How will the evolution of the utility industry converge with Clean Power Plan targets and natural gas policy? During today's OnPoint, former Interior Secretary Ken Salazar discusses the challenges facing U.S. EPA as it crafts its final Clean Power Plan rule and the impact the plan could have on grid reliability. Salazar, now a partner at WilmerHale, also weighs in on expanding oil and gas development in the U.S. and the Interior Department's proposed leasing expansions along the Atlantic and in the Arctic.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is former Interior Secretary Ken Salazar. Secretary Salazar is now a partner at WilmerHale. Secretary Salazar, I thank you for joining me.
Ken Salazar: Thank you, Monica. It's good to be with you.
Monica Trauzzi: Secretary, since you departed the Obama administration, there have been -- there has been a full-focus surge on climate, in particular on the Clean Power Plan. EPA has received a lot of pushback for the state targets it's established as well as the building blocks it's presented in its draft. How dramatically do you anticipate the agency will change its proposal from what we see in the draft?
Ken Salazar: You know, I think from what I understand is they want to have a rule that's going to withstand the test of time. The reality of it is that this administration EPA has another two years to get some things done and this is a very high priority, so what they want to do, in my view, is come up with something that is going to withstand the test of time, and so I think that's why they have spent so much time meeting with stakeholders and receiving input all around the country. So I think there's still significant improvement that is being considered for the rule and looking at matters including some of the timelines, but at the end of the day, there is going to be a new rule, and it's going to be in the best interest of both industry as well as the administration and the country to make sure that it's a rule that does withstand the test of time.
Monica Trauzzi: There's been a lot of disagreement over the impact the plan could have on reliability. We've heard members of FERC raising concerns. NERC has also raised some questions about grid reliability. Is there a way for this plan to occur and for there to be absolutely no impact on reliability in any regions of the country?
Ken Salazar: Well, I think the state implementation plans that are going to be very much a part of this, or the regional implementation plans will take that into account, and I think that one of the key issues here is the amount of time that it's going to take to implement the rule. But certainly the issues of reliability and affordability, those have always been a part of how we deal with electricity here in the country. The Clean Power Plan rule introduces some other elements into that equation, but at the end of the day, we're seeing a transformation happen within the electrical industry like we've never seen before in the history of the company. Many people say that we will see more transformation in the next 10 years than we've seen in the first 100 years, and so that transformation occurs, we're not only going to be dealing with issues of reliability but also with issues of affordability, renewables and a whole host of other things that are causing this transformation and electrical generation and distribution in the country.
Monica Trauzzi: And this utility, this evolution of the utility industry is more apparent now than ever before. Do you think there's enough of a focus on grid investments?
Ken Salazar: I think there should be more. I think the fact of the matter is that the grid is a very valuable infrastructure asset of the United States, the companies who own, municipalities who own the power lines and the grid, and in truth, it is a system that has not been upgraded, and so it's something that continues to need increasing investment, new power lines and more efficient power lines, all of those kind of things are part of the equation of how we will provide electricity to a growing demand for electricity around the country.
Monica Trauzzi: Many utilities have brought in their portfolios to include significant natural gas investments. Do you think action by local governments on fracking could undermine or derail the overarching national approach on natural gas?
Ken Salazar: I think we all have -- we understand the reality, and that is that we have a natural gas abundance here in this country, a 100-year supply of natural gas that's plentiful in many of the regions of the country and we have a system to distribute and deliver natural gas all over the United States of America. So I don't see the limitations that are being proposed in some states as rolling that back. On the other hand, I do think those limitations ought to be based on the science, and the reality of it is that, when you talk to the scientists, hydraulic fracking is, in fact, safe, and we find ourselves at a very fortunate part of history in the United States of America where we're more energy-independent and job -- manufacturing jobs are coming back to the United States in major ways, and that's all a part of this energy revolution that we find ourselves in. And so in places where I had watched the hydraulic fracking debate take place, I think it's important for the communities that are involved to understand the national security, the economic security and the environmental security implications of the natural gas boom that we're seeing here in this country, which I believe are positive.
Monica Trauzzi: So as we see some U.S. oil and gas operations being negatively affected by the downward swing in oil prices, is there a national interest for those prices to rise? What do you think the impact is on energy security here in the United States of these low oil prices that we're seeing?
