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Context of 'April 17, 2001 and After: Enron CEO Meets with Cheney, Recommends that No Price Caps be Adopted'

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Newly elected president George W. Bush says he opposes price caps on wholesale electricity, and suggests that for California to ease its power crisis, it should relax its environmental regulations and allow power companies such as Enron to operate unchecked. “The California crunch really is the result of not enough power-generating plants and then not enough power to power the power of generating plants,” he says. [Harper's, 1/23/2001] In 2002, former Enron energy trader Steve Barth will give a different perspective. “This was like the perfect storm,” he will say of Enron’s merciless gaming of the California energy crisis. “First, our traders are able to buy power for $250 in California and sell it to Arizona for $1,200 and then resell it to California for five times that. Then [Enron Energy Services] was able to go to these large companies and say ‘sign a 10-year contract with us and we’ll save you millions.’” [CBS News, 5/16/2002]

Entity Tags: Enron Energy Services, Enron Corporation, George W. Bush, Steve Barth

Timeline Tags: US Environmental Record

Exxon logo.Exxon logo. [Source: Goodlogo (.com)]One of the first officials to meet with Vice President Cheney’s energy task force (the National Energy Policy Development Group—see May 16, 2001) is James Rouse, the vice president of ExxonMobil and a large financial donor to the Bush-Cheney presidential campaign. Several days later, Kenneth Lay, the CEO of Enron, meets with the group. It will not be his last meeting (see April 17, 2001 and After). The names of the various officials, executives, lobbyists, and representatives who meet with the task force will not be released until 2007 (see July 18, 2007). [Washington Post, 7/18/2007]

Entity Tags: National Energy Policy Development Group, Enron Corporation, James Rouse, ExxonMobil, Richard (“Dick”) Cheney, Kenneth Lay

Timeline Tags: US Environmental Record

Representatives of 13 environmentalist groups meet with officials from Vice President Cheney’s energy task force (the National Energy Policy Development Group—see May 16, 2001). Since late January, some 40 task force meetings have been held, all with oil and energy company executives and lobbyists (see Before January 20, 2001, After January 20, 2001, Mid-February, 2001, Mid-February, 2001, March 5, 2001, March 20, 2001, March 21, 2001, March 22, 2001, April 12, 2001. April 17, 2001, and April 17, 2001 and After). Today is the one day where environmental groups are allowed to have any input. Anna Aurilio of the US Public Interest Group will later say, “It was clear to us that they were just being nice to us.” (Notably, the only people ever identified as “lobbyists” by the task force to the press are the representatives from the environmental groups from today’s meeting.) Their input is neither wanted nor used; an initial draft of the task force’s report has already been prepared and President Bush has already been briefed on its contents. The names of the various officials, executives, lobbyists, and representatives who meet with the task force will not be released for six years (see July 18, 2007). Until this meeting, the only environmentalist group to meet with the Cheney task force has been the Council of Republicans for Environmental Advocacy, founded in 1998 by conservative tax activist Grover Norquist and Gale Norton, now the Bush administration’s Secretary of the Interior. That group is now run by Italia Federici, described by the Washington Post as “socially involved” with Norton’s deputy, J. Steven Griles. [Dubose and Bernstein, 2006, pp. 18; Washington Post, 7/18/2007]

Entity Tags: Richard (“Dick”) Cheney, J. Steven Griles, US Public Interest Group, National Energy Policy Development Group, Italia Federici, Anna Aurilio, Grover Norquist, Council of Republicans for Environmental Advocacy, George W. Bush, Gale A. Norton

