Making Energy Policy: What History Teaches Us

Guest

Spencer Abraham

Former U.S. Secretary of Energy

Host Bill Loveless speaks with Spencer Abraham, former U.S. Secretary of Energy under President George W. Bush, about changes in the energy sector over the last 10 years and their implications for the outlook of energy policy under President Trump. Among many topics they discuss, several include: how public policy has kept up with disruption in the energy sector; energy policy and energy “dominance” under the new administration; challenges facing Secretary of Energy Rick Perry; the future of nuclear energy in the United States; and President Trump’s approach to climate change.

View the full transcript

Bill: Hello and welcome to the Columbia Energy Exchange a podcast from the center on Global Energy Policy at Columbia University from Washington I am Bill Loveless. Today, we’ll take a look at U.S. Energy Policy from the perspective of a former U.S. energy secretary whose experience in government came at a time when circumstances were far different than they are today. Our guest is Spencer Abraham who led the U.S. Department of Energy from 2001 to 2005 under President George W. Bush. From the start secretary Abraham confronted crises from electricity shortages in California to worries that the nation was relying too heavily on oil inputs and running low on natural gas.

The energy picture has certainly changed in the United States where production of oil, gas and renewal energy are all on the upswing now. And the nation’s energy security is far more solid, but what’s passed is prologue as Shakespeare would say. And with high insight policy makers are recalibrating their approach to energy, supply and demand. Is that happening effectively and quickly enough? Secretary Abraham and I sat down in his Washington office to talk about these questions as well as the approach taken by the Trump administration so far.

His four years in office at DOE marked one of the longest tenures for an energy secretary. And before that he served six years in the U.S. Senate as a republican from Michigan. Now, he is a principal at the Government Relations from Blank Rome and the chairman and CEO of the consulting firm The Abraham Group. He also sits on the boards of Occidental Petroleum energy — energy PBF Energy in the California Institute of Technology. Spencer Abraham, thanks for joining us on the Columbia Energy Exchange.

[00:01:50]

Abraham: Oh Bill, it’s a pleasure and I’ve got lot of respect and admiration for what’s going on in the Columbia and the energy front. It’s very, very impressive operations. So I am glad to be part of it.

[00:02:03]

Bill: Well thank you very much. You know the energy picture in the United States and around the world has changed dramatically since you were the nation’s energy secretary from 2001 to 2005, but has the public policy kept up with those changes?

[00:02:20]

Abraham: Well first of all the changes themselves are — are worth noting I think. I — I left office in 2005 and at that time we forecast that America’s dependence on imported oil continue to grow. We were worried that America would run out of sufficient supplies of it’s own natural gas to meet its demand. We’d have to start importing gas and people in fact began putting together the plans to build import terminals. We thought that coal would remain the diamond at source of electricity and — and variety of other things.

And today almost everything is reversed. We’re exporting natural gas because there is such an abundance our dependence on imported oils dropped there’re just a lot of changes. And so to your question, what I would say is this I don’t think it fully has. I mean I think we’re now starting to realize that these changes will have a more permanent nature to them. It wasn’t — it isn’t in the case of a short-term experience. And I think one of the — you know one the areas for instance that that comes to mind is just in the price of energy.

You know there was a — there was a point when I was secretary and certainly before that when we worried about high energy prices, high oil prices and therefore high prices at the pump. Today, America’s economy has generated so much activity in the energy sector that that people that worry that if energy prices don’t go higher it’s going to put people out of work. So the — the focus has you know it’s catching up, but it’s still I think there is still some — some areas where — where there needs to be some recognition of the — of the dimension of the change.

[00:03:57]

Bill: I think a lot of the concerns that you had previously were reflected in the book you wrote back in 2010 called, Lights Out! which you wrote that the United States has become extremely dependent not far in sources of energy. You also wrote that the era of inexpensive oil is over just sort of couple of snapshots to go back. Again how things have changed?

