Rick Perry’s free market energy strategy

He is also pushing ahead on the national security front by ramping up a new cybersecurity office at the Energy Department to be the lead agency in helping the energy industry respond to cyber attacks. He is also heading up a robust agenda to modernize the nation’s nuclear weapons arsenal, which is a central part of the president’s fiscal 2019 budget and Nuclear Posture Review. The Energy Department houses the National Nuclear Security Administration, which oversees the nation’s nuclear weapons enterprise. Nearly half of the Energy Department’s budget in fiscal 2019 goes to NNSA.

Washington Examiner: I just wanted to first touch on coal, and understand where you are. You were trying to get a proposal through the Federal Energy Regulatory Commission, and I was just wondering if there is a new iteration of that in the works, and if you’re looking to do something after that? I know they’re doing something as well, but just wanted to see what you were doing for the power plant side, what you’re doing for coal?

Rick Perry: Let me back up. … We’re an all-of-the-above department. We’re not here just to promote the fossil fuels. We’re here to promote a wind, and solar, and hydro, and maybe some forms of energy that we haven’t even dreamed up yet. But for the foreseeable future, fossil fuels are going to play a really important role, not just in America, but in the world. By, I think, 2040, over 70 percent of the electricity that’s created in the United States is going to come from fossil fuels. So, our goal is to produce it, develop it, make it available cleaner. That’s the key for us. So, we’re promoting American technology around the world; we’re promoting American fossil fuels around the world.

As the governor of Texas, I oversaw a rather interesting period of time as we transitioned out of older, inefficient power plants to a massive amount of natural gas plants. We put programs to move old, dirty-burning diesel engines out of the fleets of big fleet operators to cleaner burning engines. We had the largest wind energy development in the nation. Texas developed more wind energy now than five countries. So, I’ve got a history of being an all-of-the-above guy promoting it. It makes a lot of sense from an economic standpoint for us to be selling our coal, exporting it. Obviously, LNG [liquid natural gas]. Crude, now. So, America is in the energy business. My role in that is not only to be a really good salesperson as we travel around the country, we interact with world leaders, my counterparts, but also to promote this technology that we have, CCUS, for instance.

Washington Examiner: The clean coal technology.

Perry: Clean coal technology. Yes, sir. The carbon capture, utilization, sequestration. And so, it’s really an exciting time to be the secretary of energy, partly because of American ingenuity, American technology, and we’re just coming out of a period of time from, let’s say, the mid-70s when America was all about regulation. You know, we’re going to regulate our way forward, no matter how draconian it may be or how dark the future may look. We don’t believe in that. We believe that it’s innovation rather than regulation. Because if you will give Americans stability, predictability in the regulatory world, they will risk their capital. They will go spend dollars. A lot of those dollars will go into research and development, our national labs and things that we do there. I just think it’s a fascinating time to be the secretary of energy, and an all-of-the-above strategy is the wise way to go.

Washington Examiner: We’re now becoming a net exporter of natural gas. What’s your outlook there?

Perry: We are the No. 1 oil- and gas-producing country in the world. We will soon be the net gas exporter. So, it’s a fine line producing versus exporting. But the point is, 15 years ago, if someone had said you and I were going to be having this conversation, “Boy, you boys are not in touch with reality.”

Washington Examiner: You’re talking about innovation over regulation, or laying the foundation for the private sector to come in, the private sector has come in, they’re investing more. They’re asking you to approve facilities for export. Where do you see that role for the government in helping move faster toward an energy export economy?

Perry: So, I’ve got a history. I was the governor of the 12th largest economy in the world, and during that period of time, one of the things that I heard often was the regulatory climate is what affects us more so than anything, have a predictable, stable regulatory climate. And the way we did that in my home state was we said, “OK, here are the rules. You’ve got the rules written down. When somebody comes to get a permit, here are the rules; you make these rules. Those get made by legislators or by agencies. I mean there’s a process that you go through to get those. But once those are out there, government’s role should be simply: “Here are the rules. You meet these rules, here’s your permit.” That’s not what we saw in the last eight years at the federal government, in particular. We saw a government with their thumb on the scale. They had a definite bias against coal. They had a bias against nuclear, and if you were in the renewable business, hallelujah.

