ENRON & FRIENDS

November 22, 2002:  Tired of rehashing the old stories about sweetheart arrangements between energy companies and the Bush administration?  Well here's a brand new one:  it looks like our government is about to aid the government of Peru by building a big new natural gas pipeline for them with almost a billion dollars in taxpayer money.  The beneficiaries at the U.S. end are the Hunt oil company and Dick Cheney's own Halliburton, both based in Texas.  (Competitive bids?  What are those?)  The beneficiaries at the Peruvian end, of course, are Fighting Communism (one of the last governments in the world to be doing so).  And just to make the deal even more attractive, they're building it through the middle of pristine rainforest, and federal regulations that restrict backing projects that destroy unspoiled habitat would have to be brushed aside.  The Washington Post reports that the effort to get tax money for the project "will test the political pull of the Texas companies... which have longstanding ties to the Bush-Cheney administration and the Republican Party."

Natural gas companies back here in the States aren't getting such a bad deal either.  Senator Pete Domenici (R-NM) is floating a plan to grant additional rights and privileges to extract fossil fuels from federal land to companies such as El Paso Natural Gas, the outfit that is still embroiled in criminal investigations arising out of the California electricity crisis.  Domenici is also trying to reverse the vote on drilling in the Alaska National Wildlife Refuge.  In the forthcoming Congress, Domenici is going to be the chairman of the committee that oversees energy policy.  Another company mentioned as a beneficiary of Domenici's plan is Williams, which like El Paso is under criminal investigation.  Dick Cheney's original energy policy bill may have been worn away by the erosion of bickering and dealmaking, but Domenici is out to pass a replacement form of it that may hardly be better, except that they hopefully won't try this time to Enronize the entire nationwide electric system.  Democrats have already agreed to go along with many measures in the bill Domenici foresees, including protecting nuclear power plant operators from liability if terrorists blow up such a plant.  Various companies that would benefit from opening up of federal land are also seeking measures that would limit environmentalists' ability to file lawsuits against their operations in such land.  (Insurance companies have already won taxpayer coverage for losses due to terrorism.)

California's hearings into the criminal activities during the crisis has recently uncovered extensive falsification of records and reports by El Paso and other gas companies, basically lying about the amount of gas actually going through the pipelines and how much was paid for it.  These reports were used as just another tool to manipulate prices.

These investigations have also turned up a recorded phone conversation in which we get to hear one of the generating companies (Williams) telling the operators of a power plant (owned by Williams' partner AES) not to hurry to bring offline power plants back into service, and suggesting that other outages would be just fine.  The guy at AES replied "I understand.  You don't have to talk any more."

Another piece of fallout from the California power crisis is that Southern California Edison is being dragged in front of the state Supreme Court.  They made a deal with the Public Utilities Commission that let them stay out of bankruptcy (which PG&E went into and is still resolving) by charging customers elevated prices for two extra years.  The Utility Reform Network challenged the deal, asserting that the rate hikes were never meant to be used for such a purpose, and the high court has agreed to hear the case.

A new worry is afflicting both SoCalEd and PG&E: on January 1 they're supposed to resume buying their own power, but neither has reestablished enough creditworthiness yet.  However, they can go ahead if they deposit bonds of $56,000,000 with the state.  Those involved are saying there's no problem and things should proceed smoothly.

Elsewhere on the utility monopoly front, Pacific Bell is getting uncomfortable with the "deregulation" deal that is allowing other phone companies to compete in California's local phone service market.  AT&T is currently making a very aggressive marketing push here to get people to switch (including some exceptionally insistent telemarketing, and a bad excuse that it takes 30 days for you to be placed on a do-not-call list).  So Pac Bell is fighting back by demanding that the Public Utilities Commission raise the prices that they charge for use of their wires.  They want the rates more than doubled.  Apparently they regard anything that allows even the possibility of anyone else underpricing them as an unfair theft.

AT&T recently ran into a little scandal of its own with Citigroup, involving the trading of favors such as access to a highly exclusive nursery school.  (My god, are there really such things as highly exclusive elite nursery schools?)  The larger consequence of this, it turns out, is that the embarrassment to Citigroup could, for at least a while, derail the whole effort to put together a reformed regulatory agreement for Wall Street's financial corporations.  See, the financial houses' side of the deal was supposed to be that they would clean out their closets and cease to produce new scandals and embarrassments.