Timeline Tags: US Environmental Record

Vice President Cheney meets with Enron CEO Kenneth Lay as part of Cheney’s secretive energy task force (the National Energy Policy Development Group—see May 16, 2001). Though Cheney may not know it, Enron is on the verge of collapse, with liabilities far outweighing assets and heavily doctored earnings statements. Enron’s only income generation comes from the unregulated energy markets in California and other Western states (see January 23, 2001). Enron traders are gouging the California markets at an unprecedented pace; as authors Lou Dubose and Jake Bernstein later write, Enron is “taking power plants off-line to create shortages, booking transmission lines for current that never move[s], and shuttling electricity back and forth across state lines to circumvent price controls,” among a plethora of other illegal market manipulations.
Ignoring California's Energy Crisis - Unable to make a profit between buying Enron’s energy at staggering prices and then selling it at regulated rates, one of California’s two largest utility companies has filed for bankruptcy and the other has accepted a government bailout. California is in a calamitous energy crisis. Governor Gray Davis is pleading for rate caps that would help both utility companies and consumers. But price caps are the last thing Lay wants. Once in Cheney’s office, Lay gives Cheney a three-page memo outlining Enron’s recommendations for the administration’s national energy policy Cheney’s group is developing. Prominently featured in the memo is the following recommendation: “The administration should reject any attempt to deregulate wholesale power markets by adopting price caps.” Almost every recommendation in the Lay memo will find its way into the energy task force’s final report. Cheney may not know that Enron is in such dire financial straits, but he does know that energy prices in California have gone from $30 to $300 per megawatthour, with periodic jumps to as high as $1,500. He also knows that Enron’s profits in California, along with other power producers, have gone up 400% to 600%.
Price Caps in Spite of Lay, Cheney - Lay does not get his way; the Federal Energy Regulatory Commission will override Cheney’s arguments and impose price caps on energy traders working in California. The state’s energy prices are brought under control, Enron’s trading schemes—luridly given such sobriquets as “Death Star,” “Fat Boy,” and “Get Shorty”—are brought to an end, and Enron collapses six months later (see December 2, 2001). Cheney will have a measure of revenge by forcing one of Lay’s adversaries on FERC, Curtis Hebert, out of his position (see August 14, 2001).
Avoiding Scrutiny and Oversight - This meeting and others are cleverly designed to avoid legal government oversight. According to the Federal Advisory Committees Act (FACA), the energy task force should be subject to public accountability because private parties—in this case, oil and gas industry executives and lobbyists—are helping shape government policy. Cheney’s legal counsel, David Addington, devises a simple scheme to avoid oversight. When a group of corporate lobbyists come together to create policy, a government official is present. Suddenly, FACA does not apply, and the task force need not provide any information whatsoever to the public. Dubose and Bernstein will later write: “It was bold as [artist] Rene Magritte’s near-photographic representation of a pipe over the inscription ceci n’est pas une pipe—‘this is not a pipe.’ Fifteen oil industry lobbyists meet in the Executive Office Building and one midlevel bureaucrat from the Department of Energy steps into the room—and voila, ceci n’est pas une foule de lobbyists. Because one government employee sat in with every group of lobbyists, a committee of outside advisers was not a committee of outside advisers.” Between Addington’s bureaucratic end-around and Cheney’s chairmanship of the working group giving the entire business the cloak of executive privilege, little information gets out of the group. “The whole thing was designed so that the presence of a government employee at a meeting could keep the Congress out,” a Congressional staff lawyer later says. It also keeps the press at bay. [Dubose and Bernstein, 2006, pp. 3-4, 10]

Entity Tags: National Energy Policy Development Group, US Department of Energy, Richard (“Dick”) Cheney, Kenneth Lay, Jake Bernstein, Enron Corporation, David S. Addington, Curtis Hebert, Federal Energy Regulatory Commission, Gray Davis, Lou Dubose, Federal Advisory Committees Act

Timeline Tags: US Environmental Record

George Skelton, a reporter for the Los Angeles Times, gets an unexpected call asking if he wants to interview Vice President Cheney. Skelton thinks the call might be to lay some groundwork for the 2004 Bush-Cheney re-election campaign. But Cheney wants to talk energy. Skelton is happy to oblige: energy prices are out of control in California. Cheney doesn’t just want to talk energy, though, he wants to talk about how bad an idea price caps are (see April 17, 2001 and After). “Price caps provide short-term relief for politicians,” Cheney says, in an oblique swipe at California’s Democratic governor, Gray Davis. He continues, “But they do nothing to deal with the basic, fundamental problem.” Skelton asks if the administration will support temporary price caps to get California through the immediate crisis period, and Cheney replies: “Six months? Six years? Once politicians can no longer resist the temptation to go with price caps, they usually are unable to muster the courage to end them.… I don’t see that as a possibility.” Cheney goes on: “Frankly, California is looked on by many folks as a classic example of the kinds of problems that arise when you do use price caps.” What Skelton does not know is that Cheney is echoing the recommendations of Enron CEO Kenneth Lay, whose company is primarily responsible for the California energy crisis. [Dubose and Bernstein, 2006, pp. 4-5]

Entity Tags: Gray Davis, Enron Corporation, George Skelton, Los Angeles Times, National Energy Policy Development Group, Richard (“Dick”) Cheney, Kenneth Lay