We don’t think that’s fair. We like for people to have a lot of options out there from a national security standpoint and from the security of our citizens standpoint, so we believe that if you will have a stable, fair, and if you don’t like the rules, work through the process to change them, but don’t stop a permit going forward because you’ve got a political bias against a particular type of fuel. And so, the Trump administration all across the board, whether it’s EPA, Department of Interior, whether it’s Commerce, whether it’s over here at DOE, the message is clear. You have a regulatory climate that is fair, predictable, and if a rule is blocking something going forward, if it’s in the way, if it costs more than it benefits — out the door.

Washington Examiner: Now, I know for LNG, you have principal authority to approve permits in line with FERC.

Perry: FERC has a role. They’re an independent agency. I don’t mind giving them advice. They don’t mind giving me advice.

Washington Examiner: Is there any specific way you’re looking to speed up permits? Is there a certain number you want to see approved in the next year?

Perry: The market will decide what’s the right number. My job is to basically say, here are the rules. You meet the rules, here’s your permit. My job is not to say, “Well guys, we’re looking at this, and we think the market is a little oversaturated.” That’s not our job. That is for the private sector to decide how they’re going to risk their capital, and when they think that the market is ripe for them to be building an LNG facility, they’ll show up here and make the application. At that particular point in time, our job is to look and make sure that they follow all the rules and then deliver a permit.

Washington Examiner: There are new market opportunities in Appalachia. There’s a lot of natural gas in Pennsylvania, in Ohio, a lot of liquids in Ohio.

Perry: Kentucky, Ohio, Pennsylvania, West Virginia.

Washington Examiner: They’re talking about opening refineries for things like ethane, which is a precursor to a whole bunch of other things. The administration seems to be supportive of that. How do you see that coming to bear in the next year or so?

Perry: The administration is highly supportive of that. The president really likes the concept of duplicating the petrochemical footprint that’s in the Gulf Coast region in Appalachia. And here’s why it’s wise. As the governor of Texas in August and September, I always was very wary about hurricane season, a major hurricane, a category five, storm up the Houston ship channel. Devastating not just to the city of Houston and the millions of people that live there, but that petrochemical footprint. It could literally knock out the economic and national security basis of this country. So, wouldn’t it make sense to have a duplicate of that, if you will, in another region of the country? And I think Appalachia makes a lot of sense, partly because of the economics that come along with that, the transition in a region of the country that could really use the help economically, sitting on top of a massive amount of natural gas in the Marcellus and then below that the Utica, and the close proximity to the East Coast, to those ports there that they could be sending that value-added product out of.

So, I think it’s a brilliant concept that the president really likes. I think that the members of Congress, as they are educated on it and take a look at it, there’ll be support in Congress for that. And at the end of the day, the private sector will build it out. The private sector will be the ones who decide. Our job will be, don’t get in the way. We have our role to protect the environment, protect the people with our rules, “You meet the rules, here’s your permit.”

Washington Examiner: That proposal is attracting a lot of investment to the tri-state area — West Virginia, Ohio, Pennsylvania — looking for places to set up, seeing the huge resource there. How’s that affecting DOE as far as the workload? Are you looking to set up an Appalachian division?

Perry: I think we’re yet to announce anything from the standpoint of here’s how DOE is going to be structured around this project, but we’ll be very involved at the appropriate time. I think it’s a little early to be laying it out with great specificity. But the other side of that is that we’re not too far away from being able to do it.

Washington Examiner: You mentioned the hurricanes and the threat they pose and that being a reason for expanding refinery capacity. The other threat is cyber, and you have structurally proposed some changes at DOE to embrace that. And also, today’s news about Russian sanctions and some of what was revealed at the White House that the Russians were trying to undermine the electric grid. What is DOE’s role in combating that?

