Feature

How will Rick Perry run the Department of Energy?

Some Texas energy veterans remember an engaged, pro-business governor, while others worry of a 'pay-to-play' DOE

In mid-December, President-elect Donald Trump announced he would name former Texas Gov. Rick Perry (R) to head the Department of Energy, a seemingly ironic choice, since Perry once proposed shuttering the entire agency.

Perry called the decision a “tremendous honor,” but has said little of his plans for the agency. Even so, his coming nomination has divided energy observers, with some arguing he is not as qualified as the scientists who led the DOE under President Obama.  

The split extends to the Texas energy sector, where some worry his approach will favor a pay-to-play DOE. Others, though, say his strategy of putting business ahead of policy could work at the department.

“Rick Perry will be a breath of fresh air because he is committed to protecting the environment while making Americans less dependent on other nations for our energy needs,” Texas Oil & Gas Association President Todd Staples emailed Utility Dive.

“The combination of industry innovation and science-based policies championed by Gov. Perry has made Texas the number one oil and natural gas producer in the nation,” Staples added.

Republican State Senator Troy Fraser has known Perry since they were in high school and served in the Texas legislature throughout most of Perry’s political career.

“Under Gov. Perry, Texas took a different approach to dealing with climate change,” Fraser said. “Rather than endorsing the Kyoto climate agreement, we gave incentives to the wind and solar and natural gas industries. It was an economic approach instead of a mandate.”

As governor, Perry followed through on predecessor George W. Bush’s wind initiative and Texas took the national leadership for installed wind capacity. There is widespread agreement the 2005 Texas Renewable Portfolio Standard (RPS) Perry signed into law and the $6.9 billion transmission expansion completed during his tenure were key to that wind growth.

“Governor Perry was instrumental in allowing the wind industry to get the Competitive Renewable Energy Zone (CREZ) lines built,” Virtus Energy President Mike Sloan told Utility Dive. “Those lines carry much the state's 18,000-plus MW of wind, allow more oil production by delivering power to electric pumps in remote drilling regions. and will soon allow a big build-out of utility-scale solar in West Texas.”

But not everybody credits the former governor for those achievements. During Perry's tenure, Karl Rabago was a commissioner with the Public Utilities Commission of Texas (PUCT) and an Austin Energy executive.

“I give him some credit for not taking action against the development of wind and transmission,” Rabago, now director of the Pace Energy and Climate Center, told Utility Dive. “But he also was a vocal champion of coal expansion.”

“The DOE agenda includes basic science, nuclear management, international relations, lab management, and many complex interactions with states, universities, and industry on R&D, deployment, and market development,” Rabago, also a former DOE Deputy Assistant Secretary, said. “Former Gov. Perry does not have a reputation as a strong leader in those areas.”

CREZ lines deliver wind energy from West Texas and the Panhandle to load centers in the south
 

The Rick Perry story

James Richard Perry is a fifth-generation Texan born in 1950. He was elected lieutenant governor in 1998 and took over the top job in 2000 when then-Gov. George W. Bush moved to the White House. He was elected in 2002, re-elected in 2006 and 2010, and retired in 2014 as the longest-serving governor in the state’s history.

Perry graduated from Texas A&M in 1972 and spent five years as a U.S. Air Force pilot, flying missions in Europe and the Middle East. He then worked on his family’s cotton farm until he was elected as a Democrat to the Texas House of Representatives in 1984. He served three terms, earning recognition for fiscal austerity, and won a legislative commendation for his service.

Perry supported Al Gore’s bid for the 1988 Democratic presidential nomination and worked for the Gore Texas campaign. He became a Republican in 1989 and beat the Democratic incumbent to become state agriculture commissioner in 1990. In 1998, he became the first Republican elected lieutenant governor.