[00:04:19]

Abraham: Yeah well thanks for reminding me of my prescience, but — but I what — I what I — I will just elaborate on — on the point of oil the thing — the point I was trying to get out then and I think should be put in perspective is that that a lot of the basins that you know where — where the lifting costs were — were practically nothing in fact you know have been largely tapped. What we have today in the oil market is unconventional oil, shale oil sources and the like. And one of the things it’s affecting the U.S. and the other parts of the world as well, but primarily the U.S. production is that if the prices are above $50 it’s hard to afford the cost of production and companies are being to forced to really cut back on employment and so on. And that’s really what I was trying to get I was the cheap oil was — was in fact you know harder to come by in the future and it is true that the cost of lifting oil here in the U.S. is — is much higher. But that’s not the only thinking that’s different and it’s interesting how shorter time span it took for things to reverse as much as they really have.

[00:05:33]

Bill: Well when you were secretary, was it much discussion of shale I mean the research into horizontal drilling and — and hydraulic fracturing you know goes back decades. And in fact as you know the Department of Energy played a hand in supporting some of the research that led through the breakthroughs but you know 01, 05 did it word shale —

[00:05:52]

Abraham: No one — no one forecast the extent to which it would revolutionize the — the industry in the United States. And certainly nobody thought America’s dependence on imported oil would — would drop very much. I mean there was — there was hope that there would be alternatives. We talked about hydrogen — hydrogen fuel cell vehicles, we talked about electric vehicles and plug-in hybrids and things of this sort has been the solution to the dependence. Nobody thought we would be in fact able to generate enough domestic production to reverse the trend. And — and that was not that long ago, but it took a few years I mean sort of regard I was a secretary when this dramatic change happened because it was pretty — pretty exciting period. But you know after about 2010 we started to see the impact of the of the increased of use of horizontal drilling, hydraulic fracturing and frankly the perfection of those technologies as — as more and more usage took place.

[00:06:58]

Bill: Well, is this is a lesson for policy makers today? You know if you were to go back and talk we’ll talk in a minute about the Trump administration and all, but if you if you would talk to people involved in energy policy today, what is the — what is the lesson here?

[00:07:14]

Abraham: Well I think first of all that in the world of energy innovation and technology does matter. And nothing is static and that the price signal can play a very dramatic impact and role in terms of stimulating new approaches new technologies and so on. And the one thing that that I think I would — I would accuse myself and many other policy makers over the last several decades in the energy area I would accuse this of is not having enough confidence in the ingenuity and creativity of the science and technical people both in the industry, in the laboratories, in the colleges and universities who’ve — who’ve developed all sorts of — of new technologies that have come into play. And you see it obviously in the high tech area, but you’ll also see it in energy. I mean energy is becoming a high tech — a high tech sector. And you’re seeing now the use of big data analytics we’re getting to emerge as a way to even further refined everything from where people drill for oil to how they can maximize and more efficiently extract it with limited impact on the environment.

[00:08:31]

Bill: Do you think that’s where the next impact will be with oil and gas?

[00:08:33]

Abraham: I think – it definitely is going to happen. I am not sure will be only one, but I think it’s going to be significant because companies now are as — as a way to bring down cost are trying to find ways to — to make their — their drilling and exploration more efficient more effective. And they’re learning that the that the world of big data analytics can be very effective in their sector just as it is in so many others.

[00:08:58]

Bill: Well let’s talk about the Trump administration, they do have the advantage of coming in after this boom as begun in the U.S. when it comes to oil and gas in the United States. In fact, I was just reading before we met from the energy information administrations and the first half of this year we — we exported record amounts of crude oil and petroleum exports I mean who would have — who would have thought so a few years ago. How — how — when it comes to energy policy, how is the Trump administration doing?

[00:09:28]

Abraham: Well I think they’re doing fine. I mean they do have some advantages that you know are — are emerging everyday not — not from government, but from what’s going on in the private sector. And I think the statistic you just mentioned you know when I left office when I served in the senate no one would have ever dreamt that there would be a day when we would lift the embargo and exporting oil and — and that we would in fact then begin to — to be a major player in the export world so lots happened in a short time.

And I think the Trump administration is notion that America could be a significant player in terms of the global energy picture and — and the reference to try to — to adapt policies to allow that to happen makes a lot of sense. Not only is it good of the U.S. economy, but I think to the extent that the United States can be a — a strong participant in the exporting, in the sale of oil and natural gas around the world. It helps to address a lot of geopolitical attentions that that you know we have been seeing emerge over the last decade or so.