Perry: So, from a bit of a high-level look down, the Department of Energy is the sector-specific agency dealing with the protection, the resiliency of the electric grid that includes any natural disasters that would occur. And it also covers any cyber attacks that would occur. So, the decision was made to clearly define that, to stand up an office that sent that message clearly, not to just the public, but also to our friends on the Hill, that this is where sector-specific, relative to the electrical grid, the real work is going to be to protect it. So, CESER [Cybersecurity, Energy Security, and Emergency Response], it’s cyber, and the back end of that is emergency recovery. So, this has a number of areas, cyber is in there, the security of the grid, you have emergency response and recovery, all in one shop. One of the things the president wants to do is to, he talked about on the permitting process in his infrastructure plan, a one-stop shop, if you will. And we’re a long way away from that because of the massive amount of government agencies that if you’re building some type of infrastructure, you got to go to all these different agencies. Sometimes, it’s pitting agency against agency. The president wants to cut through all of that as much as he can.

On cyber for the electrical side, that’s one of the things that we’re doing, clearly defining that this is where you come if you’re in the electrical generation business and you’ve got big panels, the Department of Energy is going to be here to help you deal with any cyber attacks. If you’re in the transmission business, this is the place you would come to partner. We’ve got national labs that work on this, we’ve got a real focus on cybersecurity, dealing with the resiliency and the protection of the electrical grid.

Washington Examiner: There had been some concerns in the past by the electricity sector that they would have to go to DHS, Department of Homeland Security, but they’d rather go to FERC or DOE. So, is that what you’re addressing?

Perry: DHS certainly has a very important, I would suggest even a lead, role in global cybersecurity, the issues that are dealing with the Department of Homeland Security [are] efforts that you would see in the attack of a hospital computer system. DHS would be the lead on that. With that said, we work very closely together. There’s no space between DHS and DOE. We’ve probably from time to time borrowed some of their things; from time to time, they use our national labs to see if they can break a particular piece of equipment, or get into all the things they do.

Washington Examiner: Is the president asking the Department of Energy to do anything in light of the Russian revelations? Are you collecting information? What is your role as they impose sanctions? Are you being asked to do anything by the White House in light of these attacks?

Perry: We know what our duties are. Some of them we can share with you, and some of them we can’t. We’ve pretty much shared with you our public side of what we do. You know, there’s a reason that the Department of Energy and the secretary is on the National Security Council. There’s a lot of work out there that we classify, and we’re right up to the edge of that now.

Washington Examiner: That brings me to National Nuclear Security Administration, and the arsenal. The budget proposal for NNSA is pretty robust. There are some reforms that the national academies and others have proposed. Where do you see the reorganization of the nuclear weapons arm of DOE in the next few years?

Perry: Again, I want to take you back to a little higher level and observe. For 25, 30 years, the members of Congress did not see the importance of modernizing our weapons program. They patched it up from time to time, but there was no effort to modernizing. I moved into a house in Austin one time that hadn’t had any upgrades done to it for about 40 years. I mean it literally still had fuses that you screwed into the electrical system, OK? And this was in the early 90s, but still that’s maybe a poor analogy, but these systems are old. They deteriorate. And both the DOD and the DOE recognized that we have a responsibility, and we were getting to a point where these weapons systems were at the end of their ability to just sit on the shelf and replacing a few parts here and there wasn’t enough. So, I think the administration wisely and Congress, saluting properly, they added dollars that have gone to modernize that fleet, and it’s going to be a lot of work. NNSA is going to be tested if they are up to it.

But the better news in all of that is that the message that it sends around the world is that United States technology, United States readiness is going to be as good as it’s ever been. And that is an appropriate response and an important duty at the DOE.

Washington Examiner: What was the meeting you had with the president on Monday at the White House? What was that about?