In the 2001 legislative session, while completing the Bush term, Governor Perry used the veto power 82 times, more than any governor since reconstruction. During his 14 year tenure, he appointed over 7,700 people, according to Austin’s KXAN-TV, and was the first governor to make every statewide appointment, the Dallas Morning News reported.

Between 2003 and 2013, Texas created 33% of “net new jobs nationwide," according to the Bureau of Labor Statistics, earning Perry a strong economic reputation he hoped would carry him to the White House.

Perry’s 2012 bid for the Republican presidential nomination went awry when, during a televised debate, he proposed closing three federal departments but could only remember two.

The one he forgot, he said afterwards, was DOE. The episode was widely seen as the beginning of of the end of his campaign.

Perry ran again for the 2016 GOP presidential nod, but became the first candidate to drop out of the race in September 2015 after failing to attract support in a crowded field. On Dec. 13, news broke that Trump would tap him for Secretary of Energy.

Texas energy during Perry's tenure

Both critics and supporters of Perry’s nomination to DOE caution against drawing direct links between his leadership and Texas energy trends, since the powers of the governor are limited. But throughout his tenure it’s clear the state government was supportive of a variety of resources.

Texas crude oil production fell persistently from its peak in 1972 of 3.4 million barrels per day until technological advances began to push it back up in 2008, according to the EIA.

By the end of the Perry’s administrations, Texas was producing over 3.1 million barrels per day. Its more than 5.1 million barrels of per day of refining capacity also led the U.S.

Texas natural gas production dropped steadily from its 8.6 trillion cubic feet peak in 1972 until, the EIA reports, advances in horizontal drilling and hydraulic fracturing technologies started shale production upward in 2004. By 2014, it was at 7.95 trillion cubic feet. At the end of 2015, Texas produced 26% of the nation’s supply.

The unprecedented wind industry growth in Texas also cannot be separated from the Perry administration.

Installed wind capacity in 2005 was 1,992 MW when Perry signed the RPS bill. It was 7,113 MW in 2008 when the Perry administration committed to completing the CREZ build. Installed capacity had doubled to 14,098 MW by the end of 2014, when Perry left office. It is now approaching 19,000 MW.

The Texas wind industry supports 24,000 wind-related jobs and over 38 manufacturing facilities, according to the industry trade group. It has attracted over $32.7 billion in capital investment and delivers over $50 million in annual land lease payments to Texas land owners.

In 2010, the Texas energy resource mix was 39.5% coal generation, 38.2% natural gas, 7.8% wind, and 13.1% nuclear, according the Electric Reliability Council of Texas (ERCOT). In 2015, the mix was 48.3% natural gas generation, 28.1% coal, 11.7% wind, and 11.3% nuclear.

The state’s carbon dioxide emissions from fossil fuel combustion only grew from 700.98 million metric tons in 2000 to 708.81 million metric tons in 2014, according to Environmental Protection Agency numbers.

In addition, per capita energy-related carbon dioxide emissions fell 15.5% from 31.1 metric tons in 2000 to 26.3 metric tons in 2014, according to the U.S. Energy Information Administration.

As a result, Texas was sixth in the U.S. in decoupling gross domestic product (GDP) growth and emissions growth between 2000 to 2014, according to recent Brookings Institution numbers. Between those years, state GDP grew 50.5% in real terms, while energy-related CO2 emissions grew 1.1%.

Following market trends, coal generation has diminished in Texas as natural gas and wind have grown
 

An all-of-the-above approach

Supporters of Perry’s expected DOE nomination say his track record in Texas reveals a leader concerned and engaged with a variety of energy issues.

Sen. Fraser was involved in much of the energy-related legislation Perry signed into law and "saw how the governor and his staff handled it,” he said.

Perry was detail-oriented and understood the importance of getting the CREZ transmission system built, Fraser said. But, “his real strength was appointing people good at getting things done. The people Gov. Perry appointed engineered the process of getting the CREZ lines built and he will do the same thing at the Energy Department.”

