Category — Enron/Ken Lay

“We’re trying to minimize the package,” [Sen. John] Kerry said yesterday of the 987-page bill. “We’re trying to keep it simple. We’re trying to keep it transparent and open and understandable for why something took place.”

- Darren Samuelsohn, “Kerry-Lieberman Bill Uses ‘Fewer Buckets’ in Giving Out Highly Prized Allowances,” E&E News, May 14, 2010.

“One often speaks without seeing, without knowing, without meaning what one says.”

- Jacques Derrida, quoted in Mitchell Stephens, “Deconstructing Jacques Derrida; The Most Reviled Professor in the World Defends His Diabolically Difficult Theory,” Los Angeles Times Magazine, July 21, 1991.

The late postmodern philosopher,  Jacques Derrida (1930–2004) would find intellectual kinship in the political debates about climate and energy coming from the party in power. If alive today, Derrida would nod approvingly at Senator John Kerry’s above I-say-it, it-is-true inversion of reality. It ranks right up there with Ken Lay and Jeff Skilling telling the world after the Enron collapse that Enron was a great company.

Donway Unmasks Enron’s Inner Philosophy

Roger Donway was the first person to identify Enron as a postmodern company. In “The Collapse of a Postmodern Corporation,” he wrote:

But if Enron’s executives were neither incompetent nor crooked, what brought Enron down? I believe it was a culture of corporate values rooted in postmodernism. These were not your grandfather’s businessmen.

He explained: [Read more →]

[Editor note: The following post, "Cap-and-Trade: The Temple of Enron," appeared one year ago in MasterResource.  It is being reprinted in conjunction with the release of the outlines of the Senate energy/climate proposal. Robert Bradley, formerly with Enron, further documents Enron's cap-and-trade shenanigans in other MasterResource articles listed at the end of this post. Two press releases from the Competitive Enterprise Institute and the Institute for Energy Research on the Senate outline are reproduced as well.]

“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 [Kerry-Graham-Lieberman'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, as I note in the introduction to my book Capitalism at Work. Enron gamed the highly prescriptive accounting rules (GAAP), tax system (the corporate tax division was actually a profit center as told in an exposé in the Washington Post), and energy regulatory rules. [Read more →]

Editor Note: This commentary is reproduced, with slight revision, from the December 2009 issue of POWER magazine.

As director of public policy analysis in my last seven years at Enron, I participated in many legislative and regulatory debates involving electricity, although the public policy thrust of the company was the opposite of what I personally believed was good social policy.

While I favored free markets, the business model of Ken Lay (a PhD economist with years of Washington regulatory experience) centered on special government favor. Enron, for example, had seven profit centers geared to government pricing/rationing of carbon dioxide (CO ₂) emissions. And in the 1990s, the company was squarely behind a Btu tax. Today, Enron would be pushing cap and trade and a federal renewables mandate–and a lot of mandated energy efficiency with its profit centers in mind.

Backing Gas

Ken Lay’s political niche began innocently enough with a unique, highly focused natural gas strategy, one that would culminate in Enron’s 1995 self-description as “the world’s first natural gas major.” In pursuit of that goal, Lay promoted gas-fired power generation relative to coal. He countered the coal lobby’s contention that the 1970s shortages were the inevitable result of a tiring North American gas resource base. “We had a surplus of regulation, not a shortage of gas,” Lay would say, and Enron backed up its claim by offering utilities long-term fixed-priced gas contracts.

Enron also challenged the tendency of electric utilities to opt for coal plants over gas plants because, under public-utility regulation, the former’s higher capital cost created more rate base and thus more profits. Citing new combined-cycle technology, Enron made the case that gas was economically and environmentally superior to coal for new capacity. For example, in March 1992, Enron unveiled “the natural gas standard” in letters, press releases, and speeches. The standard, set forth under Lay’s signature, declared: [Read more →]

[This excerpt from Capitalism at Work: Business, Government, and Energy prefaces a five-chapter review of energy Malthusianism from the time of Thomas Robert Malthus in the late 18th century through the Julian Simon/Paul Ehrlich debate of the late 20th century.]