Perry: Man, in an hour we covered the watershed. We talked about a lot of different things. As a rule that I don’t break, I don’t talk about my conversations with the president. One thing I will tell you is that we talked about some veterans’ issues because we have a program over here called ACTIV, A-C-T-I-V, which we use our massive computing capability to deal with traumatic brain injury, post-traumatic stress, and mental sides of the veteran world. But it’s more than just the veteran; it reaches into the world of first responders into professional athletes anywhere in the country. It could be a young lady who played soccer who’s had a concussion. The data that we’re going to be making available is literally going to change the world if you’ve had a traumatic brain injury or been affected by post-traumatic stress.

Washington Examiner: Why did the president want to hear about that? Is he planning something?

Perry: I don’t know whether he wanted to hear it or not. I wanted him to hear it. That was my job, is to share that with him so that he understood the importance of what we were doing over here. And you know, the president’s curious. He asked a lot of questions. He wants to know what’s going on, “What have you been doing? How’s this sector, that sector doing?” I mean, he covers the watershed. So, we talked about a lot of different things. What he didn’t talk about was me changing jobs. I know there’s a lot of interest in that over the last 48 to 72 hours. The president knows I like where I am. He knows that we have a done a really good job of getting this agency focused, particularly in those areas that he’s interested in, selling American, running an agency effectively. It was a good conversation, and I’m glad I got to sit down with him and share with him. So, he knows what’s going on at DOE. He knows what our priorities are, he knows about what we’re doing with cyber, he knows what we’re doing on the promotion of American energy resources globally. He knows what we’re doing on a regulatory front.

This veteran’s program, some might look at and say that’s a little outside of your lane. Actually, it’s not because of the national labs and what the national labs had been doing on brain science for a long time and this massive amount of computing capability now. So, we’re right up to the point of both machine learning, verging on artificial intelligence, if you will, with computers of that capacity. Five of the 10 fastest computers in the world belong to the Department of Energy.

I’ve just got a passion about these veterans, particularly veterans who have had both TBI and post-traumatic stress events, and we know that both in professional sports and and public school sports. The public that we will be servicing with this program is relatively small. Obviously, we are doing some programs with the VA as well. There’s one called the Million Veterans Program, which draws the blood, runs the DNA, and then be able to go back to the vet and say, here are the things you have a propensity [for], here’s what you need to be looking out for as you go on with your life.

Washington Examiner: Have you been at the Department of Energy a year yet?

Perry: March 2 was my one-year anniversary. That’s also Texas independence day. So, it’s easy for us to remember anyway.

Washington Examiner: How do you see the next year shaping up?

Perry: I look back over the last year and say what was the most successful thing? It was putting a really good professional team together, and we still have a few openings out there. But we brought in a highly capable professional team of men and women who are serving well.

So, the next year, what I full well expect is we’ll get the 2018 budget done, knock on wood, and we’ll have some surety and our funding going forward. We’ll have the 2019 process in place. The Senate and the House will both look at what we’ve done and say, “good job,” continue with the tweaks that they want. Certainly given us direction on what we need to be working on together. But cyber and the standing up with the CESER office, continuing to promote American energy, that is probably as target-rich an environment as there is. We’ve got trips into India, into Europe, into some other regions … South America, of which the potential for American innovation, American technology, American products, whether it’s fossil fuels or whether it’s our solar and wind energy technology. I think the potential here in the next year is quite good.

Domestically. This Appalachian plan, we hope to be able to not only flesh it out, but to announce it. This is one of those on the infrastructure side. I mean, the president’s vision about infrastructure is really big, as it should be. I’ve had the privilege of visiting almost every state in the nation, not in the last year, but over my public service years, and what I saw was a crumbling infrastructure. Roads that need work, bridges that need work, and then, when you think about rail, wires, and pipelines, those are owned by the private sector. So, there’s a lot of infrastructure out there that we need to see built back up and, in some cases, expanded.

For instance, pipelines in the Northeast, that’s a real restriction for citizens living in, say, New York. They don’t have access to all of this abundance of energy and they’re having to pay substantially higher rates, or in the case of these really cold snaps that came along, they were burning fuel oil up there. I mean, it sure would have been a lot better for the air if they were burning natural gas.