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Category — Enron Corp.

Ex-Im Bank Cronyism: Remember Enron’s Bad Investments

“Enron was a political colossus with a unique range of rent-seeking and subsidy-receiving operations. Ken Lay’s announced visions for the company—to become the world’s first natural-gas major, then the world’s leading energy company, and, finally, the world’s leading company—relied on more than free-market entrepreneurship. They were premised on employing political means to catch up with, and outdistance, far larger and more-established corporations.

- R. Bradley, “Enron: The Perils of Interventionism,” EconLib, September 3, 2012.

A debate is currently playing out over the future of the Import-Export Bank, which comes up for Congressional reauthorization this September. In “End Corporate Welfare? Start With the Ex-Im Bank,” Tim Phillips, president of Americans for Prosperity, a free-market advocacy group, pin-pricked the notion that small business was the beneficiary of taxpayer-guaranteed loans.

Every time Congress debates the Ex-Im Bank’s future, which last happened in 2012, defenders claim that it exists primarily to serve small businesses. The bank itself proudly proclaims this near the top of its annual reports. Yet … the bank doles out the vast majority of its funds to America’s biggest corporations. Last year, 10 companies—including giants like Boeing, General Electric, and Dow Chemical–received roughly three-quarters of the bank’s financial assistance for exports. A similar number of companies accounted for 97% of its loan guarantees by value, along with 97% of the bank’s direct loans by value.

So why do the Big Boys needed the average taxpayer to backstop their voluntary incurred indebtedness? Why should big and small companies be encouraged to invest in risky, non-bankable areas?

Ex-Im exposure today is estimated to be $134 billion, up from $60 billion eight years ago. Crony capitalism, helped along by Republicans and Democrats alike, is in the crosshairs of reformers across the political spectrum.

Enron: Bad Energy Investing via EXIM/OPIC

Enron International, specializing in infrastructure development in high-risk countries in the late 1980s and 1990s, depended on Export-Import Bank loans and Overseas Private Investment Corporation (OPIC) insurance and loans for most of its projects. [Read more →]

June 18, 2014   No Comments

Enron Romm: History Should Not Forget

It is a common refrain in headlines at Joe Romm’s Climate Progress:

Smearing and innuendo is hardly fair play. But in this case, Joe Romm has something embarrassing to hide. Just as Koch Industries might be his least favorite company, Enron was his darling company.

Specifically, Romm was not only a cheerleader of Enron (Enron is “a company I greatly respect,” Romm would say). He was also an unpaid consultant and collaborator with the infamously fraudulent division, Enron Energy Services (EES), purveyor of energy efficiency service in (gamed) long-term contracts.

It is timely to reestablish the linkage between Joe Romm and once-mighty Enron Corporation, a company which went bankrupt ten years ago this month. Perhaps this history will help the combustible Romm to deal with the arguments more and funding links less. (Besides, would he like for his critics to bring in the funding link between George Soros and Center for American Progress?)

Some Romm Enron Quotations

“I hope there is something in [my book] Cool Companies Mr. Lay can refer to. I’m sorry Enron isn’t in it, but if you have any good case studies, I would love to use them as I talk to the media and Fortune 500 companies. Feel free to use my personal email.”

- Email communication from Romm to Enron, June 6, 1999. [Read more →]

December 19, 2011   11 Comments

“Rob Bradley at Enron” (for the record)

“Sorry to bother you with this…. Rob is obviously not a fan of renewables or the global warming issue.  Unfortunately, he works for a company that is.”

- “Rob Bradley’s Writings.” Tom White [chairman & CEO of Enron Renewables Energy Corp. ] to Ken Lay [chairman & CEO of Enron Corp.], June 8, 1998.

The Confluence, a blog advertising itself as “Democrats Putting Principle Over Party,” recently criticized a new initiative of the Institute for Energy Research, Stop the Energy Freeze. After reciting some peak-oil arguments against IER’s case for expanding access and production of domestic oil and gas resources for new jobs and greater BTUs, the post Sunday: Spreading the mess to YouTube goes after yours truly.

I also bothered to look up who was behind this Stop the Energy Freeze campaign.  It’s the Institute for Energy Research and it seems to be particularly concerned with oil that is currently off limits in the Gulf of Mexico, for some strange reason.  Maybe that’s because they’re based in Houston?  Or maybe it’s because it’s because it’s been touted by Rush Limbaugh who hasn’t met a resource (natural or human) that he hasn’t considered exploitable?

Ahhh, this little tidbit is interesting.  The co-founder and CEO of The Institute for Energy Research is some dude named Robert L. Bradley.  And HE used to work for Enron and Kenneth Lay.  You know, the Smartest Guys in the Room?  The ones whose traders used to yuck it up about how they were going to f$^& over some Granny in California by manipulating the energy market?  The company that made all of its employees invest in Enron stock in their 401Ks and then locked them out of their accounts when the price plummeted so that they lost EVERYTHING? 