“Here is a planet, whirling in sunlit space,” reads the opening of Rose Wilder Lane’s The Discovery of Freedom: Man’s Struggle against Authority, penned during the dark days of World War II. “The planet is energy,” she continues. “Every apparent substance composing it is energy. The envelope of gases surrounding it is energy. Energy pours forth from the sun upon this air and earth.”

Energy is pervasive and liberating. It moves people, makes things, and provides incalculable services. It vanquishes darkness, literally and figuratively. “Since early men ignited the first fires in caves,” it has been noted, “the unleashing of energy for light, heat, cooking, and every human need has been the essence and symbol of what it is to be human.” 

In economic terms, energy is the resource of resources, the master resource. Energy transforms mineral and natural resources from their raw form into consumable goods. Energy must be expended to create more energy and to refine energy into more usable forms. Thus, energy can be considered the fourth factor of production, in addition to the textbook triad of land, labor, and capital.

In business terms, energy has been and will likely always be the world’s biggest enterprise. The energy sector has spawned some of history’s great entrepreneurs. John D. Rockefeller shaped the American and world oil industry more than a century ago. Mr. Petroleum was one of the greatest business doers in U.S. and world history, if not the greatest.

Second to Rockefeller in the history of the U.S. energy industry is Mr. Electricity: Samuel Insull. An émigré who teamed with Thomas Edison to build the company that emerged as General Electric, Insull ventured on his own and built America’s largest gas and electricity entity. But his fortunes spectacularly reversed in the early 1930s. The dramatic rise and fall of the father of the modern electricity industry, “the Babe Ruth, the Jack Dempsey, the Red Grange of the business world,” is still the subject of contemporary books and articles.

In the 1980s and 1990s, another figure cut a unique path in the energy sector: Mr. Natural Gas, Kenneth L. Lay. He made a case for methane as the economic and environmental answer to America’s energy challenges and positioned Enron as the world’s first natural gas major. Lay’s star power put him in a league with the biggest names of the industry at the time, such as Lee Raymond of ExxonMobil and John Browne of BP. In early 2001, Paul Portney, president of Resources for the Future, declared, “In his role as chairman of Enron Corp., Ken Lay has almost singlehandedly made the world rethink what it means to be a modern energy company.” [Read more →]

 [Editor note: This interview with Rob Bradley from the April 2006 issue of The New Individualist, published by The Atlas Society, is reproduced for two reasons: 1) the role of Lay and Enron in launching the global warming debate within the energy industry in the late 1980s and 1990s; 2) the role of Bradley during his 16 years at the company brought up by critics of the Institute for Energy Research/American Energy Alliance.]

TNI: Why should Objectivists, libertarians, and individualists take an interest in the collapse of Enron and particularly in the fall of Ken Lay?

Bradley: Enron will prove to be one of the most important episodes in the history of American business, and its story, from beginning to end, is inseparable from Ken Lay, its founder and long-time chairman. Thus, what people make of Enron—and what lessons they draw from it—will depend to a considerable degree on how they understand Lay.

As I’m sure you know, Enron has to date been blamed largely on free-market politicians, heartless corporate managers, and an egoistic chairman. In fact, as my book will show, Enron relied heavily on government favors, was run by postmodernist managers, and had as its chairman the kind of person Ayn Rand would have called “a second-hander.”

TNI: You have a long chapter near the beginning of your book that shows how Ayn Rand’s philosophy applies to Enron. Where did this germinate?

Bradley: Funny you should ask, Roger [Donway]! It was your piece [in Navigator] that confirmed for me the value of Objectivism in analyzing Enron. When Enron was sinking and Great Man Ken Lay was melting, I thought, “Wow! This is right out of an Ayn Rand novel!” I was not familiar with The Objectivist Center at the time. But several months after the bankruptcy, I did a Google search and came across your article on Enron as a postmodern corporation. The article opened my eyes to the fact that the causes of Enron’s financial bankruptcy were at root philosophical.

Since that time, I have plunged into the Objectivist literature as it relates to business and developed the theme that whatever may or may not be prosecutable fraud, Enron’s leaders were certainly engaged in massive philosophical fraud—an attempt to cheat reality itself.