Ken Salazar: Well, I think the history of both oil and natural gas prices shows that they go up and they will go down. I think most people who are in the industry and who have been following these issues for a long time know that there will be spikes where it'll go -- it'll be up and it'll be down, but the reality of it is that, when you look at the global realities of oil and gas, we expect that there's going to be increases in the price of oil over time, and here in the United States, for the first time in modern history, we're in the position where we are getting to energy security for our country, and so much of it has to do with the fact that the technologies of horizontal drilling and hydraulic fracking has allowed the United States to get itself to this fortunate point of view, and that's been coupled with some very smart policy changes as well, including efficiency, higher fuel standards for vehicles and a whole host of other things that have got us to this good place in 2015.
Monica Trauzzi: Let's talk about some drilling in the Atlantic and the Arctic. The Obama administration recently proposed a leasing expansion along the Atlantic and also in portions of the Arctic. How significantly has the game changed since Deepwater Horizon to allow for such a proposal?
Ken Salazar: Well, I think that if you watch what this administration has done from the beginning, the all-of-the-above energy strategy has included oil and gas, and so the critics of the administration that have said that it was not supporting oil and gas need to look at the reality of the facts in terms of the decisions that the administration has made, including opening up parts of the Arctic and in the more recent decisions that were announced by the administration, looking at the Atlantic in terms of finding out what is there. And so there is -- oil and gas are a significant portion of the energy portfolio of the United States of America, and it is, indeed, a part of why we're having the economic resurgence, the best of times that we've had for a long time, and again addressing the fundamental issue of energy security has, I think, been one of the major achievements of the last six, seven years.
Monica Trauzzi: On the Keystone XL pipeline, you've said it should be built and can be done safely as long as conditions are imposed. Having worked directly with the president, how do you think he'll ultimately come down on the pipeline?
Ken Salazar: I have no idea how he will ultimately come down, and obviously he is following the processes that he wants to follow. The reality of it for me is that I do believe the pipeline should be built because I think it is in the national interest and our bi-national interest with Canada as well as the concept of North America energy independence when you see what's happening in Mexico, what's happening in Canada, what's happening here in the United States. We're the focal point of the globe relative to energy, and unfortunately, my own view is that the Keystone pipeline has become mired down in the debate that could have gone in another direction because there was a way, I think, in which that pipeline could have been built where we could have also advanced the concept of carbon capture through the carbon sinks that exist along the pipeline, but it hasn't gone that way. It's been a very bipolar kind of issue for the country that has very much politicized the whole effort of building the pipeline.
Monica Trauzzi: On politics, how do you think climate and energy will play in 2016?
Ken Salazar: I think climate and energy will be part of the debate, and how exactly it comes out, we'll see, but the reality of it is energy plays into our national security, our economic security and our environmental security, and so I think it is important for the candidates who are going to be running for president to be able to articulate their vision about where the United States is going on energy and climate as well. On the climate side, the fact is that the scientists are all in agreement that we have significant global warming. I think the debate today is really what do you do about it, and I think that interestingly enough, what you will find that, since I came to Washington as a U.S. senator a long time ago in -- starting in 2004-2005 as a U.S. senator here, we've already seen significant reductions in CO2 emissions here in the United States, much of that led by the utility industry. You know, 15 percent reduction in CO2 emissions just during the time that I have spent my time in the U.S. Senate and in the Department of Interior. So we're headed in the right direction. I think, Monica, the real question is what is the right model for us to move forward and what are the appropriate targets and what are the timelines for us to meet the CO2 emissions that are required.
Monica Trauzzi: Would you get back into politics if the right opportunity presented itself?
Ken Salazar: You know, I love what I'm doing now. Colorado is my home, and I very much enjoy doing what I'm doing as a practicing lawyer, and that's what I was trained to do and practiced law for a long time. I was attorney general of my state for six years and practicing law and being a -- working on the ranch with my brothers, and my family is also something else that I very much enjoy.
Monica Trauzzi: All right. We'll end it right there on that note. Thank you for coming on the show.
Ken Salazar: Thank you, Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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