The — the dependence of so many countries on Russian exports of natural gas and the thought that maybe Russia would — is and has used its exports of — of energy as a political tool. Now you’ve got a potential for the United States to be an alternative source and the same with regard to oil exports. So it’s I think — I think they’re going to try to put policies in place that that provide the U.S. with those opportunities and — and also at the same time help to address global instability in terms of geopolitics.

[00:11:08]

Bill: You know when President Trump announced what he called, the new American energy policy in June one that he said would focus not only on energy independence, but also on energy dominance. You know there is been a lot of discussion over that term dominance. I mean is that an effective assessment and — and what sort of signal do you think it sends to countries interesting in importing U.S. oil gas and other forms of energy?

[00:11:33]

Abraham: Well I — I think that that most of the countries that have had to import of foreign energy — foreign sourced energy whether it’s gas, or it’s oil, or it’s coal or it’s — it’s uranium. I always feel uncomfortable if the number of sources they can look to is limited. If the U.S. is doing is a major player in that market place, so that the only so it’s no longer the case that the only exporters are the Gulf States, Russia, etc., but in fact the U.S. is in there as well or Venezuela for example is an exporter. The U.S. provides an alternative for countries that don’t want to be completely forced to depend on and — and either unstable countries or countries where there maybe political agendas. I think also the U.S. is a — if not a preferred seller certainly is a counter balance to the — to the options they’ve had.

[00:12:33]

Bill: But do you think the Trump dominance is — is the appropriate one or I realized there is probably —

[00:12:37]

Abraham: You mean the terminology?

[00:12:39]

Bill: The terminology I mean it’s part of – I guess it’s consistent with the America first philosophy the administration, but they talk of energy dominance —

[00:12:46]

Abraham: Yeah again I — I am putting myself in the position of a country that’s had only one source for instance of — of natural gas or pipeline from Russia for instance. If you are in Eastern Europe, if you are in Ukraine, if you are in places where you only had one choice, I don’t think that there will be much caring about what the U.S. is calling. They’re going to say, this is good news because the more — the more options there are in the market for us the less we have to feel dependent on one source. And I’ve always felt that from a national security point of view and a global security point of view the more sources of product the better. Regardless of who the sources are if people are — are totally dependent on only one pipeline or one exporter the potential for misused leverage is great, but if there is a multitude of sources it’s better.

[00:13:39]

Bill: Do you had a chance to meet with the Secretary Perry —

[00:13:42]

Abraham: Well I’ve known Secretary Perry a long time. Actually when he was a legislator in Texas and in fact I have a great photo of the two of us when I was energy secretary and he was governor. We talked extensively during the transition period and you know have a good relationship.

[00:14:01]

Bill: Yeah, how do you think he is doing?

[00:14:03]

Abraham: Oh I think he is doing fine. And I — I thought at the time and said and wrote about it that you know his background really was almost ideal for the job because you know he had already demonstrated a great skill as a government executive in a big state, so the departments size and diversity was not going to be a challenge for him. He’d already had a background in a state where energy is such a key ingredient in the economy of being familiar with not just the conventional sources, but also sources like renewals which are a major player in Texas. And beyond all of that, he had a military background so that the parts of the department that are involved in national security would be areas that he had a little bit of personal familiarity with as well.

[00:14:48]

Bill: Yeah and as you know you can walk into that department and overtake whatever policy you may have had going in you walked in and there was energy crisis in California regarding the supply of electricity and — and inadequate supplies of electricity. And of course you had the situation in 9/11 when suddenly the defense side of the department of energy became that much more critical. So it does require some flexibility I guess?

[00:15:16]

Abraham: Well that’s for sure. And you know we — we had a variety of other things that happened we had the Northeast blackout in 2003. It’s a department — I mean you know we all know now if — if you know I think that — that you know these kinds of global events affect the energy sector and certainly that department substantially. But you know it is a place where which is usually now at the — at the center of almost any crises that’s going on whether it’s the outages of power in Puerto Rico or it’s the you know the impacts of you know of somebody’s global competitive markets I mean DOE is not a backbone or agency anymore and I don’t think it ever will be again.