TNI: Could you please tell our readers something about your personal involvement with Enron and Ken Lay?

Bradley: I was at Enron for just over sixteen years. I arrived about six months after Ken Lay did. And my last day was December 2, 2001, which was when the company declared bankruptcy and about 4,000 of us were laid off. [Read more →]

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

- Tom White (CEO, Enron Renewables Energy Corp.) to Ken Lay (CEO, Enron Corp.), June 8, 1998

Joe Romm, for the fifth time (the previous four are here, here,  here, and here) has purposely obscured the record of my association with Enron in an attempt to discredit the Institute for Energy Research. I founded IER in 1989, in fact, to give myself an independent voice in the energy policy debate. And I used IER to challenge my employer Enron on the issues of climate alarmism and government-dependent renewable-energy investments.

Here is Romm’s headline from yesterday’s Climate Progress:

The latest polluter front group trying to kill the clean energy bill is overseen by a proud former shill for a man convicted on fraud and conspiracy charges

Romm’s angst is centered on the American Energy Express bus tour sponsored by the American Energy Alliance, which is affiliated with IER. The tour is bringing the message of free-market energy abundance and affordability to the heartland of America–and thousands are listening, learning, and supporting.

The tour’s powerful message of fewer and lower energy taxes will be more widely heard thanks in part to Joe Romm himself, whose radicalism and raw animosity–and even hate (he has repeatedly called me a “sociopath” in private emails)–is turning off the great middle. Romm reversed course to support the “grotesque” Waxman–Markey, no doubt under orders from his bosses at CAP. Romm’s bully-like attacks against James Hansen, Sierra Club/Environmental Integrity Project/Earthjustice, RealClimate, Energy Action Coalition, The Washington Post, The New York Times, and more, certainly put me in broad company!

I have conscientiously rebutted Romm’s previous ad hominem attacks against me. [Read more →]

“If there is one thing I have been impressed with over the last decades, it is that when the environmental community defines a number one priority, something happens. Not always something good—but something.”1

Dr. Kenneth L. Lay, Chairman, Enron Corporation, June 1997 (1)

Who was the late Ken Lay, the architect and chairman of Enron throughout its 16-year history? All parties to the current legislative debate on a CO2 cap-and-trade bill should know. After all, Lay’s tireless efforts to promote CO2 regulation and enact renewable energy quotas make him a father figure for HR 2354, the Waxman-Markey climate bill, what I have called the Enron Revitalization Act of 2009.

In his lifetime, Lay did not win CO2 regulation, but he got a very damaging renewable energy mandate passed in his home state of Texas. I asked:

How has Texas, which consumer choice made the leading oil and gas state, become the second most politicized energy state in the nation (after California)?

The regulatory spiral can be traced back  to Enron, which in 1999 spearheaded a provision in the state electricity restructuring law (Senate Bill 7, signed by governor George W. Bush) establishing a statewide renewable-energy mandate. Enron’s lobbyists had in mind the special interest of Enron Wind Company, which is now part of General Electric.

It was a double win for the politically connected company. First, as the leading power marketer, and with its eyes on becoming the leading electricity retailer as well, Enron coveted mandatory open-access of electricity in the state. Secondly, it needed a big market for its money-losing Enron Wind. Cloaking both corporate-welfare goals in the guise of a renewable mandate got media-worshipped environmental groups on board to help push SB 7 across the finish line.

Whether it was hiring John Palmisano, writing op-ed’s, working with Clinton/Gore, contributing $1 million to Resources for the Future in appreciation of their cap-and-trade work, or a myriad other things, Ken Lay worked a mile a minute to promote CO2 legislation, all to help a variety of Enron profit centers (see below). [Read more →]

“Enron Lives! in Waxman-Markey. The sooner the public, media, and intelligentsia realize this, the faster cap-and-trade can be put in the dustbin of bad ideas.”

- Cap-and-Trade: The Temple of Enron, MasterResource, May 14, 2009.