Perry is better positioned than many to overcome the challenging barriers to multi-state transmission systems, Fraser said. “The Texas experience demonstrates to other states they can capitalize on their wind and solar resources if they have transmission to deliver them.”

Oil and gas pipelines may be more challenging in today's political climate, Fraser acknowledged. “But if America is going to be energy independent, we have to develop our natural resources and Gov. Perry understands how to do that.”

Fraser expects Perry to support both wind and solar at the federal level with the same kind of economic incentives and infrastructure build-out that worked in Texas. “We lowered power plant emissions by changing the fuel mix through economic incentives. That is Gov. Perry’s mentality and I think he can be successful using that approach.”

Perry, his staff, and the PUCT Chair he appointed were "very involved in the planning and implementation of ERCOT's advanced, real-time market system," Fraser added. The system has been vital to the integration of the state's rising grid penetration of renewables.

Other supporters say Perry's approach was important to the energy sector transition in Texas and argue he will show similar leadership as Secretary of Energy.

He is “the perfect choice” for DOE head because he “consistently advocated removing obstacles to all-of-the-above energy sources,” Spark of Freedom Foundation President James Taylor wrote in Forbes.

“Rick Perry knows the important impact that energy production has on our nation’s economy,” American Petroleum Institute President/CEO Jack Gerard said in an endorsement statement. As Secretary of Energy, “he has the opportunity to encourage increased exports of domestically produced natural gas.”

The energy sector boom in Texas under Perry shows his DOE can “protect the environment, enhance national security and grow the economy – all at once,” said Staples of the Oil and Gas Association.

Even some renewable energy groups have found reason to praise the President-elect’s likely nominee.

Implementation of a competitive market and technology neutral infrastructure investments under Perry paved the way for “a major expansion of new generation,” Texas Solar Power Association Executive Director Charlie Hemmeline wrote to Utility Dive.

Perry understands that solar growth can mean economic investment, jobs, cost-competitive electricity, and energy portfolio diversification, Hemmeline added. The Perry record “signals a bright future for solar nationwide.”  

Based on the years Virtus Energy’s Sloan spent working with Perry administrations on the CREZ lines, he is confident the nominee will support infrastructure and rural economic development.

“Hearing of wind companies ready to invest billions of dollars was music to Governor Perry’s ears,” Sloan said. “He was going to do what he could to get them to invest their money in Texas.”

His commitment to the 3,600 mile CREZ system build as the economy softened in 2008 was important, Sloan remembered. “I don’t know if he had a grasp of the technical details but the people on his staff certainly did.”

Beyond wind, Perry is an “all-of-the-above kind of guy who is committed to economic development and job growth,” Sloan added. “In 2006, when natural gas prices were still high, he supported an effort to build coal plants.”

A pay-to-play DOE?

While some recall Perry’s support for coal as part of an all-of-the-above approach, others see it as something else.

In 2006, Perry supported a plan from utility TXU to build 11 new coal plants in the state, fast-tracking their permitting process. In the face of lawsuits and citizen opposition, only three plants were eventually built, a conclusion Rabago called “fortunate for the Texas economy.”

Tom Smith, executive director of the Texas Office of Public Citizen, a consumer watchdog group, has worked parallel to Perry “since the first day he walked into the legislature.” He agreed with Rabago, saying the fast tracking of the plants was an example of Perry “not thinking through consequences” of his policy choices.

The governor accepted arguments from TXU (now Luminant), an important Perry campaign contributor, that the plants would boost the state economy, Smith said.

“The data clearly indicated so much new coal capacity would overwhelm the market with one kind of energy as we were building a more balanced portfolio,” he said. “Gov. Perry also made the improbable claim the plants could somehow reduce pollution.”

Proof that the proposal was ill-conceived is that only three of the plants were built, Smith said. Calling Perry “not the brightest bulb in the chandelier,” he said the governor’s decisions were often based on short term political expediencies rather than on policy goals that would benefit Texas over the long term.