Yeah, that Enron.  Bradley was the PR guy.  He’s also an adjunct “scholar” of the Cato Institute.  How charming.  Is that where he learned to deceive unsuspecting youtube viewers?  Is the liberty to make the end really justify the means ensconced in the Constitution somewhere?  Are we free to pull the wool over citizen’s eyes with bullshit?  I guess it’s the responsibility of every rugged individualist to be on his guard.

Well, I founded (not co-founded) IER, and headquarters is in Washington, D.C. (not Houston where I continue to work). And most importantly, I was a quite arguably public-policy whistleblower against “green” energy inside the company. [Read more →]

October 20, 2011   4 Comments

Solar circa 1994: What Has Really Changed? (Remembering Enron’s hoodwink in the age of Solyndra)

[This post reproduces a front-page story in the New York Times business section that excitedly reported a breakthrough with solar energy as represented by a heady energy company named Enron. Formed in the mid-1980s, Enron had just entered into the solar business and was destined to revitalize--if not save--the U.S. wind industry just a few years later.]

“Federal officials, aware that solar power breakthroughs have shined and faded almost as often as the sun, say the Enron project could introduce commercially competitive technology without expensive Government aid.”

Allen Myerson, Solar Power, for Earthly Prices, New York Times, November 15, 1994.

The nation’s largest natural gas company is betting $150 million that it can succeed where the Government has so far failed: producing solar power at rates competitive with those of energy generated from oil, gas and coal.

The Enron Corporation plans to build a plant in the southern Nevada desert that would be the largest operation in the country making electricity directly from sunlight, producing enough to power a city of 100,000 people. It is expected to begin operating in late 1996.

Grand promises in the late 1970′s about the potential of virtually pollution-free, endlessly renewable energy sources like solar energy faded into an embarrassed hush. But several of the nation’s leading solar power experts say Enron’s optimistic goal is probably reachable.

The reason is that during the last decade, the cost of solar power generation has quietly declined by two-thirds. Far from depending on some wondrous breakthrough, the experts say, Enron can offer commercially competitive solar power by inexpensively mass-producing solar panels, and then employing thousands of them in the Nevada desert. [Read more →]

September 20, 2011   13 Comments

Green Enron (Part IV Interview with Robert L. Bradley Jr.)

[This interview of Robert L. Bradley Jr. by Stephen Hicks (website here) is part of a series: Part I (Libertarianism and Energy); Part II (Expanding Energy Horizons); and Part III (Enron as a Political Company).]

Kaizen: You mentioned that Enron was also involved in lots of alternative energy sources—wind power, solar power, “green” energy, and that it was one of the first at the political table. Did Enron think that with the right kind of farsighted investment the new energies could be profitable?

Or was this again part of a political strategy: Alternative energy was a political favorite, certainly during the Clinton Administration years, when Al Gore was vice president? So Enron is getting a seat at the table; and whether alternative energy actually succeeds or not, it’s a good business strategy at least in the short term.

Bradley: Enron certainly believed that they could make money at it, but it was a very large public relations, perception, government favor play. Believe me, the fact that the intellectual class is pushing these things and you have Al Gore as vice president and the “greens” in political ascendency in the U.S. and in the EU is huge to Ken Lay’s and Enron’s thinking. If global warming was not an issue, Enron would not have been on that bandwagon.

So NASA’s James Hansen and Al Gore were Enron enablers, in retrospect.

Kaizen: So Enron had a “green” category within its political business model?

Bradley: Absolutely. This is all part of the business model of rent-seeking, political capitalism—and offensive rent-seeking at that. Enron ended up with seven, count ’em seven, profit centers tied to the global warming issue, or more specifically, to government policy setting a price on carbon dioxide.

Kaizen: Was there a division for green energy?

Bradley: Enron Renewable Energy Corporation. At the 2000 Enron Management Conference, Lay announced that Enron was going to be “world’s leading renewable energy company.” It was wind and solar with a little hydro thrown in. I don’t think we ever got into biomass.

Kaizen: How did this begin? Was there a buildup?

Bradley: Enron’s ‘green’ play actually had a noble basis at the very beginning, in that rate base or public-utility regulation penalized natural gas in favor of coal-fired electricity generation, and natural gas was and is cleaner burning than coal. So there was a free-market, environmental angle to promote gas, which Enron exploited to its advantage because it was a natural gas company, not a coal company.

Here is the problem. [Read more →]

January 28, 2011   4 Comments

Enron as a Political Company (Part III: Robert L. Bradley Jr. Interview)

[Part III of an interview of Robert L. Bradley Jr. by Stephen Hicks (website here). Part I (Libertarianism and Energy) and Part II (Expanding Energy Horizons) have been published.]