Joseph Romm holds a Ph.D. (in physics) from MIT and works for a 501(c)3 foundation. Being highly educated and in the education business, to most of us, means being careful and fair in our arguments–and avoiding reckless ad hominem argument. But not so with Joe as evidenced by his very inaccurate recent post against me.

In “George Will and WattsUpWithThat embrace a proud former shill for a man convicted on fraud and conspiracy charges,” Romm argues that I must be corrupt because of my former association with Enron and Ken Lay–and thus George Will and the mega-site WattsUpWithThat are party to corruption too.

I am surprised that Romm has taken this tack, for I have continually turned the tables on him regarding Enron. I am disappointed (but not surprised) that he ignored my posts and other readily available information that contradicts his argument and insinuations.

As I will again document for Romm’s information, I was a whistle blower against Enron’s climate alarmism and rent-seeking activities as director of public policy analysis and Ken Lay’s speechwriter.

But more than that, Enron’s fate is the perfect argument against the Romm-beloved HR 2454, the Waxman-Markey cap-and-trade bill, or what I call the  Enron Revitalization Act of 2009. Last year I did a reason.tv video about Enron, Obama’s Enron Problem, and I have posted repeatedly about how Enron’s failure and fraud were closely related to its “sustainable energy” strategy with solar, wind, and energy efficiency.

And to complete the argument, guess what company is antithetical to Enron in terms of corporate culture, energy strategy, and financial results? It is the company Romm loves to hate–Exxon Mobil, the anti-Enron!

Challenging Enron at Enron

At the website Political Capitalism, I have penned a short history and posted memos on my public-policy conflicts at Enron, information that Romm has ignored. Some Enron executives wanted me to be fired, and I reached an agreement with Ken Lay personally to not publish anything critical of windpower in order to stay with the company (Enron Wind was struggling, and we could not sell it when we needed to, which resulted in Enron’s first crime.) [Read more →]

I have previously described Exxon Mobil as the anti-Enron. In an opinion-page editorial in yesterday’s Houston Chronicle, I contrasted the two companies in terms of both energy strategy and public policy.

More could be said than is in the editorial (reprinted below). Enron’s first fraud, engineered by Andrew Fastow, came with the purchase of Zond Corporation, which was renamed Enron Wind Corporation and is now part of GE Energy. (This complicated story about a “qualifying facility” under federal energy law is told in McLean and Elkind’s The Smartest Guys in the Room, pp. 166–67 and Kurt Eichenwald’s Conspiracy of Fools, pp. 142–44.)

Enron Energy Services, the energy outsourcing division of Enron that so excited environmentalists (including Joe Romm, now blogging at Climate Progress), was one of the company’s biggest frauds.

So Enron’s “green” strategy was at the core of its business problems and legal problems, a theme that I will detail in a forthcoming book.

Also, some of the points made below have been the subject of MasterResource posts, such as: [Read more →]

“It will be possible to achieve a 100% clean power mix over the next ten years if appropriate policies are put in place to unleash the [zero carbon source] technologies’ vast potential.”

- Repower America (The Alliance for Climate Protection)

The heavily bankrolled climate alarmist/energy coercion lobby, led by Al Gore’s new national organization Repower America, is coming to a town or city near you!

In Houston, they have arrived. The “Repower Texas” campaign is being fronted by a group of government-dependent political capitalists that see Big Green (as in money) in Texas’s renewable energy mandates. And how did this business underclass get started? It began with the Ken Lay/Enron renewables mandate for the Lone Star State in 1999, and the policy begun by then-governor George W. Bush is being continued today by governor Rick Perry.

The big question now is if renewable mandate #3 will be voted out by the Texas legislature and whether Governor Perry will sign it.  If so, hapless electricity ratepayers in the Lone Star State will be paying for a massively uneconomic solar boom just like they are already paying for the (artificial) wind boom.

Repower America/Repower Texas should be a wake-up call to taxpayers, ratepayers, and real energy producers. Make no mistake: the parasitic (intermittent, uneconomic) energies are after the markets now met by consumer-chosen, economic energies.

In short, the free-market energy economy has been put into political play. Expect a lot of counter-education in the name of “Don’t Depower Texas.”

Here is the call to action from Depower Repower Texas. [Read more →]