“Based on my interactions with him and on the data, it seemed he often didn't fully understand the implications of what he did,” Smith said.

Both Smith and Rabago said they saw a worrying pattern of Perry rewarding political allies in his energy policies.

“Perhaps the most important and direct measure of Perry is in the people that he appointed,” Rabago said. “Perry had a strong reputation as a ‘pay-to-play’ type of governor.”

Smith said another Perry decision influenced by lobbyists was his endorsement of a low-level radioactive waste disposal facility at a remote West Texas site. It was, according to Smith, proposed by Harold Simmons, Perry’s second-biggest career campaign donor.

Eight Perry staffers and his environmental agency executive director recommended against the facility because of groundwater contamination concerns but Perry decided to support it, Smith said.

It is now licensed to take low-level radioactive waste from any U.S. nuclear facility and the developer has recently proposed storing high-level of radioactive waste, including spent fuel rods, there, he added. None of the recommendations against the facility have been reversed.

Smith and Rabago also took issue with giving Perry credit for the CREZ expansion. Because of how executive branch powers are assigned by the Texas constitution, the lieutenant governor was more instrumental in the CREZ transmission expansion than the governor, Rabago said. “Perry did not ‘implement’ or ‘oversee’ it, as some commentators have said.”

“It is not Perry who deserves credit for the CREZ build and wind boom but economics, private industry, minimal siting requirements, and the policy momentum created by previous governors’ appointees and the Texas Legislature,” Rabago recalled. “I have a hard time thinking of any bold leadership by Gov. Perry on clean energy or utility transformation.”

Perry’s politics did not impede the good put in motion by his predecessor, but it would take a more positive factual record to make him a suitable candidate for Secretary of Energy, Rabago said.

Smith agreed Perry was not the driving force in the wind boom. “Governor Bush started the wind bill but it actually goes back to the Richards administration,” he said. Perry responded, Smith recalled, because major political donors, including wind developers, major power producers, and utilities saw the opportunity.

Public Citizen documented “campaign contributions from folks like Enron, utility board members, GE, and Westinghouse," Smith said. They were contributing, he believes, "because they saw 'green gold in them thar hills.’”

Smith expects this to be the model for a Perry-led DOE. “If history is prologue, it’s gonna be a pay-to-play Energy Department and a bidder’s war between the coal companies, the renewable energy companies, and the big nuclear companies."

A chance to influence Trump

As DOE head, Perry could play a pivotal role in reproducing the Texas experience nationally “if he has enough courage and vision to stand up to Trump and deliver what he calls ‘the Texas miracle’ to national politics,” Smith said. In particular, the CREZ program could be considered a model for the kind of national infrastructure investment President-elect Trump has proposed.

Former Federal Energy Regulatory Commission Chair James Hoecker agreed.

“Perry appreciates the job creation, market flexibility, and reliability implications of the strong grid he helped authorize,” Hoecker told Utility Dive. “He would be in a splendid position to make an integrated, high voltage grid a centerpiece of the new administration’s focus on infrastructure, which could be huge for the economy.”

Despite Sloan’s endorsement of what Perry did for wind in Texas, he remains uncertain of Perry at DOE. “I do not know whether he will be a good Energy Secretary because he will be answering to Donald Trump and that man is a wild card.”

Governor Perry has close fossil fuel industry ties but has also demonstrated “a wider view on energy,” wrote World Resources Institute Energy Program Global Director Jennifer Layke recently. Through his Texas experience, he can show the Trump administration how clean energy can "create jobs, protect people’s health, and support American competitiveness."

New cabinet members will have to work to overcome President-elect Trump’s skepticism of renewables, she wrote. As head of DOE, Gov. Perry would have that chance.

Filed Under: Generation Transmission & Distribution Solar & Renewables Regulation & Policy
Top image credit: Wikimedia