[00:16:03]

Bill: What — and I can help you mentioned you of course did recommend the abolishment of the Department of Energy —

[00:16:07]

Abraham: Right.

[00:16:07]

Bill: in the senate, but you said many times over you’ve come around again on that particular topic, what but like what do you think is the single biggest challenge that that Secretary — Perry faces right now when it comes to the energy policy in the United States?

[00:16:26]

Abraham: Well you know I — I would not try to characterize it for — for this administration or for a successor what their biggest challenge is. I mean they have to sort out their priorities. I think their — their remains you know challenges in terms of you know how to how to — to most effectively support the energy sector all parts of the sector you know going forward with government not getting in the way because you do have a lot of potential to develop even more domestic sources and you want to make sure that government is not a an impediment, but in fact is playing a role that’s supportive, so that’s one of the — the issues that any secretary will face.

I think any secretary you know looking again at the energy side of the building will have to set priorities for research because there is a very large part of the budget of the department that goes to energy research or physical science research and trying to figure out what the priorities are to be are — are you know is it important part of the job. But it’s a lot of easier to do all of this in environment like we have today where the energy sector is potential and the United States has become so vast versus in the kind of settings that we had when I was there and we thought we thought that America’s hay days and energy producer had passed. And we were totally focused on alternatives.

[00:17:54]

Bill: Well secretary Perry has spoken very highly of the national laboratories consistent with your comment that research is an important part of the department of energy’s portfolio. And yet you know the — the administration at least in its initial budget proposal it called for shortcuts in the department’s spending especially on — on research development in various energy offices there. What did you think of those proposals as much to be made of it or —

[00:18:23]

Abraham: Well you know if you’re trying to you know be fiscally responsible you’ve got to spread you know responsibility across all the departments. Nobody can cut anything or propose cutting anything without you know being the victim or the — the target of accusations that you’re going too far and I don’t know how those will all play out. But what I would say is this I think the department science mission needs to — to remain strong, but it also needs to remain what it’s — what it’s supposed to be which is basic research and the physical sciences the kind of research that is going to happen in the private sector, but can only happen with government funding.

And I think we’ve seen and — and talking today about the advancements that have happened over the last decade or so that most of that has happened out in the private sector where innovators looking for ways to — to build new businesses, to improve the existing businesses and so on have turned their talents into a research that’s applied research. And I think that’s the main distinction that needs to take place.

I do think there are some national security issues the department’s going to have to focus on. And now that that some of these problems with regard to imported energy and that have been addressed. I think they can now put a little bit more attention on some of the security issues that that come up within DOE.

[00:19:50]

Bill: Yeah are you talking of defense side of DOE as supposed to —

[00:19:53]

Abraham: Actually I am talking about more the — the regular DOEs the energy side. You know we one of the things in this country that that troubles me and has sometime we worked on it during the — the Bush administration was the extend to which America had become dependent on foreign sources of uranium for the power plants that operate the nuclear power plants in our country it used to be that we produced most of the we mine and produce most of the product here in America, but we stop doing that with for good reason because we — we made an arrangement once the Soviet Union fell with the Russian Federation to buy down blended Russian military uranium and so on for use in our — in our plants.

But not that all those agreements are over and in the interim what’s happened is atrophying of the — of the domestic mining capabilities. And so today only six percent of the uranium used in the United States’ power plants comes from the United States and we’re 94% dependent on places like Kazakhstan and Russia for our uranium. That’s a lot higher percentage of dependence than we ever were dependent on foreign oil. And so some of these issues I think now you know are ones that need to be addressed so that we don’t have to ever worry about having 20% of our power supply at the mercy of — of imports that that come from unstable parts of the world.

[00:21:22]

Bill: You know speaking of nuclear power, you’re a big advocate of nuclear power while you were in government and I know that you’re still are. It was you as secretary who recommended Yucca Mountain as the national repository for spend nuclear fuel and nuclear waste and your recommendation was approved by — by partisan majorities in the — in the house in the senate and implemented by President Bush in — in 2002. The Obama administration of course reversed that decision. Now the Trump administration wants to get that project the Yucca Mountain going again, so unlikely to happen?