Timeline Tags: US Environmental Record

National Energy Policy report.National Energy Policy report. [Source: Climate Change Technology Program]Vice President Cheney’s National Energy Policy Development Group releases its energy plan. The plan, titled Reliable, Affordable, and Environmentally Sound Energy for America’s Future, warns that the quantity of oil imported per day will need to rise more than fifty percent to 16.7 million barrels by 2020. “A significant disruption in world oil supplies could adversely affect our economy and our ability to promote key foreign and economic policy objectives, regardless of the level of US dependence on oil imports,” the report explains. To meet the US’s rising demand for oil, the plan calls for expanded oil and gas drilling on public land and the easing of regulatory barriers to building nuclear power plants. [US President, 5/16/2001, pp. 8.5 pdf file; Associated Press, 12/9/2002; Guardian, 1/23/2003]
Emphasis on Foreign Oil - The report places substantial emphasis on oil from the Persian Gulf region. Its chapter on “strengthening global alliances” states: “By any estimation, Middle East oil producers will remain central to world oil security. The Gulf will be a primary focus of US international energy policy.” [US President, 5/16/2001, pp. 8.5 pdf file] But it also suggests that the US cannot depend exclusively on traditional sources of supply to provide the growing amount of oil that it needs and will have to obtain substantial supplies from new sources, such as the Caspian states, Russia, Africa, and the Atlantic Basin. Additionally, it notes that the US cannot rely on market forces alone to gain access to these added supplies, but will also require a significant effort on the part of government officials to overcome foreign resistance to the outward reach of American energy companies. [Japan Today, 4/30/2002]
Revamping of Clean Air Act - The plan also calls for a clarification of the New Source Review section of the Clean Air Act, which requires energy companies to install state-of-the-art emission control technology whenever it makes major modifications to its plants. The administration’s energy plan gives the Environmental Protection Agency 90 days to review NSR and determine whether it is discouraging companies from constructing or expanding power plants and refineries. It also instructs the attorney general to review current NSR litigation efforts against utility companies to determine whether those efforts are contributing to the country’s energy problems. “The outcome could determine whether the government drops some cases, approaches others more leniently, or even renegotiates settlements already reached,” the New York Times reports. [US President, 5/16/2001, pp. 8.5 pdf file; New York Times, 5/18/2001]
Dodging the EPA - The representative of the Environmental Protection Agency (EPA) on the task force had blocked the recommendation of a technique called “hydraulic fracturing.” Sometimes called “fracking,” the technique, used to extract natural gas from the earth, often contaminates aquifers used for drinking water and irrigation. The recommendation was removed to placate the EPA official, then quietly reinserted into the final draft. Halliburton, Cheney’s former firm, is the US leader in the use of hydraulic fracturing. [Dubose and Bernstein, 2006, pp. 18]
Cheney Stayed Largely behind the Scenes - Much of the task force’s work was done by a six-member staff, led by executive director Andrew Lundquist, a former aide to senators Ted Stevens (R-AK) and Frank Murkowski (R-AK). Lundquist served as the Bush-Cheney campaign’s energy expert, earning the nickname “Light Bulb” from the president. Lundquist will leave the Bush administration and become a lobbyist for such firms as British Petroleum, Duke Energy, and the American Petroleum Institute. Much of the report is shaped by Lundquist and his colleagues, who in turn relied heavily on energy company executives and their lobbyists. For himself, Cheney did not meet openly with most of the participants, remaining largely behind the scenes. He did meet with Enron executive Kenneth Lay (see April 17, 2001 and After), with officials from Sandia National Laboratories to discuss their economic models of the energy industry, with energy industry consultants, and with selected Congressmen. Cheney also held meetings with oil executives such as British Petroleum’s John Browne that are not listed on the task force’s calendar. [Washington Post, 7/18/2007]
Controversial Meetings with Energy Executives - Both prior to and after the publication of this report, Cheney and other Task Force officials meet with executives from Enron and other energy companies, including one meeting a month and a half before Enron declares bankruptcy in December 2001 (see After January 20, 2001), Mid-February, 2001, March 21, 2001, March 22, 2001, April 12, 2001, and April 17, 2001). Two separate lawsuits are later filed to reveal details of how the government’s energy policy was formed and whether Enron or other players may have influenced it, but the courts will eventually allow the Bush administration to keep the documents secret (see May 10, 2005). [Associated Press, 12/9/2002]