In another South American story, the nation of Colombia recently decided not to buy some attack planes from us, opting instead to save money by having a Brazilian company upgrade their existing planes.  When news of this got to the Pentagon, a general told the Colombians that if they want our international aid money, they'd better buy our planes.  Now the Colombians have ditched both purchases.

There is some slightly more positive news on some fronts.  The Bush administration has started to temper some of its blind triumphalism in a couple of areas, perhaps because it is starting to notice the intractable real-world problems arising from the policies it has championed in the past.  For example, they are now starting to admit the need to push automakers to get better mileage in SUVs.  They opposed this staunchly before, and got Congress to reduce its demands for mileage improvement to under one mile per gallon.  But now they are talking about backing a move to push SUV mileage up by 1.5 miles per gallon... by 2007.

Another area where the Bushies seem to be waking up is in realizing that the SEC has to be able to do its job, and not just protect companies that commit malfeasance.  There are multiple reasons for the recession we're in now, including the bursting of the dot-com bubble and the effects of the terrorist attack, but one big reason is the corporate crime scandals that came out in the wake of the Enron collapse.  Bush talked about "restoring investor confidence" but his actions were mainly aligned with restoring the confidence of crooked executives in their ability to continue business as usual once the storm blew over.  The widespread perception -- even among Wall Street republicans -- that the Bush White House and the GOP wing of Congress were part of the problem instead of part of the solution meant that investor confidence got worse instead of better, helped create a longer and deeper slide in stock prices than was expected.  Today the economy is reeling and massive layoffs are in the news all over, and lack of capital due to low stock prices is a big part of the reason.  Now that Harvey Pitt has resigned from the SEC, Bush seems to be looking for a genuine enforcer to replace him.  I previously mentioned that he was considering Michael Chertoff of the Department of Justice; now a new trial balloon is naming Erskine Bowles, an investment banker who was once Bill Clinton's chief of staff.  Bowles is not yet admitting that he'd take the job if it was offered.

Bush is also, under pressure from democrats and campaign reformers like John McCain, appointing a democrat named Ellen Weintraub to the Federal Election Commission, an outfit whose recent outbursts of partisanship (to the point of unilaterally rewriting election laws, especially McCain's own) has infuriated McCain to the point that, according to Jack Anderson, McCain is ready to join the Democratic party.  McCain was already suing the Commission, and he recently expanded that suit to attack its exemptions for nonprofits and churches, which basically come down to an illegal attempt to give the Christian right a free pass on election funding laws.  Weintraub once served as counsel to the House Ethics Committee.  She would be replacing Karl Sandstrom, a nominal democrat who often sided with the republican members on these recent partisan decisions.  Sandstrom's term actually expired a year ago!  Apparently Bush agreed to appoint Weintraub when faced by threats from McCain to block various Bush nominees for other posts from being approved, and then stalled for months on doing so.

Here's a little bit of special interest legislation from back here in California.  The car-parts chain AutoZone has, for a few years, offered a service that brings in customers: if your OBD-II equipped car flashes a "check engine" light, they will read the engine's trouble codes for you at no charge.  But now they are no longer doing this in California, because some asshole lobbyist got the legislature to pass a measure saying that only "qualified mechanics" are allowed to plug a code reader into your car and push the button.  Service station mechanics were already charging $75 or more for this service that takes about one minute to perform, presumably because most people aren't aware of cheaper alternatives.  This easy money may be coming under threat since OBD-II code reading machines you can use at home are now available for as low as $40 (when I got one last year I had to pay over $100) so I guess they decided that to preserve their remaining opportunity to gouge these fees, they had to stop AutoZone and outfits like it from competing with a price that fits the amount of work involved.  Hopefully when people start to learn about this, there will be some letter-writing and this bullshit will be reversed, because there really is just no excuse for passing such a law.

Speaking of automobiles, energy secretary Spencer Abraham recently endorsed the plan to eventually replace the nation's infrastructure for gasoline powered cars with one for providing pure hydrogen for fuel-cell powered cars.  Now if this happens, it would be a good thing.  But the automotive industry has backed this idea, in the short term, mainly as a way to undermine any other alternative for reducing our dependence on gasoline, and of all the possible plans to replace the gasoline engine, this is probably the most expensive and the one that would require the fossil fuel industry being paid the most money for new construction and new products.  GM, Ford, and the others have proclaimed this the only viable choice for the long term, which in the short term means that they do nothing.  Whenever somebody raises the issue of, say, electric cars (which can be built now, and which many people already enjoy despite usually having to build the cars by hand), the hydrogen fuel-cell vision is used as a stick to beat down any effort to do something more immediate.

