. We should also see in the 80s in the emergency number of businesses small and perhaps larger which will produce fiber feels Pete and other new energy sources and we will see will see other companies and jobs created to harvest fuels to transport them in to install the equipment to use them. Returning the energy conservation all the major energy conservation measures. We should be emphasizing are less costly than acquiring and burning additional volumes of energy, even an auto tune up something which folks like me avoid to put off as far as cheaper than the inefficient use of gasoline. We are working on a major super-insulated housing program at the energy division now constructing through the AV ti25 demonstration homes throughout the state. We believe that future new homes in Minnesota should be super insulated and we feel that the Returns on super insulation Investments are attractive for new homeowners. We also re-evaluating super insulation retrofit to see how costly it will be and how economical economical it will be to improve the existing housing stock. In determining the cost effectiveness of weatherization. We need to look at the actual dollars compared with the accumulated energy cost savings over a. Of years as you can see on a 15-year life cycle basis, we can show that a near $4,000 weatherization investment in the average home heated by natural gas will yield about $9,700 or more than double in dollar savings through less energy consumption. The savings are slightly higher for oil-fired homes. What is discuss these days about the role of government in energy in an a number of critical public policy issues in areas are biennial report States firmly that government has and should play a strong role in energy that roll off and cost money. And in many instances the sums are large government, like any other institution should seek to invest its capital in those areas where the returns are most attractive and clearly in response to real public needs for government. The Returns come in at least two forms generally economic benefits what we call sucks secondary economic benefits in the form of new jobs new businesses new private and public revenues and continued economic expansion. Secondly, we get other indirect return through reductions in payments for unemployment welfare and other subsistence and where possible and where we'd like to see it reduce taxes. For the next four years, at least we see four major areas where government should play a major positive role through energy initiatives in the areas of Economic Development the state can and it has stimulated those businesses and jobs which can supply and use alternative fuels and Technologies. We have a base here for that with our fuels and with some of our companies. Importantly the energy problems a low income people represented continue than growing drain on the public coffers and clearly on the Improvement instability in the growth of private businesses and individuals you have I am sure you heard from any low-income people about their problems. What is needed is a major effort public and private to bring that public and private Capital to bear on this problem emphasis should be placed on developing ways to use private financing to solve this problem in that public funds are limited and stretched thin. This means finding ways to use public funds to leverage private money. At lower interest rates and it means finding ways to stimulate in particular private property owners particularly those who have multi-family housing ownership where many low-income people live to make the Investments necessary to improve Energy Efficiency. Are on public institutions have not received near the effort needed to improve Energy Efficiency a major effort to retrofit school should be done to take any mediately in order to reduce operating costs and to make those see dollars available to maintain the quality of Education local and state governments have not done enough themselves to reduce energy costs. There are private companies today in this state who have expressed interest in financing in implementing major energy conservation programs in the public sector with their own Capital. We should look at these firms and they will hire local people and local use local materials to ensure these Investments are made. The combined Energy savings and jobs created can have a major impact on the state's economy and on the funding of local government in school systems one statistic is most telling in our own backyard in downtown st. Paul including the capitol complex the state government owns or leases about 40% of all of the available commercial office space yet. This space has had far less Energy Efficiency improvements made in the past decade than that remaining 60% which the state has no involvement in. Using energy efficiently means using dollars efficiently and well state and federal funds have made substantial dancing are conditions much more needs to be done government's key roles fall in areas of education and information Financial incentives and stimulation and Leadership. To us the eighties represents a. Of major challenges we seek to move out of our poor economic environment into one of growth and Improvement Energy across affect all of the states economy agriculture mining forestry small businesses Homes and Apartments Transportation tourism and even government issue and it's not unlike any other economic issue we face but we have before us like in other areas is an opportunity to turn the problem into a solution Rising Energy prices are a problem for many sectors of the economy yet those seem Rising prices particularly for petroleum natural gas and electricity provider real stimulus to the development of alternative fuels into even more energy conservation. And these more attractive Alternatives create jobs cause businesses to grow and help create new businesses equally important. They reduce public and private cost and keep Minnesota dollars in, Minnesota. We have in this state made a major investment in acquiring the knowledge and tools to better understand our energy problems and opportunities clearly the 1980s is the time to put those tools to work on behalf of the folks in to advance the economy. Thank you very much.