Entity Tags: Kenneth Lay, Halliburton, Inc., Environmental Protection Agency, Enron Corporation, Andrew Lundquist, Bush administration (43), American Petroleum Institute, Richard (“Dick”) Cheney, British Petroleum, Duke Energy, John Browne

Timeline Tags: US Environmental Record, Complete 911 Timeline, Events Leading to Iraq Invasion, Peak Oil

ABC reporter Ted Koppel asks Vice President Dick Cheney about meetings with his “pals” from the oil and energy industries (see January 29, 2001 and April 17, 2001 and After). Koppel is referring to the attempts by Congress to be given the names of the participants in Cheney’s energy task force meetings. Cheney says: “I think it’s going to have to be resolved in court, and I think that’s probably appropriate. I think, in fact, that this is the first time the GAO [Government Accountability Office] has ever issued a so-called demand letter to a president/vice president. I’m a duly elected constitutional officer. The idea that any member of Congress can demand from me a list of everybody I meet with and what they say strikes me as—as inappropriate, and not in keeping with the Constitution.” Authors Lou Dubose and Jake Bernstein will later write, “The vice president was deftly turning a request for records into a constitutional struggle between the legislative and executive branches.” Representative Henry Waxman (D-CA), who issued the original requests before turning them over to the GAO, will put his demands for information on hold because of the 9/11 attacks and the war in Afghanistan, but the case will indeed end up in court (see February 22, 2002). [Dubose and Bernstein, 2006, pp. 11-12]

Entity Tags: Lou Dubose, Richard (“Dick”) Cheney, Government Accountability Office, Henry A. Waxman, Ted Koppel, Jake Bernstein, National Energy Policy Development Group

Timeline Tags: US Environmental Record, Civil Liberties

Curtis Hebert of the FERC.Curtis Hebert of the FERC. [Source: PBS]Curtis Hebert is replaced by Pat Wood as the head of the Federal Energy Regulatory Commission (FERC). Hebert announced his resignation on August 6. [US Department of Energy, 12/2001] Hebert, a Clinton appointee who nevertheless is a conservative Republican, an ally of Senator Trent Lott (R-MS), and quite friendly towards the energy corporations, had been named to the FERC shortly before Clinton left office; Bush named him to chair the commission in January 2001. [Consortium News, 5/26/2006]
Replaced at Enron Request - Hebert is apparently replaced at the request of Enron CEO Kenneth Lay, who did not find Hebert responsive enough in doing Enron’s bidding. Hebert had just taken the position of FERC chairman in January when he received a phone call from Lay, in which Lay pressured him to back a faster pace in opening up access to the US electricity transmission grid to Enron and other corporations. (Lay later admits making the call, but will say that keeping or firing Hebert is the president’s decision, not his.) When Hebert did not move fast enough for Lay, he is replaced by Pat Wood, a close friend of both Lay and President Bush. [Guardian, 5/26/2001; Los Angeles Times, 12/11/2001] Lay apparently threatened Hebert with the loss of his job if he didn’t cooperate with Enron’s request for a more pro-Enron regulatory posture. [CNN, 1/14/2002]
Opposed Enron Consolidation Plan - Hebert was leery of Enron’s plan to force consolidation of the various state utilities into four huge regional transmission organizations (RTOs), a plan that would have given Enron and other energy traders far larger markets for their energy sales. Hebert, true to his conservative beliefs, is a states’ rights advocate who was uncomfortable with the plan to merge the state utilities into four federal entities. Lay told Hebert flatly that if he supported the transition to the RTOs, Lay would back him in retaining his position with FERC. Hebert told reporters that he was “offended” at the veiled threat, but knew that Lay could back up his pressure, having already demonstrated his influence over selecting Bush administration appointees by giving Bush officials a list of preferred candidates and personally interviewing at least one potential FERC nominee (see January 21, 2001). [PBS, 2/2/2002; Consortium News, 5/26/2006] According to Hebert, Lay told him that “he and Enron would like to support me as chairman, but we would have to agree on principles.” [Guardian, 5/26/2001] Hebert added to another reporter, “I think he would be a much bigger supporter of mine if I was willing to do what he wanted me to do.” Lay recently admitted to making such a list of preferred candidates: “I brought a list. We certainly presented a list, and I think that was by way of letter. As I recall I signed a letter which, in fact, had some recommendations as to people that we thought would be good commissioners.…I’m not sure I ever personally interviewed any of them but I think in fact there were conversations between at least some of them and some of my people from time to time.” [PBS, 2/2/2002]
Cheney Behind Ouster - Joe Garcia, a Florida energy regulator, says he was interviewed by Lay and other Enron officials. After Hebert made it clear to Lay that he wouldn’t go along with Lay’s plans to reorganize the nation’s utilities, Vice President Dick Cheney, who supervises the Bush administration’s energy policies (see May 16, 2001, began questioning Hebert’s fitness. [Guardian, 5/26/2001] Cheney said in May 2001, “Pat Wood has got to be the new chairman of FERC.” In private, Cheney said then that Hebert was out as chairman and Wood was in, though Hebert did not know at the time that his days were numbered. [PBS, 2/2/2002] “It just confirms what we believed and what we’ve been saying, that the Bush-Cheney energy plan is written by corporations and it’s in the interests of the corporations,” says the National Environmental Trust’s Kevin Curtis. [Guardian, 5/26/2001] Not only was Hebert not responsive enough to Lay’s pressure, but he had become a focus of criticism for his refusal to scrutinize Enron’s price gouging in the California energy deregulation debacle. Wood’s more moderate position helps ease the worries of other states themselves losing confidence in the Bush administration’s deregulation advocacy. [American Prospect, 1/2/2002]
Hebert Investigating Enron Schemes - And even more unsettling for Enron, Hebert was beginning to investigate Enron’s complicated derivative-financing procedures, an investigation that may have led to an untimely exposure of Enron’s financial exploitation of the US’s energy deregulation—exploitation that was going on under plans nicknamed, among other monikers, “Fat Boy,” “Death Star,” “Get Shorty,” all of which siphoned electricity away from areas that needed it most and being paid exorbitant fees for phantom transfers of energy supposedly to ease transmission-line congestion. [Consortium News, 5/26/2006] “One of our problems is that we do not have the expertise to truly unravel the complex arbitrage activities of a company like Enron,” Hebert recently told reporters. “We’re trying to do it now and we may have some results soon.” [Guardian, 5/26/2001] Instead, Hebert is forced out of FERC. Senator Dianne Feinstein (D-CA) called for an investigation into Enron’s improper influence of the FERC committee after the media revealed Lay’s phone call to Hebert in May 2001 (see May 25, 2001).