Ironically, these same automakers are likely to start building a considerable number of electric-hybrid cars in the next five years, which would still run on gasoline but would contain most of the components of a battery-powered electric car.  To go from electric-hybrid to pure electric is a small step.  If battery-powered cars don't become popular, they can always use electric cars powered by the zinc-air cell.  This is like a fuel cell that runs off a solid metal instead of a gas -- or like a battery whose active chemical ingredients can be replaced by just dumping pellets into a hopper.  Powering cars with zinc instead of hydrogen would, on an economic and ecological level, be pretty nearly the same proposition... except that it would eliminate the need to build a massive new set of pipelines and re-equip every service station.  The machine for "recharging" the zinc pellets is small and cheap enough that many families might have one in their own garage instead of going to the service station.

But if the existing auto companies want hydrogen fuel cells, Spencer Abraham is not going to argue with them.  And MSNBC also reports that "oil companies are investing heavily in fuel cell technology."  Though eventually hydrogen could be produced by renewable energy methods, for the short term it would probably be made from fossil fuels.  What would happen to the carbon in that production is something I'd sure like to find out.  What they might be talking about here is getting rid of the carbon dioxide problem of fossil fuels (which are hydrocarbons) by throwing the carbon away and only using the hydrogen... which would double the amount of fuel that we need to take out of the ground!  Either that, or they're just talking about burning the fuels the same old way to make electricity, and then making hydrogen from that.  In other words, just taking a more roundabout path to using the fuel the same way we do now.

It turns out that the nationwide move to force the inclusion of ethanol in gasoline, replacing MTBE and other oxygenators that some states were using also originated with the oil companies.  Their main interest was to have one uniform formulation rule nationwide, even if it didn't use their originally preferred ingredients.  (They also seek a lack of accountability in the pollution results achieved by this oxygenation.)  You will recall that the EPA's own scientific staff did not support the measure to force the use of ethanol, and were shocked to be overruled in the matter.

On the general corruption front in Washington, the Homeland Security bill has passed, and because it was seen as a must-pass bill, it promptly got loaded down with tons of unusually bad-smelling special interest riders.  I've already mentioned the one that granted lawsuit protection to the pharmaceutical industry from claims arising over autism.  There were plenty more -- some say the riders far outweigh the original bill when it comes to the amount of paper involved.  There was even one to grant an extra layer of protection to companies that incorporate overseas in order to avoid paying taxes!  John McCain fought with the democrats to block a lot of this stinking crap from being passed, but they failed.  Bush, of course, is pleased as punch to be able to sign it all.

On the positive side, the California state pension fund, pushed by unions (mainly AFSCME), recently announced that if certain companies want the fund to invest in them, they'd better move their place of incorporation back onshore and pay their taxes.  The companies named were Tyco International, McDermott International, and Ingersoll-Rand.

A story we've been mentioning from time to time here is the changing of the EPA's "New Source Review" rules, which essentially are laws that say you can't modernize an old highly-polluting power plant unless you also modernize its emission controls.  The power industry, especially in states like Texas, has long profited by running power plants under lenient pollution laws that were intended solely to allow ancient outdated plants to serve out their twilight years without having to be shut down prematurely.  Under regimes like that of Governor Bush in Texas, plants have been allowed to pollute at this old level by claiming that they were still "old" installations worthy of being grandfathered, no matter how much modernization they received.  On a national level, the New Source Review rules were supposed to prevent this.  A legal case brought the old rules under question, and today the administration pronounced its new version.  Surprise surprise, they sided with polluters.  They wrote more lenient standards into several areas of the law, and created a much more relaxed definition of "routine maintenance, repair, and replacement".  The support for additional pollution is so egregious that many states in the northeast are suing.  Eliot Spitzer, the attorney general of New York, accused them of attacking the Clean Air Act.  EPA head Christie Todd Whitman denied that the new rules would lead to any more pollution.

As usual, there are lots more stories that I haven't covered.  At least I managed to avoid mentioning Iraq this time.
 

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