Academic journal article Energy Law Journal

Energy Bar Association Mid-Year Meeting

Academic journal article Energy Law Journal

Energy Bar Association Mid-Year Meeting

Article excerpt

December 3, 2009

Washington, D.C.

PROCEEDINGS

Thanks to the Bar Association for inviting me to speak. Over the last 20 years, I probably have spoken four or five times at this event. Fortunately, the planners don't remember at all what I had to say on those occasions and neither do I, so we're on equal footing. I can assure you while I was in Congress working on energy policies that I only supported good policy. I always opposed bad policy. And if you buy that, you must be really new to Washington.

One caveat about my speech: Resources for the Future is an independent and nonpartisan research organization - a think tank. It strives for the highest quality economic analysis of public policy issues, especially on resource policy, and in particular on energy and climate these days. Let me be very clear, however, I'm not here to speak from that analysis. I'm here to do the softheaded political speculation based on my previous experience in Congress, and you can be assured I've got lots of experience with the softheaded part of it.

Our folks have been deeply involved doing analysis and providing technical assistance to the Regional Greenhouse Gas Initiative when it was being developed, including how to design the auction system being undertaken in New England and the implementation of AB32 in California. They're very active on Capitol Hill, not as advocates but simply analyzing the different design options under the cap-and-trade system. And we have a major energy project underway, trying to do a comparative analysis of different energy strategies in terms of their outcome for energy security issues as well as for carbon dioxide emissions. But I was not hired to do the thinking at this think tank; I was hired to clean out the tank today!

I'm going to fly at about a 50,000-foot level to describe where we are. Then I'm going to bring the plane down a little to engage in some speculation about where they are on Capitol Hill with the Climate Energy bill. And then we'll open up to questions, and you might be able to pin me down to actually answer something more specifically. We'll see how well my skill can keep us from getting to that.

Let me suggest what is obvious to most people. If we look at what is happening now in this country and indeed around the world, there's much doubt that we're at a time of incredible change and uncertainty, especially in the energy sector, more so than any of us have ever seen in our lives. In Washington especially, we always come up with these melodramatic statements that "the time is now." You've heard all those speeches. If you haven't, you haven't had the pleasure of being on Capitol Hill very much or you haven't been watching cable television, where melodrama rides high. But, in fact, in this case, it really is true; we are at some major turning point. One individual described it this way recently, which captures that notion. He said, "It's not just a time of change, but a change of times."

If we just look at the last five years in the energy sector, what we see are some very dramatic changes over the last 25 to 30 years. Energy prices just shot through the roof and then they fell down, and then they went back up - in particular oil and natural gas. These shifts were radical - unexpected by industry, by academia, by government. They were not predicted, except by a few outliers who, of course, for one day became "the experts" and were invited to testify everywhere because they luckily happened to strike on what occurred. But by and large, these swings were unexpected, and that's a very important lesson for us in making policy or in deciding on investments.

When prices rose, it energized our energy markets unbelievably, changing investor behavior, changing consumer behavior, and changing behavior throughout the system of production. We saw investments in the private sector rush into alternative fuels to oil in particular. We saw new technologies coming more rapidly into the market, many of which had been developed over the last 30 years but never could make it into the market. …

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