[00:21:55]

Abraham: Well I am sure that they will encounter the resistance that was encountered by us in the courts and among the environmental groups that that you know worry about the transportation of nuclear waste. I think the thing it’s different and I hope it will result in real progress in this area is that were in 2002 most of the environmental community were antagonist towards nuclear power. Today, I think that’s — that’s changed a bit, I can’t say what the percentages are, but I think a large number of people in the environmental community realized that that nuclear energy and power produced via nuclear power plants is emission free. And that if you really want to reduce Co2 emissions there is got to be an important role for nuclear power in your mix. But the only way to — to continue the plants that are inexistence and to see new plants built is to have a pathway forward for nuclear waste. And that pathway shouldn’t be pilling the waste outside the existing plants it should be to carefully and safely transport it to a location that is — that is safe and is approved for exactly that purpose.

[00:23:09]

Bill: Yeah. It seems like that is one big impediment for the development of nuclear energy in the United States, but certainly there are other ones too and just cost building a nuclear plant today the competition from low cost natural gas and renewal energy I mean would recalling your book Lights Out, you — you called for the construction of 50 nuclear reactors in the United States and — and something that you said should be done with some government financial support. Now you know one of the two nuclear projects that are underway in the United States has — has been cancelled and the other down in Georgia still faces an uncertain future you know we’ve seen the bankruptcy of Westinghouse. Has the hope of a nuclear renaissance in the U.S. been dashed once and for all?

[00:23:51]

Abraham: No, in the United States we’re still you know not moving forward the way we should be. And the rest of the world progress is — is taking place in the Middle East, in China, in Russia, in varieties of places nuclear plants are being built. And the rest of the world has concluded that from an environmental point of view as well as from an efficiency point of view that nuclear power is an important part of the global energy mix. In the United States, as I indicated in my book one of the problem always has been that people investing in these plants, run into so many road blocks, so many — so much resistance and so on that that the capital is hard to acquire which is why I recommended that that my idea was to have the government and the private sector team up to build an initial group of plants. Because my belief is that once the plants were up and operating the government portion would be sold at a profit because the big — the big impediment is just getting to the — to the finished product. And I think that still makes sense, but there maybe other ways to get there.

[00:25:01]

Bill: This is not with the — the big concern is saving the nuclear plants that are that are currently generating we’re seeing plants close in different places —

[00:25:09]

Abraham: Right. And part of that is some of the other factors you mentioned. I mean obviously low cost natural gas is proved to be a real challenge not just nuclear power, but to renewables and to coal and all other forms of power generation. But — but I still think a balanced mix makes a lot of sense and I think for people —

[00:25:31]

Bill: But do you think that nuclear — do you see any sort of come back for nuclear?

[00:25:34]

Abraham: I still think that’s — that’s very possible. And I think it’s again and this is unfortunate I think the United States is going and not be the leader they’re going to be the follower and you’re going to at some point people are going to say, Je it seems ah that we’ve got all over the rest of the globe people building nuclear plants. In the United States we’ve got people still fighting them as if it’s the 1970s and that isn’t a smart approach. We need a balanced mix and frankly we should be using natural gas for other things beside power generation. I mean some of if for power generation, but there is other efficient ways to use gas and we should be doing some of that and I think ultimately we will.

[00:26:14]

Bill: Yeah you mentioned — you mentioned the nuclear has is emission free and that has in fact generate some support among some environment for that energy option. What about the administration’s stance on climate change. Again I am going back to your book Lights Out! you wrote that there maybe some scientific uncertainty of a climate change, but there are plenty of reasons to believe that burning fossil fuels may eventually affects Earth’s climate and plenty of reasons to be reducing our consumption of fossil fuels anyway. I mean what — how do you see the — the administration’s position on climate change?

[00:26:49]

Abraham: Well what I think the real challenge is and where the focus needs to be whether it’s Trump or any other person in the White House is. What is the realistic timing of consequences? I am on the board of Caltech one of the foremost research schools in the world. And one of the — one of the things which that faculty has concluded and the administration at the school has supported is the idea that that no one has developed a very accurate model of when the most adverse kinds of consequences of climate change are going to take place, are they going to take place in 10 years, 20, 50, a 100, or 1000.