“Ken Lay lives in Jim Rogers! The master of the regulation game for natural gas transmission brought Lay’s get-out-in-front political strategy from Enron to a company called Public Service Company of Indiana, which became Cinergy, which was bought by Duke Energy. Rogers positioned his coal-laden company as very concerned about climate change and wanting cap-and-trade regulation.”

Kaizen: Enron operated in a highly mixed political and economic environment. In the decades that Enron was operating—the 1980s through the early 2000s—to what extent was the U.S. energy market a free market, and to what extent was it regulated economy?

Bradley: The energy industries—oil, natural gas, and electricity—have all been politicized. And Ken Lay, the big-picture economics Ph.D., had a skill set that was attracted to the mixed economy and thus to energy, particularly to natural gas.

Kaizen: When was Enron created?

Bradley: Lay joined Houston Natural Gas Corporation as CEO in May 1984. The next year, HNG became HNG/InterNorth after a merger with InterNorth, a major Midwest supplier. A year later, in 1986, the company was renamed Enron.

Kaizen: Did it begin as a regulated company?

Bradley: Not really, interestingly. What Lay did in his first six months was to take a company that was selling gas in the largely unregulated Texas market through a vast intrastate pipeline and transform it into a company of interstate gas transmission companies regulated by the Federal Energy Regulatory Commission (FERC) out of Washington, D.C. FERC was the old Federal Power Commission (FPC), where Lay worked while in Washington, D.C.

So in addition to its unregulated core, Enron obtained three major interstate pipelines that are public-utility-regulated. And Lay starts staffing up with some very innovative folks who understood the ins and outs of public utility regulation.

James E. “Jim” Rogers

One was James E. “Jim” Rogers, who had a background with FERC. He was a master at figuring out ways for the regulated pipeline to “beat” its rate case, or how to exceed your authorized regulated rate of return.

Kaizen: So Rogers is a ‘gamer’ of regulation.

Bradley. Yes, but in a good way since in this case regulatory entrepreneurship was to a large extent pro-consumer—doing what your customers want to transport or sell gas in new ways.

Rogers left Enron in 1988 for the electricity industry and is now CEO of Duke Energy, a major electric utility company. He became the leading political entrepreneur of the electricity business. Over the years, he sold his industry on cap-and-trade as a global warming policy strategy—a real blow for the free market and those of us who are against climate alarmism and related policy activism.

Kaizen: So Rogers has continued the political capitalism strategy of the late Ken Lay?

Bradley: Yes–Ken Lay lives in Jim Rogers! The master of the regulation game for natural gas transmission brought Lay’s get-out-in-front political strategy from Enron to a company called Public Service Company of Indiana, which became Cinergy, which was bought by Duke Energy. Rogers positioned his coal-laden company as very concerned about climate change and wanting cap-and-trade regulation. [Read more →]

January 20, 2011   3 Comments

Remembering When Enron Saved the U.S. Wind Industry (January 1997)

January 7, 1997, some 13 years ago, was one of the worst days in my 16-year career at Enron. Enron had already entered into the solar business (1994) in partnership with Amoco (Solarex), and the U.S. wind industry was on its back. Zond Corporation was struggling, and  rival Kenetech had recently suspended its dividend and was on the way to  bankruptcy. Enron bought Zond on this day and renamed it Enron Wind Company.

Enron Wind would never turn a profit, and it would be sold in May 2002 by the bankrupt parent to GE. (GE and Enron would have other ominous parallels.)

Enron came in at just the right time for a troubled, undeserving industry by

  1. Putting a big-name corporation in the U.S. wind industry for the first time;
  2. Issuing countless press releases on ‘wonderful’ green wind for the next several years; and
  3. Successfully lobbying Texas politicians to enact the most strict renewable mandate in the country in 1999.

Regarding the third point, the Texas mandate created an unholy business-government alliance of sufficient size for the state to increase its renewable mandate in 2005. Texas is the leading wind power state in the country–but hardly by consumer choice.

Right after Enron purchased Zond to enter into the wind business, I got a call from Hap Boyd, Enron Wind’s PR person. The Cato Institute had just published my windpower-cenric study, Renewable Energy: Not Cheap, Not ‘Green’ (August 1997), and Hap was trying to sell me on the benefits of wind. One of his arguments I remember was that landowners were receiving royalties from allowing the use of their land for wind turbines, as if this really meant something.

My relationship with Enron Wind went downhill from there. The head of the subsidiary wanted to get me fired for my public opposition against this technology (see the interoffice memos posted at my political Capitalism website).