Entity Tags: National Environmental Trust, Trent Lott, Kevin Curtis, Pat Wood, Kenneth Lay, Federal Energy Regulatory Commission, George W. Bush, Curtis Hebert, Joe Garcia, Dianne Feinstein, William Jefferson (“Bill”) Clinton, Richard (“Dick”) Cheney, Enron Corporation

Timeline Tags: US Environmental Record


Enron’s logo.
Enron’s logo. [Source: Enron]Enron files for Chapter 11 bankruptcy—the biggest bankruptcy in history up to that date. [BBC, 1/10/2002] However, in 2002 Enron will reorganize as a pipeline company and will continue working on its controversial Dabhol power plant. [Houston Business Journal, 3/15/2002]

Entity Tags: Enron Corporation

Timeline Tags: US Environmental Record, Complete 911 Timeline

Vice President Dick Cheney continues to battle the General Accounting Office (GAO)‘s request for the records of his energy task force (see January 29, 2001 and April 17, 2001 and After) in the broadcast media (see July 26, 2001). On Fox News, he reiterates his insistence that he will not turn over any records from the task force unless compelled to do so by the courts, and says indignantly, “They’ve demanded of me that I give Henry Waxman [the California Democratic representative who originated the demand for task force records] a list of everybody I met with, of everything that was discussed, any advice that was revealed, notes and memos of these meetings.” Cheney is lying. The GAO only asked for the minutes from the meetings and the names of the participants (see July 31, 2001 and February 22, 2002), and soon the GAO will scale back its request to nothing more than the names and schedules of the participants and the meetings, not the contents of the meetings themselves. Four years later, when the court case has long been settled in Cheney’s favor (see February 7, 2003), Cheney will still mischaracterize the issue as an improper demand from Congress for an executive branch official to disclose the contents of private conversations and meetings, and therefore destroy “the ability of the president and the vice president to receive unvarnished advice.” Former Justice Department official Bruce Fein will call the argument “bogus, specious, [and] absurd.” [Dubose and Bernstein, 2006, pp. 12-13] GAO officials call Cheney’s statement a “critical and highly material misrepresentation” of the facts. [National Review, 2/20/2002]

Entity Tags: General Accounting Office, Richard (“Dick”) Cheney, Bruce Fein, National Energy Policy Development Group

Timeline Tags: US Environmental Record, Civil Liberties

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