I mean we — we don’t have good research on this. And so Caltech has — has undertaken that as one of its major areas of research going forward. And I think the sooner we get a better handle on that the easier it’ll be to really to resolve these debates because it’s pretty — right now pretty much the case that you’ve got some people are going the cataclysmic results are going to be upon us tomorrow or soon and others saying that it’s not going to happen for centuries.

And until we have a better sense of the time table I think this debate will always go on and be unresolvable. So I am very excited about what’s going on in the in the laboratories of Caltech and kind of excited to be a little bit of part of as a board member and hoping that as those projects and modeling are finished that we’ll be able to give policy makers a much better sense of what the — what the right timeframe is and therefore what the level of urgency is to take action.

[00:28:31]

Bill: Well that sounds like sort of the position at many in the Trump administration have taken and it does fly the face of what many consider to be the consensus amongst scientist that you know —

[00:28:39]

Abraham: There is no consensus amongst scientist about the time table. What — the consensus that exists is almost exclusively over whether or not temperature changes are taking place. And there is some disagreement about what the extent to which that humans are participating or creating this but what — what is very poorly modeled is the timeframe in which the adverse consequences will transpire. And therefore whenever anything happens whether it’s a hurricane or it’s a snow storm or it’s excessively high temperatures people say, well it’s happening now and maybe happening now.

But nobody has done — and again I — there is no higher rated institution science institution America the Caltech and — and well the scientist there are I think probably uniformly have the belief that the temperature of the planet is rising and that humans are a part of the reason for that. There is consensus also that we don’t have good modeling on the actual points on which climate change will have various consequences. And I think that’s what we need because otherwise you’re just going to have a constant debate about whether this is something we should worry about today or leave for somebody down before.

[00:29:57]

Bill: You’re speaking of climate there is the political climate in Washington which has been a –a troubling on for many on — on both sides of various issues. You are a member of the senate you are part of the Bush administration, you’ve been an active participant in policy discussions in Washington in recent years and still are. How has the — that climate changed since you are a senator and — and do you see any science that it might improve anytime?

[00:30:23]

Abraham: Well I am I am not seeing a lot of science of improvement at the moment and I am disappointed that I am not. When I was in the senate, we really did what I guess I would describe as legislate which meant that we brought bills to the floor. People had the opportunity to amend them. At the end of the day, there was generally by partisan support for the product maybe not uniform support or unanimous support, but — but typically a strong support for the position that emerged from the legislative process.

Today, you know we’ve moved to an era where almost all the different ideas for legislation regardless of the area they’re in end up being stuffed into one or two or three must passed bills. And therefore the people aren’t legislating very much. A lot of members of the senate’s participation is as a result minimized unless you’re part of the negotiating team you’re often on the sidelines hoping that maybe something you had introduced would get included.

And I think that’s part of the problem because I think it means a lot of senators because they’re not doing the legislative work have time to engage in history _____ [00:31:43] on the floor or — or you know more partisan in shrill kinds of speeches. We didn’t have as much of that when I was there and it isn’t that long ago. And I — I unfortunately what I see is you know a pattern here where we’ve gone away from what they call regular order to this situation where we pass a defense authorization bill, we pass a continuing resolution, we pass an Omnibus spending bill or we pass a dead ceiling bill and if something doesn’t get on those bills the chance of it getting anywhere unless it’s just unanimously endorsed is diminished and I think that’s not good.

[00:32:23]

Bill: And we’ve seen in the senate recently and energy with senator McMurkowski and Cantwell they’re republic and chairman and they’re ranking democratic member of the senate energy committee trying to passing energy policy bill for several years now.

[00:32:36]

Abraham: They are not on real controversial neither for that manner.

[00:32:39]

Bill: That’s right it is it’s a difficult time. Well, I am afraid we need to leave it right there, but secretary Abraham thanks for joining us on the Columbia Energy Exchange.

[00:32:46]

Abraham: Thank you Bill.

[00:32:47]

Bill: And thanks to our listeners for tuning in. Don’t forget to rate our podcast on iTunes it helps us grow and for more insights on today’s energy issues visit us online at energy.columbia.edu or follow us on Twitter and Facebook at columbiauenergy. For the Columbia Energy Exchange, I am Bill Loveless, we’ll be back next week with another conversation.

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