Oh how sad I am that Enron purchased Zond and did so much to enable the artificial windpower boom in Texas and United States. Houston Chronicle business editorialist Loren Steffy wrote about this in a column, Wind Whispers of Enron (June 3, 2008). [Read more →]

January 19, 2010   3 Comments

The Enron Revitalization Act of 2009 (from the Kyoto Protocol to Waxman-Markey)

“This agreement will be good for Enron stock!!”

- John Palmisano, “Implications of the Climate Change Agreement in Kyoto & What Transpired” (1997)

The 219–212 passage of HR 2454 inspires another look at Enron’s infamous “Kyoto memo,” written almost 13 years ago by company lobbyist John Palmisano. Indeed, an Enron memo upon House passage of the Waxman-Markey climate bill would have been similar! Change the dates and some other specifics and the bottom line would be the same–potential gains for Enron’s profit centers in wind, solar, CO2-emissions trading, energy outsourcing, and natural gas.

One can imagine a quotation like this from Enron’s fabled public relations department, hyperbolizing a half-victory into something bigger in the attempt to create a bandwagon effect:

“This historic vote was heard ’round the world,” stated Kenneth L. Lay, chairman of Enron Corp. “Although much work remains before we have new law, HR 2454 signals a new commitment toward clean, green energy, of which Enron is the acknowledged world leader. All of us look forward to working with lawmakers and citizens in this new era of global climate protection.”

Perhaps Al Gore himself would have placed a call to Ken Lay to congratulate the company that did to much so spark the CO2 reduction debate within the industry in the 1980s and 1990s. Indeed, the U.S. Climate Action Partnership (US CAP), a bootleggers-and-Baptists coalition that had much to do with the opening draft of Waxman-Markey, probably had more to do with Ken Lay protégé James Rogers  (now chairman of Duke Energy) than any other single person.

Reprinted below, verbatim, is the infamous Enron Kyoto Memo, the original copy of which is posted here. [Read more →]

July 1, 2009   12 Comments

Cap-and-Trade: The Temple of Enron (James Hansen makes an important political point)

“Since 1976, Enron [and predecessor company] employees have been at the forefront of developing air credit trading policies for governments and businesses…. Enron today is the largest and most sophisticated air emissions credit and allowance trading organization in the United States. Since 1990, Enron has participated in over 80 SOx allowance transactions and has also been active in establishing policies for trading NOx in the United States and carbon [dioxide] world-wide.”

- “Enron Corp.’s Participation in Air Trading,” Enron Capital & Trade Resources, November 4, 1996 (copy in files).

“If implemented, [the Kyoto Protocol] will do more to promote Enron’s business than will almost any other regulatory initiative…. The endorsement of [CO2] emissions trading was another victory for us…. This agreement will be good for Enron stock!”

- John Palmisano (December 12, 1997) from Kyoto, Japan. Quoted in Bradley, Capitalism at Work, p. 307

“If anyone has environmental credit needs, that’s what we do. We want to be to be the clearing house to monetize available credits or to manage risk.”

- Kevin McGowan, director of coal and emissions trading, Enron Corp., (Enron Biz, November 29, 2000, copy in files)

“We are a green company, but the green stands for money.”

- Jeff Skilling, CEO, Enron Corp., quoted in Capitalism at Work, p. 310.

Enron is Exhibit A against Waxman/Markey’s cap-and-trade proposal. Enron was poised to make money coming and going by being the nation’s and the world’s largest market-maker in CO2 permits, and the “smartest guys in the room” were ready to game and game for incremental dollars (remember California?). Enron’s business model, in retrospect, had to do with regulatory complexity, [Read more →]

May 14, 2009   14 Comments

Special Note to Our Readers (a record number of you)

This has been the busiest period in the short life of MasterResource (we are less than five months old). Our viewership this week has exceeded ten thousand, and cross posts on mega-blogs across the political spectrum have introduced us to new audiences. MasterResource, an energy scholars’ blog (but one that is accessible to the general reader), is on the map!

Two issues have driven our recent traffic. One is the temperature analysis of the Waxman-Markey climate bill by environmental scientist Chip Knappenberger. His straightforward analysis (but don’t ask me to use the MAGICC model!) reflects Chip’s usual careful scholarship. I expect that it will not need to be substantially revised (no complaints so far at RealClimate). But if errors are found, Chip will be the first to thank the reviewer and make the changes.

I know Chip personally, and I have worked with him for more than a decade. In our camp, he has a reputation for telling it like it is in regard to climate science and climate observations to “skeptics” and “alarmists.” Knappenberger’s beginning post in a series questioning “ultra-skepticism,” for example, has attracted critical attention (and maybe even made him some enemies in such a contentious debate). Expect more interesting posts from Chip in his effort to identify the middle way between “skepticism” and “alarmism.”

The second issue driving our record views involved Joseph Romm of the mega-blog Climate Progress. [Read more →]

May 9, 2009   5 Comments